BLOG: Will China flood overseas with steel AGAIN?
Well, I am not surprised at the question, but I think the context has changed so much now against 2015 that there are no longer the chances for history to repeat itself in the strict sense. Without going into details yet, the first question that comes to my mind is “even if China would like to sell, who will be buying?”.
The virus has no mercy on a single country, spreading the pandemic in over 200 countries with over 3 million confirmed cases and over 200,000 deaths, and the blow on the national and regional economies, thus, has been even and huge in scale.
In the context like this, many of the countries are more worried about job losses, economic contractions, their medical system sustainability than any construction projects, whether it is property, commercial housing or infrastructure, for example.
The ASEAN countries including Singapore are still in a lockdown mode, and Singapore, for example, announced on April 21 to extend its Circuit Breaker measure by another four weeks until June 1, though some of the businesses are allowed to reopen for business gradually. By the end of April, only 17% of workforce had been allowed to work in the offices, while the dominant majority had been working from home since April 8 when the government imposed the Circuit Breaker.
(A deserted metro station construction site in Singapore)
Many countries including those in Europe and the U.S. are planning to resume normal orders bit by bit starting May, but the uncertainties are always hanging in the air as whether the gradual restart will be continuing as planned or another outbreak cycle will throw these countries back to the square one.
China was the first to be hit and also the first to be on the path to normality, and it has taken the country about three and a half months to bring everything back onto their due courses barely at the start of May after the country had adopted stringent lockdowns and requested citizens to wear mask compulsorily and later on not to step out of door unless necessary and one family member only at one time.
The other countries that have not implemented as strict measures may find the progress of returning to the normality take even longer.
The ASEAN countries are China’s top steel export destinations, more flats than longs, but when all are in a similar situation with many citizens are even unable to go to their offices or worksites, I do not think resumption of steel consumption will be very much on the government agenda or happening overnight.
On the other hand, China’s steel mills may well rely on its domestic sales, just as it has always been doing for 90-95% of their steel products, as the domestic steel market appears to have returned normal track both for demand and supply as of now, as in comparison, China now has been the only country in the world to have started consuming steel steadily.
(China’s daily construction steel trading among 237 traders), Source: Mysteel
It is a
fact that steel inventories both at the traders and steel mills are still much
higher than a year ago after having declined slowly since mid-March. As of
April 24, Chinese traders in 35 cities were holding 10.8 million tonnes of
rebar, about 4.05 million tonnes higher than a year ago, and 137 producers 4.3
million tonnes, or 2.35 million tonnes higher than April 2019.
(Rebar inventories at producers (red line) and traders (blue line)), Source: Mysteel
However, if it turns out to be true that many economies in the world have been thrown into the negative growth zones by the pandemic, China will probably be the only rescuer to its steel mills as the central government has made it clear that it will expand government spending substantially just to avoid its economy from falling into a negative GDP growth for 2020.
In the first quarter of 2020, China’s steel exports declined 16% on year to 14.3 million tonnes, with the decrease steeper than the 7.3% on-year for 2019.
Written by Hongmei Li, li.hongmei@mysteel.com
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