China robust steel exports in March unsustainable, may fall in May-June: trade

China's total exports of semi-finished and finished steel in March reached the highest since June 2022, led by strong order bookings received in January-February. However, this momentum is expected to reverse in the coming months, declining notably in May and June, market participants said April 24.

In March, China's semi-finished steel exports reached 168,000 mt, jumping from only around 2,000 mt in the same period of 2022, according to China customs data. The daily export volume was almost 80% higher than the daily average in January-February, after rising by 39.1 % from December's average.

Total exports of semi-finished and finished steel in March were up by 63% on the year at 8.058 million mt, according to customs data. Over January-March, the total steel exports increased by 55% on the year at 20.427 million mt.

However, overseas orders have declined since March, and a sharp decline in Chinese steel prices in late April have pushed more buyers to the sidelines, market participants said.

Some of the sources expected China's total steel export volume to stay relatively high in April, but would drop in May and June.

"The strong exports were only temporary. The export market has become very quiet recently, as overseas buyers are in a wait-and-see mode, expecting the Chinese export prices to fall further amid the sharp decline in the Chinese steel futures," an exporter said.

"I think overseas buyers will come back for Chinese steel once the futures show signs of stabilizing. But it's hard to say when the futures could hit the bottom, unless there is some good news in the market, such as more steel output cuts or monetary stimulus," another exporter said.

Markets under pressure

The most actively traded October contract on the Shanghai Futures Exchange closed at Yuan 3,773/mt ($547/mt) on Apr. 24, down Yuan 454/mt, or 11%, from the end of March.

The export prices of Chinese SS400 HRC 3 mm thick fell by $45/mt, or 7%, from the end of March to $618/mt FOB China April 21, data from S&P Global Commodity Insights showed.

So far, steel output cuts by late April have remained on a smaller scale, as most mills either were operating at thin margins or currently found their losses bearable, sources said.

At current raw material cost levels, if domestic HRC spot market prices fell below Yuan 3,900/mt, steel output cuts would be widened as most steelmakers would have no marginal profits, some market sources expected. The domestic HRC price in Shanghai spot market was Yuan 4,100/mt April 21, according to S&P Global data.

The weakness in the Chinese domestic steel market, both spot and futures, was mainly due to sluggish end-user demand and bleak outlook, particularly for the steel demand in property and its related industries, some sources said, adding that mills would have to cut their production more to ease oversupply.

Meanwhile, China's semi-finished steel imports fell by 81.3% on the year to 161,000 mt in March, with daily figure down by 41.5% on the month, customs data showed.

Total imports of semi-finished and finished steel in the first quarter thus fell by 54.8% on the year at 2.597 million mt, also indicating a slow domestic demand.

As a result, China's net exports of semi-finished and finished steel in January-March increased by 140% on the year at 17.83 million mt.