Chinese steel companies are ramping up low-cost exports in response to a downturn in the real estate market and a slowdown in domestic demand. This export surge is causing global steel companies to struggle while iron ore prices continue to fall without signs of recovery.
According to industry sources, the price of iron ore fell to $96.74 per ton, marking the first time it had dipped below $100 since November 2022. However, analysts predict that iron ore prices are likely to continue declining.
On the same day, Bloomberg cited Citigroup, which forecasted that “Iron ore is poised to extend declines into the $80s-a-ton range,” attributing this to the reduction in production by Chinese steel manufacturers. Citigroup analysts noted in their report, “Below $100 a ton would have offered an attractive iron ore dip-buying opportunity in the past, but the set-up looks different this time.”
The reason for the drop in iron ore prices is that Chinese steel companies are expanding low-cost exports. As steel demand in China decreases due to a stagnant real estate market and slowed economic growth, these companies attempt to secure profits by exporting surplus steel products at lower prices. This has led to a decrease in international steel prices, which in turn has caused a sharp drop in iron ore prices globally. As a result, not only Chinese but also global steel companies are struggling.
Recently, Bloomberg reported that Chilean steel company CAP Group has decided to close its Huachipato steel plant in Talcahuano starting September 15. CAP Group first announced its closure plans in February. Two months later, the Chilean government announced it would impose a provisional tariff of up to 33.5% on Chinese steel to prevent the closure. However, CAP Group decided to proceed with the closure earlier this month, concluding that it would be difficult to compete with Chinese steel in terms of price, even with the tariff.
German major steel manufacturer Salzgitter AG reported a net loss of 18.6 million euros ($20 million) in the first half of this year, a shift from a net profit of $180 million last year. Gunnar Groebler, CEO of Salzgitter AG, pointed to overproduction in China as a contributing factor.
India’s steel industry is also facing significant difficulties due to the low-cost exports of Chinese steel and has urged the government to take action. Meanwhile, Vietnam initiated an anti-dumping investigation into galvanized steel sheets from South Korea and China last June. Additionally, Malaysia began an anti-dumping investigation on August 15 regarding non-alloy flat-rolled products from South Korea, Japan, China, and India.
South Korean steel companies are also experiencing substantial losses. Recently, Hyundai Steel filed an anti-dumping complaint with the Ministry of Trade, Industry, and Energy, citing damages from Chinese companies’ low-cost exports of steel plates.
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