China no longer knows what to do with its steel. With domestic consumption in decline, linked to the real estate crisis and the shutdown of many construction sites, it can only maintain its gigantic production by exporting massively to the rest of the world. According to forecasts by the London-based firm Kallanish Commodities, exports are expected to grow by 5.8% in 2024, reaching their highest level since 2016. Asia, the Middle East, Africa and Latin America are expected to absorb 12% of Chinese production in 2024 (compared to 6% in 2022).
For a country that produces half of the world’s steel, or more than 900 million tonnes, these percentages translate into colossal volumes. This year, it will sell nearly 100 million tonnes of steel worldwide, the equivalent of two-thirds of European production.
This surge is added to that of electric vehicles, batteries, solar panels and wind turbines and results from the weakness of domestic demand in the Asian giant. “China’s steel overproduction has become a global problem”worries Axel Eggert, general director of Eurofer, the association which represents the interests of European steelmakers.
“Chinese dumping”
Many countries are seeking to protect themselves by erecting customs barriers. Canada announced at the end of August a 25% surcharge on steel and aluminum from China, starting October 15. In retaliation, Beijing launched an anti-dumping investigation into Canadian rapeseed on Tuesday, September 3. Brazilian customs duties were also raised to 25% in the spring. The world’s fourth largest producer, Nippon Steel, called on the Japanese government to take similar measures at the end of August. Vietnam, which has seen its imports of Chinese steel double in one year, launched an anti-dumping investigation in June.
But an increase in customs tariffs is not always enough to limit the damage. In Chile, the Huachipato steelworks (2,700 employees) announced a month ago the suspension of its activities due to financial difficulties, despite the decision of the Chilean authorities to temporarily impose a 25% to 34% surcharge on Chinese steel. A decision justified by “The intensification of Chinese dumping” which prevented it from maintaining competitive prices. In 2023, 10 million tons of Chinese steel flooded into Latin America, a jump of 44% compared to the previous year.
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“Chinese overproduction is flowing all over the world, observes Tomas Gutierrez, an analyst at Kallanish Commodities, whereas during the last crisis in 2015, Southeast Asia absorbed almost all of it because its production was low.” The increase in Chinese exports, however, is concentrated in the Middle East and Southeast Asia, where demand is most dynamic. “But they also affect Europe indirectly, because they flood third countries like South Korea, Japan or Taiwan, which forces their manufacturers to sell their production here.”notes Axel Eggert. Eurofer is demanding that Brussels increase customs tariffs that apply to all countries with overproduction.
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