China steel - In the Trade War,China Seeks to Sell More Steel to Africa and South America

Since the US steel tariffs came into effect officially in June,  Chinese steel producers have seen double-digit fall in shipments to their biggest overseas importers in Southeast Asia, so they are now seeking new export destinations in Africa and South America to make up the short.

The US-led trade war that escalated in March is mainly aimed at restricting steel imports from China. Despite the hindrance effected by the tariffs, US steelmakers believe Chinese steel products may still have flown into the United States via other countries.

In order to chop off this kind of alternative route, the US Commerce Department last month imposed hefty duties on steel products which were imported from Vietnam but originally produced in China, in an attempt to blow China’s second largest export market following South Korea.

This is said to possibly stop Vietnamese steel companies continuing the purchase of steel from China to avoid penalization on their exports to the United States.

While China’s April steel exports set a new high over an eight-month period, the volume for the first four months of this year saw a remarkable decline by 20 percent. Moreover, China’s steel exports to its top two markets, Vietnam and South Korea, have dropped by double digits since last year, as the country is facing more competition from other suppliers such as Russia.

Meanwhile, anti-dumping duties imposed by other buyers in the Southeast Asian region such as Thailand, Indonesia and Malaysia on Chinese steel products have also negatively affected shipments from China.

“It is increasingly apparent that export opportunities for Chinese producers are becoming increasingly limited, owing to existing trade legislation, lodged by many parts of the world,” said Chris Jackson, analyst with MEPS International Ltd, a UK-based steel consultancy.

As it is getting hampered to maintain the sale to the Southeast Asian market, more and more Chinese steelmakers are moving their eyes onto new destinations, of which South American and African countries get the most attention.

Last year, 8 percent of China’s steel exports flew into South America and Africa, and shipments to some countries there have much risen this year. For example, in the first quarter, China exported 15 percent more steel to Nigeria, the biggest economy and also the top buyer of Chinese steel in Africa, while its exports to Algeria triply rocketed.

For the South American market, Chinese steel products sold to Brazil saw a 40-percent sharp increase in volume, while those exported to Bolivia shot up nearly tenfold.

It is also favorable to China that fewer nations in Africa and South America have collected anti-dumping duties against Chinese steel products, including Brazil, Chile, Colombia and South Africa.

While Chinese manufacturers would benefit from the new markets to balance their steel exports, they may inevitably clash with native producers, such as in Brazil, or with sellers from Russia and elsewhere.

China exported 75.4 million tonnes of steel last year, far below a record 112.4 million tonnes in 2015, as the country’s infrastructure construction in full swing dramatically drove up domestic demand.

Still, the impact of the US-China trade conflicts on Chinese steel exports “should not be underestimated,” said the China Iron and Steel Association (CISA).

“If steel exports continue to decline this year, steel products would flow into the domestic market and that would worsen the situation of our own market,” CISA added.

LEAVE A REPLY

Please enter your comment!
Please enter your name here