Asian ferrous markets turn cautious after China’s export licensing move

Asian ferrous markets turned cautious after China confirmed it would implement export licensing for a wide range of steel products starting Jan. 1, 2026.

Regional market participants said the move, likely aimed at curbing non-value-added tax exports, has prompted buyers across the region to reassess their procurement plans amid already subdued year-end demand.

Some China-based traders suggested this could trigger a rush to export, while others noted that the short timeline may impede effective implementation.

A Northern China mill source said the move may impact domestic trade if non-VAT exports are no longer feasible.

"This development is certainly favorable for the export market, but for the domestic market, the volume previously allocated for non-VAT exports may need to shift toward domestic sales," the source said.

A Hangzhou-based trader highlighted that non-VAT offers have been reported at around $15-$20/mt below regular levels, particularly for hot-rolled coils, which is weighing on the price upside.

Following the policy announcement, non-VAT inclusive cargo spot offers were heard to have largely retreated from the seaborne market on Dec. 15, with regional market participants heard continuing to monitor from the sidelines for greater price clarity.

The absence of previously competitive non-VAT inclusive offers was also heard sparking upward momentum in steel prices in the near-term, the participants said, noting that the long-term impact on steel prices stemming from the policy remains to be seen.

"[On spot pricing], we're currently seeing the most impact on coated steel prices from the announcement; we're seeing an increase of $30/mt in prices for Zinc-Aluminum-Magnesium (ZAM) coated steel in Thailand as compared with previous orders, with Chinese-origin offers today at $565/mt CFR Thailand for February shipment," said a Thailand-based trader Dec. 15.

A source from a mainstream Chinese mill said sentiment had already become cautious following unverified talks of the licensing requirement last week.

A Singapore-based trader commented on the broader implications, saying, "China will have to consume more of its steel if it wants to enforce any quotas or restrictions. But if they consume it and export higher value white goods like cars or home appliances, the question is how much more can buyers absorb."

Limited impact on raw materials

On the raw materials side, market participants said the move could support non-China steel markets and, in turn, underpin raw material prices.

"This will help the non-China steel markets and support coking coal prices. Many plants, such as those in Chile and Mexico, have been burdened by Chinese steel exports," a Singapore-based coking coal trader said.

Others, however, pointed out that any sustained reduction in Chinese steel exports would eventually weigh on raw material demand if it is followed by lower steel output.

"If China moves to reduce steel exports, and this is perhaps followed by a reduction in steel production, it might weigh negatively on raw material demand. Though this might be something positive for other markets outside China," a second Singapore-based coking coal trader said.

A Beijing-based iron ore trader said the impact on raw materials is likely to be short-lived, considering how the iron ore market has already retraced earlier gains on Dec. 15.

Echoing this view, a Shanghai-based iron ore trader said the impact on the raw material remained limited.

"The impact is there but short-term. It mainly affects export-linked buying, and with domestic raw material cost advantages still present, the impact on raw materials is limited," the source said, adding that seasonal factors are also weighing on demand.

"Snowfall and maintenance outages during this period are capping raw material demand, and procurement is already on the lower end," the same source said.

Short-lived optimism expected

Regional market participants expect the move will have a short-term impact on steel prices in Asia.

A Vietnam-based mill source said the policy would help address the low-priced Chinese offers that have plagued the region and weigh on steel prices.

The source added that the removal of non-VAT offers would also "level the playing field" among Asian mills.

An India-based mill source said that tighter regulations on Chinese exports could make Indian steel more competitive in key markets, potentially easing domestic oversupply and boosting export opportunities.

However, he said this optimism may be short-lived.

"People have already booked for the holiday season, so I don't think there will be any rush to buy, especially given the price uncertainty," the source added.

A Mumbai-based trader agreed, saying that Indian domestic prices were holding firm following the news, but are unlikely to sustain due to the seasonal slowdown in demand.

A second Mumbai-based trader said, "It's not that China is restricting exports, it's just introducing a licensing requirement. Initially, it might make Indian exports more competitive if there is a significant uptick in Chinese export offers because of this licensing rule, but in the long run, I do not think there will be much impact."