China’s steel exports will hit the highest level in eight years

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China’s steel exports are set to hit an eight-year high this year, flooding the world with cheap supplies and threatening to inflame global trade tensions.

Exports from China, the world’s biggest steel producer, are expected to top 100 million tonnes in 2024, the highest since 2016, according to Shanghai-based consultancy MySteel.

“Steel exports have been at historic highs so far this year,” said Vivian Yang, chief editor at MySteel. It forecast total steel exports to be 100-101 million tonnes for the full year, the third-highest level on record.

A drop in domestic demand in China, which accounts for more than 50% of global steel production, has prompted producers to export more material, especially to Southeast Asian countries and increasingly to Europe .

“China has flooded the world with steel and pushed prices down,” said Ian Roper, commodities strategist at Astris Advisory Japan, a consultancy.

Roper expected countries to fight back in an attempt to protect their domestic steelmakers from competition from the world’s largest producer. “More and more trade cases” will be filed against China in the coming months, he said.

The cases could lead to higher tariffs on Chinese steel, which faces tariffs in several countries.

A growing cohort of emerging market economies, such as Mexico and Brazil, have already raised tariffs this year, while others, such as Vietnam and Turkey, have launched new investigations.

The US tripled its tariffs on Chinese steel this year, while in May the EU launched an anti-dumping investigation into Chinese tin-coated steel products. Canada announced new steel tariffs last week.

On Thursday, the China Iron and Steel Association, which represents the country’s major state-owned mills, urged steelmakers to end “vicious competition” and accused them of “relying on ‘price wars’ to gain market share.”

The association’s China Steel Price Index fell to a near eight-year low as of Aug. 16. In Europe, spot prices for hot-rolled coils have fallen by almost a fifth since the start of the year.

A slowdown in construction and economic activity in China has caused domestic demand to fall, while steelmakers have been slow to cut output, leading to oversupply.

In a signal of Beijing’s concern over the issue, the Ministry of Industry and Information Technology suspended approvals for new steel mills in August.

China’s steel shipments to Europe are also expected to increase in the coming months, particularly for hot-rolled coil, which is used for products such as automobiles and cars.

“We will see an increase in the coming months,” said Colin Richardson, head of steel at Argus Media, a provider of commodity price data, adding that China’s exports of hot-rolled coil had increased over the past 12 months.

Although Europe imposes high tariffs on Chinese steel of at least 18.1%, China’s domestic hot-rolled coil prices have recently fallen to a point where they are competitive in Europe, even with the additional duties.

Daniel Hynes, senior commodities strategist at ANZ Research, the research arm of one of Australia’s biggest banks, said Chinese steelmakers, which typically exported 7 to 10 percent of their total output, had benefited this year on the back of relatively strong demand in Europe and Asia.

“Especially as we see manufacturers in some of those regions, like Europe for example, suffering from higher energy costs. . . that opened the door for Chinese steelmakers,” Hynes said. But he added that there had been some signs in recent months of a softening in global demand.

Baowu Steel Group, the world’s largest steelmaker, warned in August that the steel sector faces a long and cold winter that will be worse than previous steel crises in 2008 and 2015.

China’s steelmakers are deep in the red, racking up losses of RMB 2.8 billion ($390 million) in the first seven months of this year, official figures show. According to MySteel, only 1% of China’s steel mills are profitable.

Data visualization by Leslie Hook and Aditi Bhandari