China's steel surplus is a wake-up call for the world

Global steel production is having a bad year. Shanghai trader Yu Yong Zhang’s annual steel sales have fallen by more than three-quarters in a few years, in a market so bad that he “can’t see any light at the end of the tunnel.” More than 1,000 miles away in Chile, Hector Medina is on the verge of losing his job after nearly five decades working in the steel mills of Huachipato. What Zhang and Medina have in common is China, which has become the dominant force in the world’s steel industry, with profound implications for the lives and businesses of those who work in it. Concern about the future of the steel industry has prompted the world’s largest steelmaker to sound the alarm about a potential industrial crisis in China that could spread around the world and plunge the sector deeper into decline. Commenting on this, Hu Wangming, chairman of China Bao Steel Group Corp., told employees at the company’s half-year meeting that “the conditions in China’s steel sector are like a harsh winter that will be longer, colder and more difficult to bear than we expected,” warning of worse than the major shocks of 2008 and 2015. A report by Business Insider monitored the size of China’s steel production, as it is expected that China will end the current year with a record balance of steel exports that may exceed 110 million tons, and if the forecast is correct, it will be the highest number since 2015. The report indicates that China has already shipped 53 million tons of steel in the first half of 2024, an increase of 24 percent compared to the same period last year. Dumping global markets Some analysts say that this export volume is no more than a drop in the bucket compared to China’s total crude steel production, which amounted to about one billion tons last year. However, that is the whole problem: when China’s domestic consumption falls, it affects steelmakers around the world, as they all have to compete with cheap Chinese products dumping their markets. China is leading the charge, producing more than half of the world’s total steel, at 1.89 billion tonnes, so any impact on its domestic steel consumption will inevitably affect other countries. Analysts expect China’s steel consumption to fall to around 900 million tonnes this year, and some say it could stay that way for the next few years. Source: Independent independ