China’s total export of steel products to ASEAN averaged only 1.5 million tonnes per annum between the period 2000 and 2003. The volume increased to 4.9 million tonnes in 2004. In 2006, China, for the first time, became a net steel exporter and the volume of steel exports to ASEAN surged to 10.4 million tonnes in that year.
In 2009, largely spurred by strong domestic demand, China’s steel exports to ASEAN dropped significantly, by more than 50% year-on-year. However, China’s steel exports to ASEAN started to surge again in 2010 and the volume has been expanding continually ever since.
In 2013, China overtook Japan to become the largest source of steel import in ASEAN, with a total volume of 15.9 million tonnes and accounting for 30% of the region’s total steel import in that year. Its share increased to 42% in 2014 and jumped further to 52% in 2015. With total import volume of 31.9 million tonnes, ASEAN was the single largest destination for China’s steel exports and accounted for some 28% of the country’s total volume of steel export to the world in 2015.
China’s total steel export volume to the world recorded an all-time high of 112.4 million tonnes in 2015, up 20% year-on-year. Its export volume continues to surge this year, increasing by 6.4% year-on-year during the period January to May to reach 46.28 million tonnes. In the same period, its rate of increase in export volume to ASEAN was even higher, at 28% year-on-year. The ASEAN countries absorbed a total of 15.7 million tonnes, or 34% of the total volume of Chinese steel export to the world in the first five months of this year.
Many countries across the globe are intensifying their efforts in instituting various trade measures to shelter their domestic markets from the influx of Chinese steel exports. Of special notes are the actions taken by the governments in USA, EU and India. The steel associations in the USA and EU are pressuring their governments not to accord Market Economy Status (MES) to China come December 2016 so that they can continue to impose high import duties on China’s steel exports. As an example, the US Commerce Department recently imposed a final anti-dumping duty of 265.79% on Chinese cold rolled steel on top of a countervailing duty of 256.44%, making the total duty in excess of 500%! India, on the other hand, has imposed minimum import prices (MIP) on a range of steel products for a period of six months effective 5 February 2016, which are very effective in blocking out imports. And the steelmakers in India have recently been reported to be pushing for an extension of the MIP scheme which is scheduled to end on 4th of August this year.
While several governments in ASEAN have also been active in taking trade actions against Chinese steel exports, they have not been able to stem the tide of steel exports from China into the region. With the closing of markets in many parts of the world for Chinese steel exports, it is not inconceivable that more and more of such products will find their way into the ASEAN market, thus threatening the survival of the regional steel industry.
In light of the above developments, it is not surprising that many steelmakers in ASEAN are watching nervously the situation of the Chinese steel industry and how it would evolve in the near term. Of particular interest are the actions taken by the Chinese government in making good its intention of cutting down the excess steel production capacity in the country. While the weakening domestic demand amid a cooling economy has forced many steel producers in China to look for export markets, it is the chronic excess steel production capacity in the country, estimated to be in the region of 350 million tonnes, that is the core of the problem.
While there are some positive news, for example the setting up of a Yuan 100 billion fund to aid the elimination of excess steel production and coal mining capacity and the announcement by a senior government official that China is looking to eliminate up to 45 million tonnes of crude steel capacity this year, much more still needs to be done before China can meet its target of eliminating 100-150 million tonnes of steel production capacity come 2020. The entire steel fraternity throughout the world will be watching closely the developments.
TAN AH YONG