China, accountable for half of the entire world’s steel production, has been showing indications that its steel industry is slowing this year. Both the country’s production levels and consumption of steel has dropped over the past twelve months. However, during the same time frame the number of steel product exports from China has actually increased. Given China’s presence as the dominant force in worldwide steel output, changes in levels from its industry has wide reaching effects in quality, quantity and pricing of its exports, and as the United States is the world leader in steel imports, it feels these market fluctuations more than any other nation. By looking at how Chinese policy over the past year affects its own industry, American steel professionals can better adjust to market changes going forward.
In the past year, China’s steel output has dropped 3.5% from last year. In 2014, China was responsible for roughly 822 million metric tons of crude steel, so a drop of 3.5% is equal to 28.8 million metric tons (Metaljunction). To put that in perspective, the total imports of steel for the United States in 2014 equaled 40.2 million metric tons (US Census Bureau). This shows how even a small change in output in China’s industry could have global implications. China’s government has sought to put a cap on its country’s crude steel production, and it seems its policies are having the desired effect as China is going through the first decline in output after 20 years of steady growth (Hellenic Shipping News).
Despite the decline in crude output, Chinese steel product exports are on track not only increase, but are also set to break the 100 million metric ton mark for the first time in its history. The increase in exports is being attributed to the glut of steel in China’s domestic market caused by years of overproduction, which caused both a decrease in demand and prices. Therefore, Chinese steel manufacturers looked to the global market to sell their products (Metaljunction). The ripple effects are still being felt worldwide, as the low prices of the worldwide dominant producer of steel causes manufacturers from all over the world to cut their own prices in order to compete. Given the overwhelming size of China’s steel industry, the trends are set to continue in this direction until the Chinese domestic market adjusts to its own overproduction. In the meantime, leading importers such as the United States must wait for China’s market to stabilize before it can rely on steady pricing from the giant of the global steel industry.