China’s steel exports in July shrank on both monthly and yearly basis as high profit margins in the domestic market continued to shift the sales pattern.
The country exported 5.89 million mt of finished steel in July, down some 15% from a month ago, also from a year ago, according to data from Chinese Customs. This lowered finished steel exports 13.6%, to 41.31 million mt in the first seven months of this year.
Profit margins of steel products in the Chinese market stood at high levels this year with current margins for rebar exceeding 1,000 yuan/mt.
A narrow arbitrage window from the international market also deterred mills from exporting their cargoes. Steel prices in the domestic market began to climb up from late May and spreads between export offers and international prices now stand no more than $10/mt. This compared to some $50/mt seen in March-April.
Some market participants expected China’s steel exports to rebound slightly given the recent tumbles in the yuan. They estimated monthly export volumes to hover at 6-7 million mt in the near term.
Steel supply growth across the country is likely to be smaller than expected amid Beijing’s intensified environmental protection initiatives. Rebar inventory extended its decline during the week ended Thursday August 9. Steel prices are likely to continue their strong performance in the short term.