World steel prices are growing. Against the backdrop of modest growth in demand from the construction, infrastructure, mechanical and metallurgical sectors, as well as the automotive sector, the rise in prices comes from China. Domestic steel demand in China has increased thanks to mega infrastructure projects announced in 2019-25. In fact, 19 rail /city rail projects spanning 4,638 km, the construction of 13 airports worth US $ 14.71 billion together, generated a 23.8 million tonne steel demand over the period. To finance wasteful investments, China is issuing special bonds worth 3.75 trillion yuan in 2020. During the first quarter of 2020, China’s GDP declined by 6.8% and is likely to return to growth of 3.2% in the second quarter. This is likely to continue in Q3 and Q4, which will also lead to overall growth in China’s economy in 2020.
In the construction sector, construction-in-progress grew 2.3% in the first half, and FAI’s likely growth in infrastructure in 2020 is likely to be 10% versus 3.8% growth in 2019. However, growth in FAI’s infrastructure is expected to appear in full in the second half of the year, as will growth in auto, engineering and metal production. To support the growth in steel production (crude steel production by 411.8 million tonnes in the first five months, up 1.9%), China imported 546.9 million tonnes of iron ore (62% Fe) during the period – an increase of 7.3 % comparing with the previous year. In the first half of the year, China exported 28.7 million tonnes of finished steel, down 16.5% from the previous year, and steel imports at 10.39 million tonnes during the period are 60% higher than last year, making China a major net exporter of steel. China imported cheap steel during this period.
India’s total steel exports to China reached 2.7 million tonnes between April and June, significantly more than last year. It contained semi-finished steel 1.7 tons, HRC 0.97 tons, CR sheets of 0.05 tons, as well as 0.286 tons of pig iron and 0.106 tons of ferroalloys. During this period, India imported 0.3 million tonnes of steel from China, including rods and rods, HRC, CRC and coated sheets and ferroalloys. Thus, in the first quarter of the current fiscal year, India is a net exporter of steel to China. This, however, is far from the point of view of total imports and exports between India and China. During 2019, while India imported $ 85 billion worth of goods, it exported $ 29 billion worth of goods, resulting in a $ 56 billion India trade deficit.
Higher sales have helped Chinese steelmakers increase production and drive mergers and acquisitions (for example, the Jianlong Group from 35 million tonnes to 100 million tonnes in 5 years). China recently announced the closure of illegal stainless steel and alloy steel medium frequency induction furnaces for environmental reasons, which could lead to supply restrictions. The increase in export offers from China is a natural consequence of these developments. The HRC export price for the former Tianjin Port of SS-400 class increased from $ 431 /t on June 1 to $ 457 /t on July 17.
The rise in Chinese export prices has also boosted domestic HRC prices in India. On the other hand, domestic HRC prices in the United States, which were among the highest due to the subsequent unilateral increase in US import tariffs under section 232, have since stabilized at $ 460 /t from the Midwest plant in mid-July fall from $ 501.5 /ton in June.
Thus, prices are higher in all regions with good demand and decline when demand decreases. The rise in domestic prices attracts imports, and subsequently prices adjust. At this stage, new problems arise with the protectionist policies against imports adopted by all countries to protect and develop domestic industries.