China to Cut Steel Export Prices in 2016 as Trade War Heats Up

Chinese steel exports reached 101 million metric tons this year and final December numbers will push that record higher.

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The price of hot-rolled coil, used in everything from refrigerators to freight containers, may decline about 13% next year, Colin Hamilton, Macquarie Group‘s head of commodities research, recently said.

“We’re past peak steel demand,” Hamilton told Bloomberg News earlier this month. “I think, provided there is overcapacity in the Chinese system and given where demand is, it’s going to be like this for some time.”

Anti-dumping duties could curtail the flow of Chinese imports. Source: Adobe Stock/nattanan726.
Anti-dumping duties could curtail the flow of Chinese imports. Source: Adobe Stock/nattanan726.

Macquarie forecasts that the average price for a ton of steel will drop to about $267 in 2016, from $309 this year. Last week, the Commerce Department, after a preliminary injury determination, announced a 255.8% anti-dumping duty on China, over corrosion-resistant steel products imports.

Imports From Elsewhere

Merrill Lynch analysts believe the imposition of the duties reflects real concern, and a willingness to get tough with China, over the steel imports. However, they also mentioned that despite a 200% plus import duty on Chinese producers, the threat from the other four countries in the anti-dumping duties case remains. Italy, India South Korea and Taiwan all received much lighter import duties, all below 7%. During the 12 months before the case was filed, these five countries jointly imported 61% of all US steel.  The imposition of a 4-6.92% tariff on India, Italy and Korea will not stop them from filling the US Market with steel in the future. Taiwan escaped import duties entirely.

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China will likely continue to cut prices even as they curtail production next year. While the recent tariffs will likely help North American producers compete, it’s hard to imagine metal buyers facing increasing base prices next year. This is the beginning, not the end, of the steel trade war.

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