China's Steel Exports Still Rise in October YoY

In September 2024, driven by a "rush to export," China's steel exports reached over 10 million tons for the first time in 8 years. According to the General Administration of Customs, in terms of exports, China exported 10.153 million tons of steel in September, a year-on-year increase of 25.9%; from January to September, China exported 80.711 million tons of steel, a year-on-year increase of 21.2%. In terms of imports, China imported 554,000 tons of steel in September, a year-on-year decrease of 13.4%; from January to September, China imported 5.185 million tons of steel, a year-on-year decrease of 9.0%.

In September 2024, the growth momentum of China's steel exports further strengthened; compared to August, the export volume in September increased by 653,000 tons, a month-on-month growth of 6.9%; the steel imports in September increased by 8.8% month-on-month but continued to operate at a low level, thus maintaining a significant net export position for China's steel foreign trade in September. The calculation data from the Lange Steel Research Center shows that in September, China's net export of steel was 9.599 million tons, a year-on-year increase of 29.3%, with the growth rate rebounding by 11.6 percentage points compared to August; from January to September, China's net export of steel was 75.526 million tons, a year-on-year increase of 23.6%, with the growth rate rebounding by 0.8 percentage points compared to the previous month.

Currently, the price advantage of China's steel exports has significantly weakened; the overseas steel supply continues to grow year-on-year; at the same time, the global manufacturing index operates at a low level, and the external demand prosperity decreases; China's steel enterprises' export order index is still operating in a contraction range, and the driving force for steel exports is still insufficient; coupled with the appreciation of the yuan and the increase in steel trade frictions, the impact on future steel exports will gradually emerge. However, under the current situation of accelerating the delivery of steel export orders and the low base of the previous year, China's steel exports in October are still expected to maintain a growth trend year-on-year. The analysis of related influencing factors is as follows:

1. The price advantage of China's steel exports has significantly weakened

With the recent significant increase in China's steel prices, the export quotes for China's steel have significantly increased, and the price advantage of steel exports has significantly weakened. The monitoring data from the Lange Steel Research Center shows that as of October 12, 2024, the export quotes for hot-rolled coil (FOB) from India, Turkey, and the Commonwealth of Independent States were $570/ton, $595/ton, and $505/ton, respectively, while the export quote for China's hot-rolled coil (FOB) was $537/ton; currently, China's hot coil export quote is $33/ton lower than India's and Turkey's hot coil export quotes, and $32/ton higher than the Commonwealth of Independent States' hot coil export quote. The significant weakening of the steel export quote advantage will impose certain constraints on our future exports.

2. Global manufacturing PMI operates at a low level, and external demand continues to bear pressure

The pressure on global manufacturing continued in September. According to the China Federation of Logistics and Purchasing, the global manufacturing PMI in September 2024 was 48.8%, a decrease of 0.1 percentage points from the previous month, and has been operating below 50% for six consecutive months. JPMorgan's global manufacturing PMI in September continued to decline, at 48.8%, a decrease of 0.8 percentage points from the previous month. The global manufacturing continues to operate weakly, and the downward pressure on the global economy still exists, which will impose certain constraints on China's steel exports.

Looking at the data of the China Manufacturing Purchasing Manager Index released by the China Federation of Logistics and Purchasing and the National Bureau of Statistics Service Industry Survey Center in September 2024, the new export order index of China's manufacturing industry in September was 47.5%, a decrease of 1.2 percentage points from the previous month, and fell again in the contraction range, reflecting that the overseas demand for manufacturing in the later period will continue to bear pressure.

