Chinese steel trade turnaround creates tensions

All the world's steel markets are being affected by the upsurge in Chinese exports that has taken place over the last two years. Taking statistics for carbon steel finished rolled products (omitting stainless and alloy steels, as well as semi-finished products in all qualities), China's exports surged from 10.5 million tonnes in 2004 to a likely total of more than 30 million this year. Over the same period, imports dropped from around 25.5 million to a probable 16 million tonnes in 2006.

In 2004, all regions except America were net exporters to China.

In 2006, all except Eastern Europe will be net importers from China.

Our analysis shows a varying impact according to region and according to product.

The biggest effect has been seen in the nearby markets of Asia.

In 2004 the rest of Asia had a 9.7 million tonne positive trade balance with China.

The European Union was also a net exporter to China in 2004.

But this year the EU will have a negative trade balance projected at 4.8 million tonnes.

America had a small steel trade deficit with China in 2004 - less than 0.5 million tonnes - and this year that has 'ballooned' to over 4.4 million tonnes.

In China's trade with Asia, both flat and long products have contributed to the turnaround in the export-import balance.

For hot rolled coil, shipments to Asia have almost doubled since 2004.

There has been a similar increase in bars and wire rods, while exports of hot rolled plate have more than tripled.

China's imports from Asia have seen a declining trend since 2004.

China's exports of hot rolled and coated coil to America have risen since 2004.

The increase has been particularly marked in coated material which has seen a fivefold jump.

The largest tonnage is wire rod.

This product has almost doubled in two years.

Most of China's imports from this region are strip products, and this trade has seen a precipitous decline since 2004.

Shipments of cold rolled and coated coils have tumbled by two thirds, while hot rolled coils are down by about 85%.

In China's trade with the EU, the biggest increases in exports have been hot rolled and coated coil (up fivefold since 2004), with plate up from a few hundred to over 1 million tonnes.

China's imports from the EU have declined in all products except hot rolled sections.

Such a massive turnabout in global steel trade is bound to create tensions.

If voluntary restraint cannot be made to work, we are likely to see dumping action against China in the short term.