4 Apr

Falling Chinese Steel Prices Concern U.S. Steel Corporation

WRITTEN BY Mark O'Hara FEATURED IN Company News, Insights, & Analysis

Chinese steel prices

We saw a sell-off in Chinese steel prices last month. There has also been downward pressure on seaborne iron ore and coking coal prices. Since China is the largest consumer of seaborne iron ore (CLF), the country’s steel demand tends to be a key price driver. In this part, we’ll see what’s driving the recent sell-off in Chinese steel prices. We’ll see what the sell-off could mean for steelmakers like ArcelorMittal (MT), U.S. Steel Corporation (X), AK Steel (AKS), and Nucor (NUE).

Falling Chinese Steel Prices Concern U.S. Steel Corporation

Rising inventories

A demand slowdown that’s highlighted more with rising inventories seems to be putting pressure on Chinese steel prices. Capacity cuts during the winter months didn’t have much of an impact on Chinese steel production, which is adding to the demand-supply mismatch. Lower Chinese steel prices send ripples across global steel markets. China’s steel prices usually set the floor for global steel prices.

However, lower Chinese steel prices might not have a major impact on global steel prices for two reasons. First, Chinese steel exports are less than half of their peak. Chinese steel prices might not drive global steel prices like they did a few years ago. Also, more countries might look at trade actions to fend off Chinese steel if it flows to their markets after the US tariffs.

Notably, we saw a sharp decline in Chinese steel exports last year. Several regions imposed punitive duties to fend off cheap Chinese steel from flooding their domestic markets.

While steel prices have fallen in China, we haven’t seen major repercussions in other markets.

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