3. The supply of overseas steel markets continues to grow year-on-year, constraining steel exports

In August 2024, the global crude steel production showed a year-on-year decline. The monitoring data from the World Steel Association shows that the crude steel production of the 71 countries included in the World Steel Association's statistics in August 2024 was 144.8 million tons, a year-on-year decrease of 6.5%. Among them, Africa's crude steel production was 1.9 million tons, a year-on-year decrease of 7.2%; Asia and Oceania's crude steel production was 107.1 million tons, a year-on-year decrease of 8.0%; the EU (27 countries) crude steel production was 9.1 million tons, a year-on-year increase of 2.2%; other European countries' crude steel production was 3.7 million tons, a year-on-year increase of 8.4%; the Middle East's crude steel production was 3.4 million tons, a year-on-year decrease of 3.2%; North America's crude steel production was 9 million tons, a year-on-year decrease of 3.8%; Russia and other Commonwealth of Independent States + Ukraine's crude steel production was 7 million tons, a year-on-year decrease of 8.7%; South America's crude steel production was 3.6 million tons, a year-on-year increase of 0.8%.Looking at the crude steel production outside of China, it still shows a year-on-year growth trend, but the growth rate has significantly narrowed. Data monitored by the Lange Steel Research Center shows that in August 2024, the global production of crude steel in regions other than China was 66.9 million tons, a year-on-year increase of 1.1%, with the growth rate falling by 2.1 percentage points compared to the previous month. The recovery of overseas supply will continue to constrain the scale of external demand for steel in China.

4. The export order index of China's steel enterprises is still operating in a contraction range.

In terms of export orders, the export order index of China's steel industry has rebounded slightly; the new export order index for steel enterprises surveyed by the China Federation of Logistics & Purchasing (CFLP) in September 2024 was 44.0%, an increase of 2.7 percentage points from the previous month; the new export order index for steel distribution enterprises surveyed by the China Metallurgical Industry Association & Lange Steel Network was 52.1%, an increase of 8.8 percentage points from the previous month. Although the export order index of the steel industry has rebounded, the new export order index of steel enterprises is still operating in a contraction range, and the export of steel in China will still face pressure in the later period.

5. The appreciation trend of the renminbi suppresses the competitiveness of steel exports.

Since the third quarter of this year, especially in September, "strong appreciation" has become the main theme of the renminbi exchange rate. Data shows that as of the close on September 30, Beijing time, the offshore renminbi against the US dollar has risen by 2,900 basis points, an increase of about 4%; the onshore renminbi against the US dollar has risen by more than 2,500 basis points, an increase of about 3.44%. The appreciation of the renminbi in this round is mainly driven by the resonance of internal and external changes such as the Federal Reserve's interest rate cuts and the increase in counter-cyclical policy supply, as well as market sentiment that has also formed a strong disturbance to the renminbi trend in the short term. The appreciation of the renminbi will weaken the competitiveness of China's steel exports.

6. The increase in trade frictions in the steel industry will suppress China's steel exports in the later period.

In September, Brazil, South Korea, South Africa, the United Kingdom, and India successively initiated 7 trade remedy investigations against China's steel products. On September 2, Brazil initiated an anti-dumping investigation against Chinese galvanized and galvalume coil; on September 6, South Korea initiated an anti-dumping investigation against Chinese hot-rolled stainless steel plate; on September 19, Brazil initiated an anti-dumping investigation against Chinese color-coated plate; on September 20, South Africa initiated an anti-dumping investigation against Chinese flat-rolled products and section steel; on September 25, the United Kingdom initiated an anti-dumping investigation against Chinese tinplate; on September 27, India initiated an anti-dumping investigation against Chinese cold-rolled non-oriented electrical steel. Since October, Guatemala and South Korea have initiated anti-dumping investigations against Chinese galvanized plate and medium-thick plate. According to data monitored by the Lange Steel Research Center, since this year, there have been a total of 27 trade remedy investigations initiated by other countries against China's steel products, and the increase in trade sanctions will suppress China's steel exports in the later period.

In summary, the factors restricting the export of steel in China are gradually emerging. In the short term, due to the export of steel breaking the 10 million ton mark in September, the current export orders are being delivered faster, and the base number for the same period last year is relatively low (the export volume of steel in October 2023 was 7.939 million tons), so the export of steel in October is still expected to maintain a year-on-year growth trend.