Each year, China produces more steel than the rest of the world combined. They are producing about one billion tonnes of steel per annum. Most of these steels are used inside China. China Steel exports are rather small compared to its domestic use, still the exports are tremendous compared to global production excluding China. In 2023, Chinese Steel export hitted 90 million tonnes, up 35% from the previous year. That may be a small portion of China’s total production, but it is more than what America or Japan produce in a year.
With China’s economy ailing, its steelmakers are selling abroad at low costs. Last month, Japan’s largest steelmaker, Nippon Steel, asked the Japanese government to apply anti-dumping taxes on Chinese imports. In the June quarter, its net profit fell 11% year on year. ArcelorMittal, Europe’s steelmaking powerhouse, has been hammered even harder: its net profit for the same period fell by 73%. “We want fair competition, and we know that the competition against China is not fair,” says Genuino Christino, the company’s CFO.Â
This also means that consumers and property builders are enjoying affordable prices. But steel production is perhaps the emblem of each country’s industrial capacity. And the politicians are more worried about their domestic steel companies and the workers.
According to Isha Chaudhary of Wood Mackenzie, a consulting firm, only around 1% of China’s 250 steel factories that submit their finances to the government made money in August. The domestic price for hot-rolled coil steel, a benchmark product, has dropped by 16% in the last year. Despite the price drop, many of the country’s manufacturers have been hesitant to reduce output; idling a blast furnace takes months and is typically more expensive than keeping it operational. Steelmakers are exploring overseas as demand from their typical consumers at home dries up.
Steelmakers in poorer countries are now starting to complain about Chinese exports. In August, Thachat Viswanath Narendran, CEO of Tata Steel, India’s largest steelmaker, complained about “predatory pricing” by Chinese businesses. Governments are taking notice. This month, India placed tariffs of up to 30% on some Chinese steel products. Brazil, Mexico, Thailand, and Turkey have also imposed duties on Chinese steel this year. Vietnam, the largest export destination for Chinese steel, is also conducting anti-dumping investigations.
Source: Economist
