Steel exports from China to be low in 2020

Exports of finished steel to China declined 7.3% year on year to 64.293 million tonnes in 2019, the lowest annualized rate since 2014, reflecting strong steel demand despite an increase in steelmaking capacity.

In December 2019, China's steel exports fell 15.7% year-on-year to 4.684 million tonnes, data from China's customs showed Tuesday. The daily volume of exports in December decreased by an average of 0.9% compared to November. Some traders expect exports in January 2020 to be similar to exports in December.

According to S&P Global Platts analysis, finished steel exports in 2020 are unlikely to grow significantly over last year due to continued growth in domestic demand.

Chinese steel exports rose in 2015 when excess capacity in the domestic market helped China compete in the global market. However, due to China's overcapacity elimination campaign, which cut 150 mtpa of steel capacity and 140 mtpa of induction furnaces in 2016-2018, Chinese steel prices recovered, resulting in a decline in steel exports from 2016 year.

Although China's steelmaking capacity has expanded again since 2019 by replacing capacity, strong domestic demand, especially from real estate construction, absorbed most of the additional steel production, leading to a decline in steel exports in 2019.

China's steel production will continue to grow by 14 million tons per annum in 2020, after an increase of about 42 million tons per annum to 1.21 billion tons per year in 2019, according to Platts analysis. As a result, steel production in China is expected to grow by 2% year on year in 2020 to about 1,005 million tonnes. Steel production increased by 7% year on year compared to January-November 2019 to 904.18 million tonnes.

Despite continued growth in steel production, domestic demand in China is expected to remain robust in 2020, thanks to government efforts to stabilize property development and support infrastructure and manufacturing. As a result, the domestic market is likely to remain more attractive than foreign markets.

A source at a major Chinese steel mill said his company had planned to further cut its steel export quota in 2020 as it expects to see increased profits from domestic sales.

The exporter said that Chinese steel prices are likely to remain high through at least the first half of 2020 as the construction and manufacturing sectors are supported by China's proactive monetary and fiscal policies. This included reduced