By Amy Lv and Lewis Jackson
BEIJING (Reuters) -China’s steel exports are set to slump in the second quarter, threatening to exacerbate a supply glut at home, analysts and traders said, as the trade war and a wave of protectionism moving in its wake crimps export markets.
Second-quarter shipments from the world’s largest steel producer and exporter are forecast to fall by up to a fifth from the first quarter, said eight analysts and traders, who also expect exports to worsen further later in the year.
That would also leave second quarter shipments lower than in the same period in 2024.
Steel exports have been hit by a double blow as Washington’s tariffs choke off the transshipment trade, where third countries resell Chinese steel to the U.S., and top customers like South Korea and Vietnam impose their own duties to avoid steel then being rerouted and dumped in their markets.
"It’s certain that total exports will slide in Q2," said a Chinese steel trader on condition of anonymity as they are not authorised to speak to media.
"One can look at Middle East, Africa and South America as alternative outlets but the problem is no country can absorb such a huge capacity."
China’s rising steel exports have helped partly offset weak demand from the battered property sector and any decline will redirect steel back home, depressing prices, eroding steelmaker profitability and denting their appetite for inputs like iron ore.
First-quarter exports hit the highest level since 2016 as mills rushed to get steel out of the country before the then-rumoured tariffs were announced.
While the steel industry has long expected near-record exports to ultimately trigger some backlash, the magnitude of protectionism unleashed by the trade war between Washington and Beijing has surprised many.
The Chairman of China’s largest listed steelmaker, Baosteel, said late last month the sector’s exports faced "unprecedented" pressure and more steel left at home would intensify oversupply.
Overseas orders for a large Chinese exporter fell between 20% and 30% last month versus the month before, according to an April survey compiled by consultancy Mysteel.
There are also concerns the trade war could spillover into products heavily reliant on steel, like electric vehicles or home appliances, weakening the other major source of steel demand outside the property sector, said Ge Xin, deputy director at consultancy Lange Steel.
"It takes time for that impact to permeate through into the upstream steel market, likely reflected in data in the second quarter when home demand seasonally slowed, aggravating the supply glut situation."
($1 = 7.2251 Chinese yuan)