China May finished steel exports rise 15% on year amid sluggish domestic demand

China's finished steel exports rose 15.3% on the year and 4.4% on the month to 9.631 million mt in May, customs data showed June 7, amid sluggish domestic demand.

The exports reached their highest since 9.888 million mt in March, with the March volume being the strongest since July 2016. Steel exports may retreat slightly in the coming months but are expected to remain at elevated levels for the rest of 2024, trade sources said.

Strong exports

Over January-May, China's finished steel exports rose 24.7%, or 8.837 million mt, from a year earlier to 44.655 million mt.

Meanwhile, the country's May finished steel imports declined 3.2% on the month but gained 1% on the year to 637,000 mt. Steel imports over the first five months of 2024 fell 2.7% on the year to 3.043 million mt.

China's net finished steel exports over January-May increased 27.3% on the year to 41.612 million mt, according to customs data.

Some trading sources said that overseas buying for Chinese steel has recently weakened with buyers on the sidelines because of volatile prices in the Chinese market.

"But domestic steel prices appear unlikely to increase strongly from the current level in the foreseeable future, as a still-deteriorating property sector has continued to undermine domestic steel consumption ... as a result, steel exports should stay relatively strong through 2024," a trading source said.

Stronger supplies could put pressure on Chinese steel prices in June, benefitting the export market, some trade sources said.

Steel output

Chinese steelmakers' profit margins were decent currently and that may prevent steel mills from reducing production in June, when end-user demand usually tapers off due to seasonality.

Chinese domestic rebar and hot-rolled coil sales profit margins were around Yuan 100/mt and Yuan 200/mt, respectively, according to trade sources.

The average utilization at China's blast furnaces over June 3-7 was almost unchanged from late May at 88%.

Some trade sources said steelmakers were making healthy profits right now mainly because raw material prices have fallen faster than steel prices since late May, coinciding with sluggish demand from the construction and manufacturing sectors.

"China's current pig iron and crude steel output remains below the year-ago level, but domestic demand may be down even more than a year earlier, so the domestic steel market is likely to remain depressed," said a mill source.

The Chinese domestic HRC price was down Yuan 40/mt from end-May and Yuan 280/mt from the start of 2024 at Yuan 3,820/mt ($527/mt) on June 7, Platts data from S&P Global Commodity Insights showed.

Amid depressed domestic steel prices, the export price of SS400 HRC of 3 mm thickness was down $14/mt from late May and $44/mt from early January at $526/mt FOB China on June 7, according to Platts data.