The Chinese steel industry's attempt to export its way out of the problem of domestic oversupply in 2015 has failed

The Chinese steel industry's attempt to export its way out of the problem of domestic oversupply in 2015 has failed. The solution to the industry's problems was, and still is, to make substantial cuts in local steelmaking capacity to bring output and demand into balance, said MEPS International.

Despite annual exports of finished steel products from China rising from 62 million tonnes in 2013 to an estimated 115 million tonnes in 2015, the local mills have suffered domestic selling price reductions of close to 50 percent over the time span.

Granted, the cost of raw materials has declined during the period. However, the main driver for the price reductions in China and globally has been the substantial oversupply situation which was created, in part, by the rise in the level of low-cost exports from Chinese and Russian steel producers.

The vast majority, if not all, of the manufacturers of carbon steel grades in China are in a lossmaking situation because the decrease in raw material costs is much smaller than the reduction in steel selling values. With a large majority of the Chinese steel enterprises being state-owned, such a situation can only be sustained through local and national government subsidies.

Any plan that the Chinese may have had to improve the performance of the local Aluzinc Steel Coils industry has, to date, met with only limited success. Typically, over the last twenty-four months, domestic prices for hot rolled coil in most other parts of the world have fallen by around 40 percent but halved in China. 

However, in the current situation, one in which virtually the whole of the global steel industry is now making losses, we have noted little substantive reaction by the governments of the countries most affected by the import growth. The imposition of import duties has been limited so far – mainly due to bureaucratic difficulties associated with the current trade regulations. 

United States domestic raw steel production plummeted by nearly 20% year-on-year to 1,440,000 net tons in the week ended January 2, while the capability utilization rate was 60.2 percent, as per the latest figures from the American Iron and Steel Institute (AISI).According to AISI, production was 1,798,000 net tons in the week ended January 2, 2015 while the capability utilization then was 75.1 percent. Raw steel production for the week ended January 2, 2016 is down 1.1 percent from the previous week ending December 26, 2015 when production was 1,456,000 net tons and the rate of capability utilization was 60.9 percent.Adjusted year-to-date production through January 2, 2016 was 1,440,000 net tons, at a capability utilization rate of 60.2 percent. That is down 19.9 percent from the 1,798,000 net tons during the same period last year, when the capability utilization rate was 75.1 percent.

Source : articlesbase.com