Chinese Steel Strong, Except for Exports

Written by Tim Triplett

Chinese steel production and consumption took a downturn in September, though they trended ahead of 2016 for the first three quarters of this year. China’s exports to the rest of the world are down considerably in 2017, however, according to data from the China Iron & Steel Association and Bradford Research.

Year to date, China’s crude steel production totaled 638.7 million metric tons, a 5.6 percent increase over the first nine months of 2016. Shipments for the year totaled 829.8 million tons, a 1.2 percent increase. Apparent consumption totaled 780.3 million tons for 2017, up 4.7 percent from last year. Exports of 59.6 million tons, on the other hand, showed a decline of 29.8 percent compared with 2016.

For the month of September, China’s crude steel production totaled 71.8 million metric tons, a 5.3 percent increase from September 2016, but down 5.0 percent from August. China’s September shipments totaled 93.6 million tons, a decrease of 1.8 percent from the prior-year period, and down 3.3 percent from September 2016. For the month, China’s apparent consumption increased by 3.6 percent to 89.7 million tons, versus last September, but declined by 1.7 percent versus the prior month. China’s September exports totaled 5.1 million tons, a 47.7 percent drop from September 2016.

The large declines in China’s steel exports may reflect greater domestic consumption by an economy that grew by more than 6.8 percent this year, but other contributing factors are unclear. China’s steel exports to the U.S. were limited to just 908,000 tons in the first three quarters due to high tariffs. The dips in September production, shipments and exports may reflect the Chinese government’s initiatives to shutter excess capacity, especially older, less efficient mills that contribute to air pollution in the winter heating months.

“The Chinese, for both pollution and political reasons, are cutting back during the winter months,” said analyst Charles Bradford of Bradford Research. He questions the accuracy of Chinese government data. “How could they produce 71.8 million tons of crude steel in September and ship 93.6 million tons with imports of just 1.2 million tons?” he asked rhetorically. He does not believe the Chinese intend to deceive, but rather can’t secure reliable data from the country’s many mills. Domestic shipments are most likely greatly overstated due to double-counting and miscalculation of yield loss. “I think the Chinese actually try, but they just don’t get it right. No one even knows how many Chinese mills there are,” Bradford said.

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