Shougang: China long products in the international market

At the recent 55th Irepas meetings and SteelOrbis Fall 06 Conference Ms. Jin Ying on behalf of Mr. Gao Yujun, gave a general introduction about China long product exports. Mr. Gao Yujun's presentation emphasized, given the influence of the macro-controls implemented by the Chinese Government and the self discipline of the Chinese steel mills, exports of rebar and wire rod from China are not expected to affect the international market. This argument is supported by the figures which underline that the growth rate of export volumes is not as high as the growing production volumes of the products in question. Production volumes of rebar and wire rod have continuously increased since 2004.

Production   vs exports (mio mts)

Years               Rebar                            Wire rod
              Output      Export                Output       Export

2004          57.71         1.16                50.18         2.36 
2005          67.76         1.74                60.51         3.11
2006*         28.05         1.26                22.29         2.40

* 2006 figures for the first six months. The above figures represent China's total production of major long products and the proportion of the country's exports to such massive production quantities. Exports in 2004 constituted 2% of total Chinese rebar production, growing to 2.57% in 2005 and 4.50% in the first half of 2006. For wire rods, ratios are little higher – the figures being 4.70%, 5.14% and 10.7% respectively for 2004, 2005 and the first half of 2006. In Mr. Gao Yujun's paper, it was remarked that export ratios have been very low since 2004, and the growth rate of export ratios are not sharp, although the production continued to grow very fast. In terms of export destinations, Asia constitutes the major market for Chinese rebar and wire rods. China has started to export some rebar tonnage to the EU countries this year. It is likely that China will enter the Middle East and Arabian markets to meet the demand in these regions. More than 60% of Chinese wire rod exports goes to Asian countries while 30 percent goes to the US and Canada where mesh and drawing quality wire rods are widely used. The main reason Chinese exports will not have a major impact on the international market is the huge demand in the home market, according to Mr. Gao Yujun's paper. This situation is not expected to change before 2010, i.e. the Eleventh Five-Year Plan period. As long as the favorable development in the global economy is not reversed, the high price level in the steel market is not expected to change during the last quarter of this year and also in 2007. Mr. Gao Yujun expects a minor fall in the flat rolled prices in Q4 and a bigger one in 2007, while expecting a better price trend for longs compared to flat rolled. The high prices of raw materials are seen as a factor which will help keep steel prices at high levels. Mr. Gao Yujun is the director of China Shougang International Trade Corp., in charge of the export of Shougang steel products. He has been engaged in the international steel trade and Chinese steel exports for many years.