According to Italian maritime brokerage house Banchero Costa’s China Iron Ore and Steel Outlook report, there has been a recovery in steel production during the current year. In the first six months of this year, China’s steel output increased by 4.2 percent year on year to 419 million mt, according to the figures from the World Steel Association. Output from China’s steel mills has been supported by strong steel prices sustained by ongoing capacity cuts targeting low quality furnaces and by decent demand from construction and manufacturing.
The Banchero Costa report said that China’s steel exports decreased by three percent year on year to 109 million mt in 2016 and continued to decline in the first half of the current year by 28.4 percent to 41 million mt compared to the same period of 2016. The decline in steel exports has been largely attributed to improved domestic demand and Beijing’s resolve to tackle overcapacity. More stringent trade measures by importing countries have also contributed to lower Chinese exports. The report also stated that, if China’s steel prices remain high, if capacity cuts proceed and if domestic demand remains supported, lower steel exports could continue. However, regional trade may continue to be supported by infrastructure developments within the scope of China’s One Belt, One Road initiatives.
Meanwhile, in the January-June period this year, China’s iron ore imports increased by 9.2 percent year on year to 539.5 million mt, mainly due to increased steel output, a possible increasing quality of steel product output and iron ore stockpiling. However, downside risks are increasing for iron ore import volumes, including the potential for lower steel demand, high iron ore prices which may encourage destocking, and further increases in domestic output and competition from scrap.