Domestic steel demand is unlikely to see any significant improvement in the short term.

　　According to data from the World Steel Association, global crude steel production from January to November 2014 totaled 1.498 billion tonnes, up 1.8% year on year. During the same period, China’s National Bureau of Statistics reported domestic crude steel output of 749 million tonnes, an increase of 1.9%, accounting for roughly half of the world’s total. China has thus become a veritable global powerhouse in steel production. Against a backdrop of subdued domestic steel consumption, steel exports have continued to expand at a rapid pace.

　　Data show that in 2013, China’s steel exports exceeded 60 million tonnes, up 11.84%. From January to November 2014, exports surged to 83.6123 million tonnes, a rapid increase of 46.78%, reaching a new historical high. In 2014, steel exports may surpass 90 million tonnes.

　　China’s steel exports have reached a record high, effectively easing the pressure from declining domestic steel demand. While steel exports appear robust, from a “cost‑performance” perspective, this record‑breaking export volume does not translate into commensurate profits for the industry as a whole. Ultra‑low prices—often sold at “cabbage‑price” levels—coupled with a development model characterized by high pollution and high energy consumption, are inflicting severe damage on environmental protection and resource sustainability. The main features of China’s steel import and export situation are:

　　I. A stark contrast between imports and exports: import growth has slowed, while both exports and net exports have reached record highs.

　　China’s steel import growth has slowed, with imports far lagging behind exports. China’s steel imports fell steadily from 29.3033 million tonnes in 2004 to 14.0787 million tonnes in 2013. From January to November 2014, steel imports totaled just 13.2199 million tonnes, up slightly by 2.70%. In contrast, China’s steel exports have maintained rapid growth, rising from 14.2273 million tonnes in 2004 to 62.3296 million tonnes in 2013—a 4.38-fold increase over the decade. From January to November 2014, steel exports exceeded 83.6123 million tonnes, and annual exports are likely to reach 90 million tonnes. Net exports have increased markedly; prior to 2013, China’s net steel exports remained below 50 million tonnes. In the first eleven months of this year, net steel exports surged to 70.3924 million tonnes, setting a new historical record.

　　II. General trade accounts for over 90 percent of the total, with all types of trade modes maintaining rapid growth.

　　From January to November 2014, China exported 79.8978 million tons of steel via general trade, accounting for 95.56% of the country’s total steel exports and representing a year-on-year increase of 48.01%. Exports under processing trade totaled only 1.9339 million tons, or 2.31% of the total. Exports through border small‑scale trade and customs special regulatory zones each remained below 600,000 tons, together accounting for just 1% of the total, with year-on-year growth rates of 16.02% and 99.24%, respectively.

　　III. South Korea, Vietnam, and the Philippines rank among the top three export destinations, with all major export markets maintaining rapid growth.

　　From January to November 2014, China’s steel exports to ASEAN totaled 23.2908 million tonnes, up 44.01% and accounting for 27.86% of the country’s total steel exports during the same period. Exports to South Korea reached 11.8567 million tonnes, an increase of 34.88%, representing 14.18% of the total. To Vietnam and the Philippines, China exported 5.7886 million tonnes and 4.3809 million tonnes, respectively, up 59.94% and 95.52%, with shares of 6.92% and 5.24%, respectively. Steel exports to the United States amounted to 3.16 million tonnes, a rise of 61.68%, accounting for 3.78% of the total.

　　IV. Steel sheet is the largest export category, followed by steel bar.

　　From January to November 2014, China exported 39.2383 million tonnes of steel sheet and strip, up 55.54% and accounting for 46.93% of the country’s total steel exports during the same period. Exports of steel bars reached 27.0943 million tonnes, an increase of 73.64%, representing 32.40% of the total. Exports of angle steel and structural steel totaled 4.2652 million tonnes, up 9.82%, but accounted for only 5.10%. Exports of steel wire rod and steel pipe fittings each fell short of 2 million tonnes, each making up less than 3% of the total.

　　The main reasons why China’s steel exports continue to remain at a high level are:

　　I. A pronounced supply-demand imbalance has driven prices down to “cabbage‑level” levels, enhancing export competitiveness.

