China's net steel import approaches zero

China’s net steel import approaches zero

After several rounds of steel import and export increases and decreases during the first half of 2005, China's steel trade balance has begun to equalize. China has imported 10.7 million tons of steel products through the first five months of 2005 compared to 15.6 million tons the previous year, a 31.5 percent decline. Furthermore, China's net steel import has dwindled to 1.157 million tons in the first quarter compared to 10.5 million tons a year ago. Wu Xichun, former chairman of the China Iron and Steel Association (CISA), commented that China has almost reached the point where it will become a net exporter of steel instead of a net importer. China's steel exports began to take off in April 2004. It was not until that point that China's rapidly expanding domestic industry began to churn out enough steel to keep pace with the growing demand. China's steel exports exceeded imports for the first time in September 2004. Chinese steelmakers added a total of 50 million tons of capacity in 2004, and related data show that 45 percent of the newly added steel output was used to substitute import and export, while only 55 percent was used to meet domestic market demand. This situation extended into the first quarter of 2005, when 15 million tons of new capacity was added. Of that new capacity, 80 percent has been used to expand exports and substitute imports, while less than 3 million tons have been used to meet new market demand. This suggests that China's market volume for increasing steel output has shrunk and an oversupply situation has become prominent. An abundance of product in the domestic market, especially wire rod and rebar, meant that China's domestic steel prices have plummeted since the beginning of the year. At the moment, rebar prices have fallen below RMB 3'000/ton ($362/ton), while HR sheet prices have dipped below RMB 4'400/ton ($532/ton). Since domestic prices of Chinese products are still below the international average, exports of flat products especially have begun to surge in the past few months.