Japanese steel producer resumes exports to China due to increased demand

Japanese steelmaker Tokyo Steel has resumed steel exports to China for the first time in 10 years, according to Nikkei, due to the growing demand for the metal due to the large number of infrastructure projects in the country.

China’s imports of steel materials in July tripled to 2.61 million tonnes from last year, pushing prices up around the world. China has poured money into the economy to combat the aftermath of the coronavirus outbreak, which has led to a surge in infrastructure projects.

China has long been accused of steel dumping and global overproduction. Now he has become a desirable customer.

At the end of July, Tokyo Steel supplied China mainly with general-purpose materials that can be used in the construction of roads and houses. This was the first export of steel by a Japanese company to China since May 2010, and it has contracts to supply that country for September for about 100,000 tons.

Other Japanese steelmakers such as Nippon Steel and JFE are believed to have benefited from increased supplies to China as well.

Strong demand in China was fueled by massive economic stimulus measures imposed by the government, which required widespread infrastructure and housing development.

The Chinese steel industry responded with a 9% increase in shipments from last year to a record 93.36 million tonnes in July. However, it was unable to meet the growing demand.

The sharp rise in China’s imports in July meant an acceleration from June, when imports doubled from a year earlier. Imports from India and South Korea increased especially strongly. In contrast, Chinese exports in July fell 25% to 4.18 million tons.

By the end of July, the steel sheet price had recovered to $ 480 per tonne, falling below $ 400 in April and May.

But it remains questionable whether this imbalance between supply and demand will continue. Market sources believe China still has excess capacity. In 2016, Beijing told steelmakers to cut production capacity by 10%, or 100-150 million tons, over five years. But by 2019, steelmakers were able to reduce capacity by only 40 million tons.

Industry participants warn that until this surplus of steel is absorbed, the market will be overcrowded again when the effects of Beijing’s economic stimulus are exhausted.

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