General introduction to Chinese slab exports

SteelOrbis Shanghai Chinese slab exports have seen rapid growth since June, compared with the first half of the year. This rise has been fueled by the increasing production of old converters (such as Shagang, Jinan Steel and Laiwu Steel) and also by the production of new converters (e.g. Anyang Steel). Another contributing factor to the growth in Chinese slab exports is the sharp drop in flat rolled prices in the Chinese domestic market since July, while the international market continued to remain at a high level. Nevertheless, by the end of August, total slab exports this year were much lower than the corresponding period of the previous year, down 37.17 percent. As for the future, there are a number of factors that may affect Chinese slab exports. The first is the tax rebate, which has resulted in a remarkable increase in the export quotations of Chinese slab. Currently, the quotations of the various mills differ greatly, ranging from $420/mt to $470/mt FOB. According to market insiders, the trading volume has shrunk sharply. Secondly, it seems likely that supplies of Chinese slab will decrease in the coming period. Tangshan Steel commenced production on its medium plate line in October, while Shagang is due to start wide heavy plate production in the current period. Meanwhile, Rizhao Steel will put its hot rolled coil line into production by the end of November, and both Laiwu Steel and Jinan Steel have raised their hot rolled production by a large margin since October. Thus, there will be a gradual reduction in slab supplies from the above mills. Last but not least, there are also several converters being put into production in the current period so as to relieve the insufficient slab supply. For example, Anyang Steel has just commenced production on a 150-mt converter recently, while its hot rolled production line will not commence operations until March 2007. During the intervening period, the slab which Anyang Steel produces will be supplied to the market. Besides, Kunming Steel has also completed the construction of a 650,000 mt slab caster. Remarkably, the Chinese government is adopting a very strict approach as regards control of steel exports, especially of semis exports. Insiders in the China Iron and Steel Association (CISA) have indicated that if semis exports remain at the current high levels (more than 1 million mt/month), then the government is likely to hike export tariffs further. Nevertheless, demand is still a major factor in price determination. If the international market maintains its brisk trend in next year's second quarter, then Chinese semis exports will continue at a high level.