　　China’s macroeconomic growth has slowed, leading to a decline in apparent steel consumption so far this year—the first such drop since 2000 and the first decrease in steel demand in 14 years. In August, China’s apparent crude steel consumption fell 1.9% year on year to 61.9 million tonnes, while cumulative apparent consumption for January–August decreased by 0.3% to 500 million tonnes. In 2014, national crude steel output is expected to reach 826 million tonnes, hitting a new historical high, with supply significantly outstripping demand. According to data from the China Iron and Steel Association, at the end of August, inventories held by key steelmakers totaled 14.242 million tonnes, up 14.37% compared with the same period last year.

　　To alleviate the supply-demand imbalance, steel companies have stepped up their export efforts, adopting aggressive low-price competitive strategies to capture overseas markets. Customs Information Network ( www.haiguan.info Data show that from January 2013 to November 2014, China’s average steel export prices recorded negative growth in all but one month, when they posted a slight increase. In September, October, and November 2014, the decline exceeded 10% each month, with the average export price falling to US$684.20 per ton by November. For some specific product categories, prices even dipped below US$600 and US$500 per ton. On November 27, 2014, major international steel market quotations indicated that China’s cold‑rolled coil was priced at US$540 per ton FOB, while hot‑rolled coil and medium‑thick plate were quoted at just US$465 and US$460 per ton FOB, respectively. By comparison, this translates to roughly RMB 2 per jin—on par with the price of cabbage on the domestic market—resulting in steel being sold at “cabbage‑price” levels. With overcapacity and weak demand, China’s steel prices have now fallen to their lowest point in nearly a decade. Meanwhile, in the Commonwealth of Independent States, medium‑thick plate and hot‑rolled coil were quoted at US$510 and US$475 per ton FOB (Black Sea), respectively.

　　II. Global manufacturing continues to expand, and the growing demand in emerging markets has driven a substantial increase in exports.

　　Since the beginning of this year, signs of a stabilizing and recovering global economy have become increasingly evident, with manufacturing showing sustained expansion. Data jointly released by JPMorgan and Markit indicate that in August, the global manufacturing Purchasing Managers’ Index (PMI) accelerated its pace of expansion, rising from 52.5 in July to 52.6—and remaining in expansionary territory for the 21st consecutive month. Notably, the Institute for Supply Management (ISM) reported a final PMI reading of 57.9, marking the strongest increase since April 2010. The robust expansion of the U.S. economy has been the primary driver behind the global index’s rise. Although global manufacturing growth slowed in October and November, it remained in expansionary territory, with the global PMI holding steady at 52.2 in October. With manufacturing continuing to expand worldwide, steel demand is increasing; according to the World Steel Association (WSA), global steel consumption is projected to reach approximately 1.562 billion tonnes in 2014, up 2% year on year.

　　As emerging market economies continue to grow rapidly, investment in infrastructure and civil construction has steadily increased, leading to a marked rise in demand for steel, particularly construction steel. From January to November 2014, China’s exports to ASEAN totaled 23.2908 million tons, up 44.01%, while exports to Africa reached 6.0235 million tons, an increase of 40.09%. The expanding demand in emerging markets has driven a corresponding increase in China’s steel exports.

　　At present, overcapacity in China’s steel industry and a sharp surge in exports have given rise to numerous developmental challenges. Severe excess capacity has resulted in a persistent supply‑demand imbalance in the steel market, with price‑cutting competition becoming increasingly pronounced, thereby plunging the entire sector into the predicament of “increased production without commensurate revenue growth.” Meanwhile, the expansion of China’s steel exports has triggered a growing number of trade disputes. The specifics are as follows:

　　I. Overcapacity persists, and pressure to phase out outdated production capacity and meet environmental standards has intensified.

　　In recent years, investment in China’s steel industry has remained persistently robust, while efforts to phase out outdated production capacity have yielded limited results, exacerbating the problem of overcapacity. According to data from the National Bureau of Statistics, between 2006 and 2012, China’s cumulative addition of crude steel production capacity totaled 440 million tons, whereas the corresponding reduction amounted to only 76 million tons. In 2013, new capacity added reached 80 million tons, with an estimated 30 million tons of new capacity expected in 2014.

