Chinese steel glut to hit export market

The threat of Chinese steel exports swamping global markets, including India, and the resultant downward pressure on product prices is gaining strength.

As per recent Chinese data, the growth in exports was owing to Chinese steel consumption lagging production. China is the largest steel market and accounts for 34 per cent of total global steel output.

According to data from Citigroup's Metal and Mining report, Chinese net exports of finished steel was 11.96 million tonne between January and August 06 compared with net steel imports of 5.29 million tonne a year earlier.

This growth in Chinese exports helped to offset the slower pace of steel demand within the country - domestic consumption of steel grew 19.4 per cent on a y-o-y basis to 287 million between January and August 2006.

In contrast, production of crude steel was up 21.9 per cent y-o-y to 272.5 million tonne between January and August 2006. The Chinese government has recently cut the export rebate on steel products from 11 per cent to 9 per cent, but that is not expected to have much impact on exports.

Analysts says as the Chinese government has also implemented several steps to curb domestic steel demand, it leaves Chinese producers dependent on export markets.