Exports soar as domestic demand weakens

A worker at the Dalian branch of Dongbei Special Steel Group Co Ltd in October. [Provided to China Daily]

Steel exports soared 39.3 percent year-on-year to 65.34 million metric tons in the first nine months of 2014 as domestic demand remained soft and prices fell, the China Iron and Steel Association announced on Wednesday.

In comparison, China imported 11 million tons of steel, up 5 percent year-on-year.

"The Chinese government has never encouraged domestic steel companies to export since the industry is a large energy consumer and its priority is to meet domestic demand," said Zhang Changfu, vice-chairman of the association.

China exported 8.52 million tons of steel products in September, up 9.8 percent month-on-month.

For the first three quarters, the average steel export price was $783 a ton, down $74 a ton compared with the same period of last year.

Exports are mostly going to Asian countries, which account for about 70 percent of the total. China also exports high-end steel products to the European, United States and African markets.

The CISA estimates that China's full-year steel exports will surpass 80 million tons, accounting for about 10 percent of the national output. In previous years, exports only accounted for about 2 percent to 3 percent of total output.

Large volumes of low-end steel exports "will generate more trade friction, and will affect future exports. Thus, the authorities will adjust export policies accordingly," Zhang said.

Faced with a domestic economic slowdown and price gaps between local and foreign steel markets, however, Chinese steelmakers are increasingly turning to exports to raise their profits.

Wang Yingsheng, director of the market research department at the CISA, said that large steel mills such as Hebei Iron and Steel Group, Shagang Group and Baosteel Group, all have growing exports.

"China is no longer exporting just crude steel. Instead, Chinese companies' high-end steel products for the vehicle and shipbuilding industries are sold abroad at competitive prices," Wang said.

For the first nine months of this year, medium-sized and large steel producers reported an aggregate profit of 19.28 billion yuan ($3.15 billion), up 71.3 percent year-on-year.

However, Zhang said the profitability of steel companies is generally still low. The improvement in profit mostly reflected lower raw material costs.

Oversupply and slowing demand have driven down international iron ore prices.

China imported 699 million tons of iron ore in the first nine months, up 16.5 percent. Last month alone, iron ore imports rose 13.1 percent month-on-month to 84.69 million tons.