SHANGHAI, Jun. 18 (SMM) - According to China Customs, China’s finished steel exports were 5.41 million mt in May, down 2.5% MoM, but up 3.4% YoY. Finished steel imports were 1.25 million mt in May, down 0.8% MoM, and down 5.3% YoY. Steelease attributes the decline in exports on a monthly basis to weak demand overseas and waning speculative activities by foreign traders after continuous price declines. China’s finished steel exports are expected to drop slightly in June due to the following factors.
First, manufacturing activities in countries in the northern hemisphere have headed into a slack season since June, and so manufacturing operation rates will fall as a result. This will reduce demand for finished steel products. Meanwhile, manufacturing activities in South Korea, India, and other China’s major export destinations will wane as it gets hotter and hotter in summer. In May, the manufacturing PMI in South Korea was 51.1, down 1.5 from April, and the reading in India slid to a fresh 3-year low in May. In the euro zone area, the PMI rose on a monthly basis, but remained below 50, suggesting that manufacturing activities were improving in the region, but did not gain strong growth momentum.
Second, continuous steel prices in Chinese markets reduced foreign traders’ enthusiasm in purchasing and speculation. There is little price difference between export prices of steel products from China and the Commonwealth of the Independent States, but the recent RMB appreciation added pressures to Chinese exporters.
Third, a recent Steelease survey finds that some domestic steel mills have reduced production, and also cut their export plans for June. Steelease believes that their action was in response to slim profits from sluggish prices and weak demand overseas during a traditional weak demand period. As existing prices are already at a low level, domestic steel mills are not expected to further cut prices to promote exports.