The Chinese government has withdrawn the operational licenses from 29 steel mills and required operating changes from a further 40, Reuters reports. That is part of the broader policy of reducing steel over-supply with a 5% cut targeted for 2017, as outlined in Panjiva research of March 6. It may also help reduce supplies to the U.S., which have already fallen 61% ahead of the recently launched “section 232” investigation by the U.S. Department of Commerce.
Panjiva data shows that steel export discipline may have begun to fail. While exports fell 9.4% in 2016, and 3.2% in the fourth quarter, they increased by 11.9% in February. That came despite a 4.6% reversal in shipments to the U.S., and the lowest exports of rod and strip products since at least January 2013.
STEEL DISCIPLINE STARTING TO BEND
Chart segments Chinese steel exports by product type (upper panel, based on HS categories) and by country of destination (lower panel) Source: Panjiva
Shipments to the U.S. are far from the most important for Chinese manufacturers, however. Indeed, they have already come under pressure in other quarters including the European Union. Panjiva analysis of 4,100 country-product combinations show the most lucrative lines include: hot-rolled wide coil to Vietnam; hot-rolled bars to South Korea; and painted flat-rolled products across six countries including Indonesia. They may be at risk of disruption from new trade cases, though with Chinese manufacturers having acquired assets across Asia that risk may be reduced.
DIVERSE STEEL SALES, FOCUSSED PRODUCT RISK
Chart segments Chinese steel exports by product type and country of destination. Source: Panjiva