Annually, China produces as much steel as the rest of the world combined, with about 1 billion tonnes. While most of this production remains domestic, a significant surge in exports has been recorded recently, with China exporting 90 million tonnes in 2023, a 35% increase from the previous year. This amount of steel could construct a thousand Golden Gate bridges, illustrating the massive scale of production.
Amidst economic struggles, Chinese steelmakers have been exporting their surplus at low prices, causing distress among international competitors and stirring political concerns. For example, Japan’s largest steelmaker, Nippon Steel, has advocated for anti-dumping duties on Chinese steel as its profits declined by 11%. Similarly, Europe’s steel leader, ArcelorMittal, reported a 73% drop in profits, emphasizing the need for fair competition against China’s low-priced exports.
Historically, surges in Chinese steel exports have led to increased trade barriers from Western nations. From 2008 to 2018, countries like the USA, Britain, Canada, and the European Union imposed over 500 trade measures against Chinese steel. This pattern is likely to continue given China’s current economic downturn and the global reaction.
China’s steel industry faces its own challenges with barely 1% of steel mills reporting profits and a 16% drop in domestic prices for benchmark hot-rolled coil steel. Despite this, producers are hesitant to reduce production due to the high costs associated with shutting down blast furnaces. Consequently, Chinese steelmakers have turned to international markets.
This shift has triggered a new wave of tariffs. Canada, for instance, recently imposed new levies on Chinese steel, and the U.S. introduced a 25% duty on steel from Mexico not melted and poured in North America to block indirect Chinese imports.
The impact extends beyond wealthy nations, with most Chinese steel now heading to the developing world, which still has a robust demand for the material. India, for example, expects an 8% increase in steel consumption due to infrastructure investments. Yet, complaints about Chinese pricing tactics have emerged from major producers in these regions too, such as India’s Tata Steel, leading to protective tariffs from countries like India, Brazil, Mexico, Thailand, and Turkey.
In response to both internal economic pressures and international trade challenges, the Chinese government has initiated measures to stimulate domestic demand and curtail new steel mill approvals. However, significant reforms are needed to balance production with global demand, as more Chinese steel capacity is expected to come online than be decommissioned by next year.
Thus, Chinese steelmakers continue to seek new markets and are investing in production facilities abroad to maintain access to global markets, like the expansion by China Baowu Steel in Saudi Arabia and new operations by Tsingshan Group in Zimbabwe. This strategy helps manage the surplus and supports global employment but perpetuates the industry’s challenges. As stated by James Campbell from CRU Group, “Steel will always find a home,” regardless of political resistance.
