Last year, China's steel net exports hit a record high. Net exports refer to the difference between export and import volumes. The increase in this figure means that China is buying less steel from overseas while increasing its sales abroad. However, this excessive push to sell has also become detrimental to China. Although the unit price of steel has decreased, the total export value has fallen, despite having sold more than before, and China is facing anti-dumping cases from countries around the world. The Chinese steel industry has decided to move away from low-cost sales and to establish a sustainable export strategy.

On the 15th, the Chinese economic media Caixin reported, citing data from the General Administration of Customs of China, that China's steel net exports in the previous year were recorded at 10.39 million tons (t), marking the highest level in nine years since 99.62 million tons in 2015. This record comes as exports rose by 22.7% year-over-year to 11.07 million tons, while imports fell by 10.9% year-over-year to 6.815 million tons. China's annual net steel exports decreased to 33.44 million tons in 2020 before rebounding to 40.96 million tons in 2021, continuing an upward trend to 56.76 million tons in 2022 and 82.62 million tons in 2023.

A steel production corporation in Shanghai, China. /Courtesy of Reuters

The record high in China's steel net exports indicates that domestic steel demand has decreased while production remains high. Since domestic companies can’t absorb even what they produce, they have reduced imports and increased the volume sold overseas. According to a report released by the Metallurgical Industry Planning and Research Institute in December last year, China's steel demand decreased by 4.4% compared to the same period in the previous year due to the decline in steel consumption in the construction sector caused by the real estate downturn.

As the world's top steel producer, China's push to sell more has increasingly alarmed the global steel industry, including South Korea. In the case of South Korea's POSCO, the company could not overcome the oversupply from China and ultimately closed its first long steel factory in Pohang, North Gyeongsang Province, after 45 years and 9 months of operation, which began in February 1979. Long steel is a type of semi-finished steel product rolled into shapes and used for materials like nails and welding rods. Recently, Chang In-hwa, chairman of the POSCO Group, noted, "Since domestic demand in China has not recovered, China will likely push to sell its products, and our steel industry will face various difficulties."

China, the main source of the oversupply, also recognizes the severity of the problem as it has been affected immediately. Last year, China's total steel export value fell by 1.1% year-over-year to $83.631 billion (approximately 122.2 trillion won). Despite an increase of over 20% in export volume, the revenue generated has actually decreased, due to the drop in unit prices. China's steel unit price fell to $755.34 per ton (about 1.1 million won), a 19.4% drop from 2023. Accordingly, at the steel industry export working meeting hosted by the China Iron and Steel Association in October last year, an export strategy of "promoting high-quality products, restricting low-cost products, and cracking down on illegal practices" was confirmed.

By flooding the global market with inexpensive products, China's steel industry is also facing criticism for disrupting trade order. According to the China Trade Relief Information Network, the number of anti-dumping investigations against China's steel industry has exceeded 20, with countries such as the European Union (EU), Vietnam, and Brazil filing complaints. Last October, Turkey concluded its anti-dumping investigation against certain Chinese steel products and decided to impose a tariff of 15.42-43.31%. In response, the General Administration of Customs of China stated on the 13th, "China's steel exports comply with market principles and World Trade Organization (WTO) rules," adding that "some countries have taken protectionist measures against Chinese steel, which undermines international trade rules and increases downstream production expenses, hindering the stability of global supply and production chains."

The decline in domestic steel demand in China, a major cause of the oversupply, does not seem to be resolved soon. The Metallurgical Industry Planning and Research Institute has projected China's steel consumption this year to be around 853 million tons, which is 1.5% lower than last year's figure of 863 million tons. The China Iron and Steel Association reminded corporations that the number of trade relief applications has been increasing and urged them to consider the external situation while pursuing sustainable export operations.