China’s steel exports are poised to experience a significant decline in the second quarter, exacerbating the already bloated domestic supply, according to analysts and industry traders. This downturn is being driven by ongoing trade tensions and rising protectionism, which have undermined key export markets.
Shipments from the world’s largest steel producer and exporter are forecast to decrease by up to 20% compared to the first quarter, with analysts predicting the decline may extend into the latter half of the year. This marks a reversal from the same period in 2024, with exports expected to fall below year-ago levels.
The reduction in exports is attributed to two main factors: U.S. tariffs, which have disrupted transshipment trade—where third countries re-export Chinese steel to the U.S.—and new tariffs imposed by major customers like South Korea and Vietnam to prevent steel from being diverted into their markets.
One anonymous Chinese steel trader remarked, “It’s certain that total exports will slide in Q2. The Middle East, Africa, and South America could serve as alternative markets, but no country can absorb the vast scale of China’s steel capacity.”
Rising steel exports have partially offset domestic demand weakness, particularly in the struggling property sector. A decline in exports would result in more steel flooding the domestic market, further depressing prices, reducing steelmaker profitability, and weakening their demand for inputs like iron ore.
In the first quarter, exports surged to their highest level since 2016, as mills rushed to ship steel before anticipated tariffs were imposed. However, the protectionist backlash resulting from the U.S.-China trade war has been more severe than many in the industry expected.
The Chairman of Baosteel, China’s largest listed steelmaker, acknowledged last month that the sector faces “unprecedented” pressures, with more steel remaining in China likely to worsen the oversupply situation.
Overseas orders for one of China’s largest steel exporters dropped between 20% and 30% in April, compared to the previous month, according to a survey conducted by consultancy Mysteel.
The trade war’s impact may also extend to other industries reliant on steel, such as electric vehicles and home appliances. Ge Xin, Deputy Director at consultancy Lange Steel, warned that the effects on steel demand could become more apparent in the second quarter, as the domestic demand season slows, further intensifying the supply glut.
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