China’s steel exports climbed to the second-highest level on record in June, as shipments from the world’s biggest producer ramp up amid escalating trade tensions.
Sales advanced 23 percent from a year earlier to 10.94 million metric tons, according to China’s customs administration. That’s only eclipsed by shipments in September last year, when the country sent 11.25 million tons overseas. Exports in the first six months were 57.12 million tons, the seventh on-year increase in a row and the most ever for the period.
China’s record supplies have fueled global trade tensions as too many producers compete for sales. A European Union investigation launched last week into imports from five countries is “symptomatic of the rising protectionism in global steel markets as a result of overcapacity,” according to a note from Macquarie Group Ltd.
“There’s a lot of trade friction but overall Chinese steel prices are relatively low, demand is steady, and together with the renminbi’s depreciation, the Chinese exports are very competitive,” Helen Lau, an analyst at Argonaut Securities Asia Ltd., said from Hong Kong. “It’s encouraging for Chinese mills and good for overseas consumers, but it’s not what foreign mills want to see.”
Faced with its slowest growth in decades, China is exporting its steel surplus. Shipments will accelerate in the second half as prices decline and margins at mills are squeezed, Ren Zhuqian, chief analyst at Mysteel Research, said last month, forecasting exports could reach 117 million tons for the year, higher than last year’s record 112.4 million tons.
China has defended its growing presence on overseas steel markets, with Premier Li Keqiang saying Wednesday overcapacity isn’t the fault of one single country. The nation will use the World Trade Organization’s dispute settlement mechanism to protect its interests, the commerce ministry said.
The nation is taking its own steps to tackle excess capacity. The government had pledged to cut as much as 150 million tons by 2020, while restructuring talks announced last month between its two biggest mills, Shanghai Baosteel Group Corp. and Wuhan Iron & Steel Group Corp., would probably result in fewer plants and facilities.
The export surge isn’t just a result of surplus plants, according to Daniel Hynes, senior commodities strategist at Australia & New Zealand Banking Group Ltd. “I do feel that external demand has been better in the past couple of months. China is gaining market share particularly in Southeast Asia, and we see that continuing,” he said by phone.
Asia’s top economy imported 81.63 million tons of iron ore in June, bringing the total for the first half to a record 493.74 million tons, 9.1 percent more than a year earlier, customs figures show. Aluminum exports fell 9.4 percent to 2.28 million tons from January to June.