China's steel offensive is shifting from finished goods to semi-finished products, the intermediate materials before processing. Since the start of the year, imports of Chinese finished goods have fallen, but imports of slabs (large steel plates), the raw material for thick plate and hot-rolled sheet, have risen more than 70%. As anti-dumping tariffs raise barriers to importing finished goods, semi-finished products that are not subject to tariffs appear to be becoming a new channel for Chinese steel inflows.
On the 14th, according to export-import statistics from the Korea Iron & Steel Association, imports of Chinese finished goods from January to May this year totaled 3,138,540 tons, down 7.6% from the same period a year earlier. In contrast, imports of Chinese slabs over the same period were 229,134 tons, up 71.8% year over year. A slab is a thick rectangular steel ingot made by solidifying molten iron; when pressed thin, it becomes steel plate products such as thick plate and hot-rolled sheet.
Imports of billets, the bar-shaped semi-finished products used as materials for rebar and structural steel, also rose slightly to 66,195 tons from a year earlier. Imports of finished goods are decreasing while imports of semi-finished products, which are materials at the prior stage, are increasing, changing the composition of Chinese steel imports.
The impact of tariffs is cited as the backdrop. To block inflows of low-priced Chinese steel, Korea imposed 27.91% to 34.10% anti-dumping tariffs on Chinese thick plate and is proceeding with procedures to impose tariffs of up to the 33% range on hot-rolled sheet from Japan and China. However, slabs and billets are semi-finished products at the stage before being made into hot-rolled, thick plate, or rebar, so they are not subject to anti-dumping tariffs. Finished goods have lost price competitiveness due to tariff burdens, but semi-finished products can enter with relatively less expense burden.
Chinese steelmakers have been sending overseas the volumes they could not absorb at home due to the slump in real estate and construction. As major markets such as the United States, the European Union (EU), and Korea have raised import barriers on Chinese finished goods, they are using semi-finished products as a detour. Park Gwang-rae, an analyst at Shinhan Investment & Securities, said, "From January to April this year, China's exports of finished steel fell 9.7% from a year earlier, but exports of semi-finished products rose 47.8%," and noted, "China's oversupply pressure is shifting from direct exports of finished goods to detour exports of semi-finished products such as slabs and billets."
Supply disruptions stemming from the prolonged Middle East war have also widened the opening for Chinese semi-finished products to enter. Iran, one of the world's major slab exporters, has seen some mills damaged after clashes with Israel and the United States, causing disruptions to semi-finished product exports. A steel industry official said, "Since March, as supplies of Iranian semi-finished products have been limited due to Middle East risks, Chinese semi-finished products have been filling that gap."
There are also concerns that if the inflow of Chinese semi-finished products keeps increasing, it could limit the extent of price recovery for thick plate and hot-rolled sheet in the second half. With anti-dumping measures reducing inflows of low-priced Chinese finished goods such as hot-rolled and thick plate, domestic prices have recently been on an upward trend.
However, slabs can enter without tariff burdens and then be processed domestically into thick plate and hot-rolled sheet. Although imports of finished goods have decreased, if Chinese raw materials are converted back into steel plate products and come to market, they could weigh on the price recovery.
An industry official said, "So far, the increase in imports of Chinese semi-finished products appears to have had little direct impact on domestic prices for plate products such as thick plate and hot-rolled sheet," but added, "It is estimated that it will take at least six months to a year to repair Iranian steel mills, and China's sluggish domestic demand is also dragging on, so we are closely watching the scale of semi-finished inflows in the second half."
With supply variables piling up, steelmakers are broadening their defense strategies beyond relying solely on a recovery in prices for general-purpose plate products, expanding exports, high-value-added products, and non-steel businesses. POSCO Holdings, the No. 1 steel company in Korea, is offsetting expense burdens in the steel institutional sector with non-steel areas such as infrastructure, overseas steel, and secondary battery materials. No. 2 Hyundai Steel is pursuing strategies to raise list prices while exporting rebar to the United States and supplying steel for data centers. In the securities market, analysts say that defending domestic plate prices and shifting portfolios to high-value-added products will determine the extent of the steel industry's earnings improvement in the second half.