JPMorgan says 'waves of protectionism' will cap China steel

[BEIJING] Steel exports from China will probably peak in 2015 as the doubling of shipments over the past two years spurred a wave of protectionism around the world, according to JPMorgan Chase & Co.

Net exports from the top producer will plateau at about 90 million metric tons a year, with gross shipments seen at about 105 million tons, JPMorgan said in a report.

China's shipments of steel ballooned to a record this year as mills confronting shrinking domestic demand and slowing economic growth are seeking increased overseas sales, driving down global prices and spurring trade tensions from the US to India and Africa. Steel demand in China will shrink 4 percent this year and 2 per cent in 2016, JPMorgan said.

"Booming steel exports have helped steel production hold up relatively better than steel demand, but we believe exports have reached a peak," analysts including Daniel Kang wrote in the report dated Oct 4. "With Chinese exports doubling in the last two years, waves of protectionism measures have been triggered globally."

Net shipments from China may total 86 million tons this year, 87 million in 2016 and 83 million the year after that, according to the bank. The 2020 figure was put at 90 million and was unchanged through to 2035, it said.

Steel shipments from China have risen to extraordinary levels, according to Credit Suisse Group AG, which compared the volume of exports to total output from Japan, the world's second-largest producer. In the first eight months of this year, cargoes from China surged 26.5 per cent to 71.9 million tons, customs data show.

Mills outside China are pushing back. ArcelorMittal South Africa Ltd, a unit of the world's biggest steelmaker, has asked the government to extend tariffs on imports. The European Union steel industry is seeking data to file a complaint to the European Commission alleging that Chinese exporters are selling hot-rolled coil in the EU below-cost, a practice known as dumping.

China may try to rein in steel exports by adjusting taxes to achieve a situation that benefits both the country and its trading partners, Wang Liqun, vice chairman at the China Iron & Steel Association, told reporters in Qingdao last month. Still, shipments will surpass 100 million tons this year as overseas sales remain strong, Mr Wang said.

Chinese mills are making more steel than the economy needs as they are benefiting from supplies of cheap iron ore, Lourenco Goncalves, chief executive officer of Cliffs Natural Resources Inc, said in August. Iron ore delivered to Qingdao dropped 5.2 per cent to US$53.14 a dry ton on Friday, and is 25 per cent lower this year.

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