MethodologyContact usLogin
A sluggish economic performance by China so far this year has led to reduced consumption of steel products inside the country. With the nation’s steel production stubbornly holding firm, Chinese mills have increasingly been exporting their excess output.
The tide of Chinese steel is affecting a raft of major markets. Low prices from China have led to large export bookings to major scrap buying nations such as Turkey, as well as seriously reducing prices in Southeast Asia, where mills are also exporting large volumes of steel.
The consequences of this domino effect are being felt as far afield as the Russian and Middle Eastern steel markets, while also affecting demand for raw materials such as ferrous scrap.
Massive destocking and price drops have been unleashed in the Chinese long steel markets over recent weeks due to a revision of rebar manufacturing standards by China’s Standardized Administration in June, to come into effect on September 25.
Sellers need to clear their existing stocks of rebar before September 25 because rebar produced to the 2018 standard will not comply with the regulations for sales after that date.
Chinese domestic rebar prices dropped to a seven-year low on July 25. This led to bearish sentiment in the steel market, with the prices for hot-rolled coil and semi-finished steel following the dive downward.
Fastmarkets calculated its steel hot-rolled coil index, export, fob main port China, at $495 per tonne on August 1. This compared with $518 per tonne on July 1.
In the first six months of 2024, China’s exports of HRC and steel sheet amounted to 13.70 million tonnes, up by nearly 58% from 8.69 million tonnes in the corresponding period of 2023, according to Fastmarkets’ calculations based on Chinese customs data.
China also exported 1.09 million tonnes of hot-rolled bar and rebar in the January-June 2024 period, up year on year by 100,933 tonnes, 11%, from 989,067 tonnes.
Chinese mills have reduced their output of rebar due to a lack of orders recently, but they increased their production of billet.
“The higher supply of billet will put downward pressure on billet prices, and steel mills are seeking export orders because domestic demand isn’t strong enough,” an exporter based in China said.
Despite the rise in exports and poor local consumption, Chinese steel output fell by just 1.1% year on year in the first half of 2024, to 530.6 million tonnes. But production in June 2024 actually increased year on year by 0.2% to 91.6 million tonnes, according to the World Steel Association (Worldsteel).
Concern about China’s influence on external steel markets has been mounting over recent months, but kicked into high gear in late July.
Fastmarkets heard that one Turkish steel mill purchased 45,000 tonnes of Chinese steel billet at $480 per tonne CFR Turkey on July 30, with a second mill in Turkey buying a 50,000-tonne cargo at $485 per tonne CFR.
Around 50,000 tonnes of Malaysian billet was also heard sold at $507 per tonne CFR Turkey in the second half of July.
Turkish steelmakers booked another 300,000 tonnes of billet from China at $500 per tonne CFR last week, in addition to at least 200,000 tonnes of imports from the same origin at $515 per tonne CFR in the previous weeks.
The growing competitiveness of steel billet against scrap can be seen when looking at Fastmarkets’ pricing histories. While Turkey is the largest importer of steel scrap in the world, its electric-arc furnace (EAF) operators are more than content to switch to rolling semi-finished steel when prices support that option.
But the mills have to export the same volume of finished long steel products to avoid the 22.4% import tax on billet imposed under the country’s inward-processing regime.
“Turkish steelmakers are buying this cheap Chinese billet under the inward-processing regime,” a trading source said. “These are really good prices, but I wonder how they will export [a similar] volume in such weak export markets. The Chinese billet will arrive in three months, and it is not certain that the export markets will be any stronger by then.”
Moreover, the cheap billet imports from China were also expected to put downward pressure on scrap prices soon, according to trade sources.
“The Turkish steel market has been very quiet recently. Cheap billet imports from China have made the situation worse. Scrap and rebar prices have not been affected much yet, but we may see the rock-bottom [of the market] if the mills stay away from the scrap markets for a couple of weeks,” a Turkish trading source said.
“Unfortunately, these Chinese billet sales have ruined the market,” a Turkish mill source said. “People stopped buying material. The Chinese material will arrive in three months. It seems that August and September will be worse. I see that traders are taking positions accordingly. Everybody is aware of the situation.”
The premium for Fastmarkets’ price assessment for steel billet, import, cfr main port Turkey, over the daily index for steel scrap, HMS 1&2 (80:20 mix), North Europe origin, cfr Turkey, was $108.85 per tonne on August 1. This was down significantly from a year-to-date average premium of $137.20 per tonne.
The recent inflow of cheap Chinese material into Turkey has added to the factors behind the already decreasing flow of Russian billet into the Middle Eastern country, trade sources said.
Russia traditionally was the key supplier of billet to Turkey. But after its invasion of Ukraine in 2022, and the growing pressure of western trading sanctions, the loyalty of Turkish customers has gradually eroded.
In the first half of 2023, the country imported a total of 3.24 million tonnes of semi-finished steel, of which 1.85 million tonnes, 54%, originated in Russia. Malaysia, China and Indonesia supplied 151,000 tonnes, 52,810 tonnes and 81,216 tonnes respectively, according to data from Global Trade Tracker (GTT).
