Chinese Steel Price Becoming Benchmark in Many Negotiations

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Chinese Steel Price Becoming Benchmark in Many Negotiations

Chinese steelmakers are expanding their influence in the global market at a rapid pace. Most carbon steel products exported from China are, no longer, considered to be significantly inferior to local material for the majority of applications. The delivered price for Chinese material is becoming a key reference figure when negotiating new deals in many parts of the world. This is particularly true in Asian countries.

The initiative, when negotiating steel prices, is being wrested from the local/regional steelmakers. Now in western countries, the price of Chinese imports often forms part of price discussions for domestic supply. This should not be surprising when total annual steel exports of finished steel products from China, have risen by almost 65 million tonnes in the past five years – up from 17.2 million tonnes in 2009 to 81.8 million tonnes in 2014.

A significant proportion of this extra material has been scheduled for supply to Asian destinations. However, in many parts of that region, Chinese imported material is an ever present threat to the profitability of the local steel producers.

To illustrate this point, in the five years between 2009 and 2014, China’s total steel exports of finished steel products have grown from 3.2 to 10.2 percent of production, over the period. The growth in Chinese steel exports, as a proportion of apparent steel consumption, was even more dramatic – rising from 3.2 to 11.1 percent in the same time span.

In the first four months of 2015, the export tonnage from Chinese mills continued to rise. Its influence on the global market will intensify in future years. The Chinese steel industry is expanding at a pace which is substantially above the rate of growth in domestic demand. This fact will need to be given serious consideration for all steelmakers contemplating new capital investment, wherever they are located.

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