Analysis-China steel exports poised for record high, risking further tariff backlash

BEIJING (Reuters) -China’s steel exports are set to hit an all-time high this year, defying predictions that unprecedented trade barriers would drive down shipments, and threaten to provoke an even fiercer protectionist backlash against the world’s dominant producer.

Exports will grow 4% to 9% this year to hit between 115 million and 120 million metric tons, according to forecasts from 11 analysts, all of whom had forecast earlier this year that exports would fall.

Record exports from China, which produces more than half of the world’s steel, underscore how its steelmakers and traders need new markets for metal that can no longer be absorbed at home, where consumption peaked in 2020 before the collapse of the property market.

The drive also reflects worry among steelmakers that trade barriers will keep rising. Better to sell as much as possible now, the thinking goes, according to three analysts and a trader who spoke on condition of anonymity given the sensitivity of the issue in China.

But that fear risks becoming self-fulfilling as the export drive reshapes global flows and spurs countries to close off their markets to support domestic steelmaking.

Some 54 tariffs and other trade barriers have been initiated against Chinese steel from 2024, more than the total between 2019 and 2023, according to China Trade Remedies Information. Analysts say more exports will encourage further curbs.

The European Union said earlier this month it would find new ways to curb steel imports. Mexico on Thursday unveiled a plan to raise tariffs on Chinese imports, including steel.

PIVOT, PIVOT, PIVOT

Steel exports last peaked in 2015, before rising trade barriers and a property market boom in China that stoked demand for steel in construction reversed the trend. This time, steelmakers are maintaining exports in part by pivoting to new markets where barriers are lower or nonexistent.

China’s largest listed steelmaker, Baoshan Iron & Steel or Baosteel, said last month shipments to emerging markets in the Middle East, Central Asia and North Africa were growing rapidly, forecasting exports of 10 million tons this year.

The country’s steel exports to Saudi Arabia, Malaysia and Thailand climbed 24%, 14% and 13% respectively in the first seven months of this year from a year earlier. Malaysia imposed anti-dumping duties on some imports in July.

However, China’s exports to major trade partners Vietnam and South Korea, which have also imposed anti-dumping measures, fell by 20% and 10% in the first seven months, respectively, the state-backed China Iron and Steel Association (CISA) said in a note in late August.