China’s steel exports are anticipated to decline significantly in the second quarter of the year, a development that could worsen the existing oversupply of steel in the domestic market. Analysts and traders indicate that shipments from the world’s leading steel producer could drop by as much as 20% compared to the first quarter, with expectations of further decline later in the year. This downturn would result in second-quarter exports falling short of levels seen during the same period in 2024.
The decline in steel exports is attributed to the stringent tariffs imposed by the United States, which hinder the transshipment trade. This trade involves third countries that typically resell Chinese steel to the U.S. Additionally, key markets like South Korea and Vietnam are enacting their own duties to prevent Chinese steel from being rerouted and dumped in their markets. A Chinese steel trader noted the certainty of a decline in total exports for the second quarter, while pointing out that alternative markets in the Middle East, Africa, and South America cannot adequately absorb the excess capacity.
As steel exports wane, the redirected steel is expected to flood the domestic market, pushing prices down and squeezing the profitability of steelmakers. This could lead to decreased appetite for raw materials, such as iron ore. The first quarter saw record exports as mills hurried to offload steel ahead of anticipated tariffs, but the industry’s expectation of backlash from these exports has been surpassed by the extent of protectionism stemming from the ongoing trade war between the U.S. and China.
The pressure on exports is now described as “unprecedented,” according to the chairman of Baosteel, China’s largest listed steelmaker. A recent survey revealed that orders from overseas for a major Chinese exporter dropped by 20% to 30% in April compared to March. Concerns are also rising that the trade conflict may extend to other steel-dependent products, such as electric vehicles and home appliances, posing potential challenges to another key source of steel demand beyond the property sector.
The repercussions of the trade war are expected to gradually influence the upstream steel market, particularly evident in the second quarter when domestic demand typically declines, intensifying the supply glut situation.