Meanwhile, in January-June 2024, when Turkey imported a total of 3.18 million tonnes of semi-finished steel products, Russia’s share fell to 27%, 862,521 tonnes. At the same time, Malaysia increased its supply of such materials to Turkey to 929,182 tonnes, and Indonesia to 309,156 tonnes.
Chinese volumes were not significant in the first half of 2024, but now, with prices falling dramatically, their presence has already exceeded 2023 figures.
Market sources said that Russian suppliers can now only get new billet orders from Turkey in two situations: either they reduce prices below the level available from China, or they sell only small volumes with prompt shipment to the north of Turkey, where the majority of ports cannot accept large cargoes and the re-rolling facilities are comparatively smaller than in mills in the south and west of the country.
“With recent Chinese billet bookings at $480-485 [per tonne] CFR Marmara and Iskenderun, it would be a great [stroke of] luck for Russian mills to get $498-500 per tonne CFR Turkish Black Sea ports for prompt shipment cargoes,” one semi-finished steel market source said.
He also said that Russian mills were currently offering material at prices in the range of $496-503 per tonne FOB, depending on the mill, which would equate to $511-523 per tonne CFR Turkish Black Sea ports. But he added that they would have several weeks to wait before closing their order books.
He did say, however, that Russian mills may consider selling this material domestically in the form of long steel, for which the pricing environment is much more favorable. Other mills, with large allocations, understand that they will have to cut prices to keep their market share.
Billet importers in the Gulf Co-operation Council (GCC) region received offers of China-origin billet at $505-510 per tonne CFR for September shipping, and estimated that the workable price would be about $500 per tonne CFR.
But extreme heat in the region, especially in the United Arab Emirates and Saudi Arabia, has resulted in a slowing of construction activity, market sources said.
Local rebar prices in the UAE have been stable since late May because of weak construction output.
Billet from Oman was recently offered to the UAE around $520 per tonne CPT. But buyers considered this price was high considering the weak demand, as well as the lower prices available from China.
Iran-origin billet is also occasionally available in the GCC countries at competitive prices.
“Buyers are in no hurry to book material in the region because of summer conditions. Most decision-makers are on holiday, and construction activity is unlikely to improve before September,” one trader in the UAE said.
“The market has been stable since early summer, and will remain stable until the end of August. I do not expect big-tonnage imports,” another GCC-based trader said.
Chinese steel exports have affected Asian markets disproportionately this year, with countries such as Vietnam, South Korea and Thailand among the largest importers of Chinese steel, according to customs statistics.
Lower Chinese prices and rising exports have forced regional mills in Southeast Asia to also drop their prices, to try to retain market share.
Fastmarkets’ price assessment for steel billet, import, cfr Manila, was $475-477 per tonne on August 1, falling week on week from $470-480 per tonne on July 25, and down from $500 per tonne on July 2.
This price pressure shows no sign of reducing, market sources said.
“We will only bid if prices come down to $450 per tonne CFR Southeast Asia for 5SP-grade billet, and I am very confident that spot prices will reach that level,” a buyer source in Southeast Asia told Fastmarkets.
Many offers are for billet from Chinese blast furnace steel, with 1SP- and 3SP-grade billet also heard being offered to Southeast Asia.
Major Indonesian steelmaker Dexin Steel has had to reduce its billet offer to $460 per tonne FOB to stay in the market.
Negative effects from the volume of Chinese steel exports can also be seen in the major scrap import markets of South Korea and Vietnam.
Vietnam’s steel scrap imports rose by 4.17% year on year to 2.44 million tonnes in the first half of 2024, according to the latest customs data. But this pales in comparison with the 48.07% surge in overall steel imports, which reached 8.23 million tonnes in the first half of 2024.
Softer scrap import demand, linked to higher imports of steel products, weighed on prices, market sources said.
Fastmarkets’ weekly price assessment for deep-sea bulk cargoes of steel scrap, HMS 1&2 (80:20), cfr Vietnam, averaged $380-399 per tonne in June 2024, down by $5-12 per tonne from an average of $392-394 per tonne in June 2023.
South Korea imported 4.37 million tonnes of iron and steel products under HS code 72 from China in January-June 2024. If these volumes were repeated through the rest of the year, it would be the largest import volume from China since 2017.
At the same time, South Korea has also seen the biggest dip in production among the major steel-producing countries in Asia this year, with June volumes of 5.1 million tonnes, a 7.2% year-on-year decline, according to Worldsteel.
Fastmarkets’ monthly price assessment for steel scrap, HMS 1&2 (80:20), deep-sea origin import, cfr South Korea, averaged $335-380 per tonne in June 2024, down from $391-403 per tonne a year earlier.
The East Asian nation imported just 1.12 million tonnes of steel scrap in the first half of 2024, down from 2.12 million tonnes in the first half of 2023, according to South Korea customs data. This marked a year on year decline of more than 1 million tonnes, slightly more than 47%.
Follow the critical developments impacting the ferrous scrap market with our market coverage, short- and mid-term forecasts and market-reflective ferrous scrap price data. Find out more.