China's steel exports fell to the lowest in six months in August amid stronger domestic prices, offering relief to rivals overseas angered by a flood of cheap Chinese products. But the global reprieve could be temporary as Chinese steel producers could easily boost exports to ship surplus output amid gradual efforts to address its chronic overcapacity.
Elsewhere, China's August trade data on Thursday showed higher imports of crude oil and coal, while arrivals of copper, iron ore and soybeans eased. China's overall imports unexpectedly rose for the first time in nearly two years, suggesting domestic demand may be picking up and putting the world's second-largest economy on a more balanced footing. Exports of steel products from China, a sore topic with global trade partners, fell to 9.01 million tonnes in August from 10.3 million tonnes in July, data from the General Administration of Customs showed.
It marked a second month of lower exports and the volume was the smallest since February's 8.11 million tonnes. However, shipments over the first eight months were still up 6.3 percent from a year ago at 76.35 million tonnes. "It's a welcome development but there's still a long way to go in terms of Chinese exports falling sharply because of their massive excess capacity and export tax rebate policy," Roberto Cola, vice president of the ASEAN Iron and Steel Council, said.
China, with an estimated excess capacity of around 300 million tonnes - thrice the 2015 output of No. 2-ranked Japan - has said it will continue its tax rebates to steel exporters as it tries to finance a costly capacity closure plan. The fall in exports indicates the difficulties faced by Chinese steel producers amid anti-dumping tariffs imposed by other countries such as the United States and India, said Cola.
But Richard Lu, analyst at CRU consultancy in Beijing, said the drop was in response to firm domestic prices, rather than China giving in to the pressure from the rest of the world. "We may see exports flat month-on-month or perhaps post a slight uptick in September because domestic prices may still rise because of seasonal buying as well as some restocking," said Lu.
Chinese steel prices have risen 20 percent from late May due to low inventory levels and slower output from mills, some of which have been ordered shut by Beijing. As of July, China had achieved 47 percent of its target to cut steel capacity by 45 million tonnes this year. G20 leaders at this week's meeting in China have pledged to address excess steel capacity that has punished the global industry with low prices for years.
Among China's imports in August, crude oil arrivals rose to 32.85 million tonnes, the second-highest on record, as a drop in prices spurred buying, while coal purchases jumped 25 percent from July. "Seasonal demand peak and consistently rising domestic prices since start of this year, and the government's supply side restrictions all contributed to the higher (coal) imports," said a Beijing-based senior coal trader. Imports of some other commodities slipped, with iron ore arrivals falling to 87.72 million tonnes, from 88.40 million tonnes in July - the second-highest monthly volume on record. China's soybean imports fell 1.2 percent in August from the month before, with buyers slowing shipments as they waited for the release of beans from state reserves.
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