Customs said on its website that the steel export in China fell down to 59.23 million tons in 2008 whereas the export value has climbed up to $63.44 billion, with an increase of 43.8 percent year-on-year. While look back to the recent months, we can see that steel exports decreased to 1.91 million tons in January, dropping 40 percent year-on-year, and the import of iron ore 32.65 million tons, dropping 5 percent from December 2008.

Steel exported each month reached the summit of 7.68 million tons in August, but it declined to 2.95 million tons in November which is the lowest point since 2007, although there was a minor increase to 3.17 million tons in December.

As a result, Customs addressed their admonishing that this year would see no improvement in this sector.

According to statistics by foreign research organization, new orders would decline substantially as the result of the cut of global demand by more than 10 percent. It takes place even in China’s major markets. For example, it’s estimated that the demand in South Korea will drop by 9.5 percent while the United States by 11 percent, and Japan by over 30 percent. And the winter last year witnessed the beginning of dramatic drop of steel export orders in China.

Customs also warned the industry of the deteriorating trade conflicts against steel products that were made in China. That’s because some trade partners of the same line were anxious to safeguard their industries from the global financial recession. They may either evolve anti-dumping and countervailing cases against Chinese steel products, or upraise the import tariff.

It also added that the competitiveness was weakened after China was forced to revalue the yuan.

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Zhang Tieshan, the analyst of the website said that the increase of steel prices was attributed to the rebounding demand. The steel products that have increased prices include about 30 sorts.

Zhang said almost all the steel product prices have increased. For example, on Oct 17, 2008, the average price of deformed steel was 3,550 yuan per ton, however, this week the price rose 12.4 percent to 3,990yuan. Meanwhile, prices of hot-rolled steel increased from 3,770 yuan to 4,170 yuan, up 10.6 percent.

Since steel factories decreased output last year, steel supply became less, which was one reason of the price surge. Baosteel, a steel factory, has stopped its 6 blast furnances’ work for half a year since October.

Another analyst, zhu limin, who is from Shanghai Securities, said steel factories in China have utilized only a little more than their full capacity in the past months, only to balance the supply and the demand.

Zhu also said the 4-trillion yuan stimulus project emphasizing on elementary facilities such as railways and highways would make the steel industry recover. Now the project begins to work.

It is said by Zhu, an analyst from mysteel.com, although the total demand of steel is not known, a prediction of a 2 trillion Yuan used for mass construction is made by detailed projects estimation, which equals to a demand of more than 20 million tons of steel. A record demand of steel is possible due to the additional 100 billion Yuan of investment announced by the end of 2008.

The causes of the steel price rise according to Zhu, analyst from Shanghai Securities, are the rising shipping costs and increasing raw material prices such as coke and shredded.

However, analysts predicted a price drop in the near future when the annual iron ore price negotiations come to an end.

Zhu said that once negotiators reach to an agreement, steel prices will drop because the potential steel demand and excess credit will shrink in the global recession. It is possible that this year’s prices go back to 2007’s levels, which mean 40% to 50% less than that of last year. 

In fact, as an agreement on iron ore price reduction by 41 percent for 2009 between Russian steelmaker Magnitogorsk Iron and Steel Works (MMK) and Eurasian Natural Resources Corporation (ENRC) of Kazakhstan has been made in January, China has to follow a similar attitude in the ongoing iron ore negotiation.

It is said by Zhang that there is a demand of price cut in China, but the drop will not be as serious as MMK did. Due to the unpredictable conditions in export, the stimulus package of 4-trillion Yuan would not be a fix figure. Last year, 40 million tons of steel was exported from China, which almost equals to the same quantity the overall stimulus package.

According to Zhang that the price rise will stop when the current balance between supply and demand is changed as the Chinese steel mills enhance their output.

Are you interested in the business opportunities in China?

China is one of the world’s great growth markets and is likely to be for many years to come. Foreign companies often face difficulties in assessing Chinese market demand and enacting effective strategies because of the language barriers, culture differences, and high expense.

BPOVIA is the leading virtual assistant and Knowledge process outsourcing (KPO) service provider in China. BPOVIA is the only virtual assistant company ever been nominated for the prestigious “Red Herring 100 Asia” Awards 2008. Combines international perspective with local know-how, BPOVIA can provide our clients China business development service and help our clients doing successful business in China.

Please visit http://www.BPOVIA.com/ for details about our service.