Steel Prices Show Resilience As China’s Market Remains Strong

4 October 2016

Steel prices in China have continued some modest resilience and the commodity may not be headed for the massive correction that some were expecting on the back of China’s moves to trim its steel market overcapacity. The commodity has rebounded some since falling to a three-month low in September.

China has pledged to trim its steel overcapacity, to help balance the global and local steel market, and reduce its emissions, but the latest data released from the country suggests that it continues to export a large amount of steel.

China’s 2016 steel exports remain on track to beat last year’s record 112 million tons, according to World Steel Association figures, which also showed that the country’s steel output fell only 0.1% in the first eight months of the year. Beijing previously pledged to trim its excess steel capacity by 45 million tons this year.

China has come under fire for dumping cheap exports of steel on the global market. The US has imposed duties of up to 500% on imported Chinese steel after it was found that cheap Chinese steel was taking a large proportion of the US domestic steel demand.

There are hopes that as the winter construction lull hits, Chinese steel production will decrease, but with iron ore prices recently retreating there are concerns that steel producers will continue to fire up capacity to take advantage of low iron ore prices. That, however, should not be counted on given the fact that the costs of other steel manufacturing components, namely ferro-chrome and coking coal have climbed, increasing steel production costs.


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