　　As smoggy weather has become increasingly frequent across the country, both the State Council and local governments have successively introduced policies aimed at curbing air pollution and addressing overcapacity. In September 2013, the State Council issued the “Air Pollution Prevention and Control Action Plan,” which set a target to phase out an additional 15 million tons of iron‑making capacity and 15 million tons of steel‑making capacity by 2015. In October of the same year, the State Council released the “Guiding Opinions on Resolving the Contradiction of Severe Overcapacity,” calling for a reduction of more than 80 million tons of steel production capacity over the next five years. On January 7, 2014, the Ministry of Environmental Protection signed “Air Pollution Prevention and Control Target Responsibility Agreements” with all 31 provinces, autonomous regions, and municipalities directly under the central government, clearly defining regional air quality improvement targets and key tasks. On November 25, 2014, the Ministry of Industry and Information Technology published the third batch of enterprises that met the “Normative Conditions for the Iron and Steel Industry,” bringing the total share of steel production capacity covered by these criteria to 85 percent; this suggests a high likelihood of further capacity‑elimination efforts in the future.

　　Second, the “volume-for-price” strategy has intensified the risk of cutthroat competition, and the steel distribution market has lost its function as a liquidity reservoir.

　　Domestic steel demand remains sluggish, forcing producers to rely on exports to alleviate excess capacity, while competition in the export market is intensifying. To capture a share of the limited export market, steelmakers are increasingly adopting a “price‑for‑volume” strategy. This approach is bound to exacerbate cutthroat competition in steel exports and spark further trade disputes.

　　As steel prices continue to fall, steel traders have been fleeing en masse, causing the steel market’s role as a “liquidity reservoir” to evaporate. To hedge against market risks, players in the steel trade and distribution sector have slashed their inventories—some even adopting a zero‑inventory strategy—and reduced orders from steel producers. This has led to a decline in overall social steel inventories while internal inventories at producing firms have surged. In November 2014, total social steel inventories hit their lowest level since 2009: as of the 28th, steel stocks across 29 key cities nationwide stood at 8.988 million tonnes, down 7.6% month-on-month and 27.8% year-on-year. The shifting composition of steel inventories has triggered a sharp rise in non‑performing loans within the steel trading industry this year, with most banks reporting a substantial deterioration in asset quality.

　　III. Trade frictions have intensified, with anti-dumping and countervailing duty cases tripling compared to the same period last year, and spreading to emerging markets.

　　As China’s steel exports have surged, trade frictions in overseas markets have intensified this year. According to statistical data, by the end of November 2014, a total of 11 countries or regions had initiated 60 trade‑remedy investigations against Chinese steel products, representing a 200% increase. These included 13 anti‑dumping and countervailing duty investigations, 41 anti‑dumping investigations, and 6 anti‑subsidy investigations. For the 19th consecutive year, China has been the country most frequently targeted by trade disputes, with the steel sector consistently bearing the brunt.

　　Trade frictions in the steel sector are increasingly spreading from traditional markets such as Europe and the United States to emerging markets. Since the beginning of this year, Chinese steel products have been subject to trade‑remedy investigations initiated by countries including the United States, India, the European Union, and Malaysia. Notably, emerging markets such as India, Malaysia, South Korea, and Brazil have also launched their own trade investigations. For example, on October 30, 2014, Brazil issued a final anti‑dumping ruling on seamless steel pipes imported from China, imposing a five‑year anti‑dumping duty that remained in effect until October 30, 2019. Meanwhile, this year Thailand, Malaysia, Morocco, and other economies have successively initiated safeguard investigations against imported steel. On August 18, 2014, Malaysia launched a safeguard investigation into imports of hot‑rolled steel sheet.

　　The government continues to roll out new measures to stabilize growth, yet domestic steel demand is unlikely to see a significant rebound in the short term. On the funding front, policies such as the “Ten Measures for Financial Support,” interest-rate cuts, and initiatives to encourage private investment have been introduced one after another. In infrastructure, over the past two months, the National Development and Reform Commission has successively approved railway, airport, and port projects. Despite the boost from this package of growth‑stabilizing measures and the ongoing release of reform dividends, it will still take time for these funds to materialize and translate into increased demand across the steel sector. Consequently, export pressures on steel remain substantial. We recommend strictly enforcing industrial policies, actively phasing out outdated capacity, aligning production with sales, and regulating the export‑enterprise landscape to prevent destructive low‑price competition.