China’s steel shipments to Australia have reduced by more than 50 percent in recent months. The trend is projected to further accelerate as China takes more measures to cut output and restrict exports; largely attributed to China’s diminishing steel supply.
Consequently, this will likely lead to a steel shortage for the recovering Australian economy, which is about to start on a massive infrastructure project.
Wang, a steel exporter from Tangshan, China told the Global Times that although Australia is not his main export destination, the plummeting steel exports to the country recently has been very evident.
“Overall steel exports have halved in recent months, but the export slump to Australia was one of the fastest,” Wang said.
Xie, a representative of a Shanghai-based professional steel and iron materials export and import company also told the Global Times that despite exports to Australia being very small, it has continuously declined as domestic output has been gradually controlled.
“Considering China’s goal of reducing carbon emissions and the relatively low cost of steel production, the chances of additional levies on steel exports are high,” Xie noted.
The falling output and exports would sap China’s demand for iron ore, Australia’s biggest commodity export to China.
CHINA’S OVERHAUL
According to data released by the National Bureau of Statistics, China’s steel output dived to a 15-month low in July; in their efforts to reduce carbon emissions and overhaul the industry to tame a price surge.
China has raised the cost of steel exports twice so far this year. The Chinese government revived taxes on steel exports and cut tariffs for ferrous imports from May 1. Also, starting from August 1, China canceled more rebates of the value-added tax for some steel exporters.
Wang Guoqing, a research director at the Beijing Lange Steel Information Research Center said that this will burden the economies of countries who rely heavily on steel imports from China;
including Australia.
“As Australia reboots its economy, demand for steel is set to further jump with the rollout of more housing and infrastructure construction. That, combined with dwindling imports from China, will only widen the supply gap, which no other country could fill,” Wang noted.
A WAY TO GET AROUND THE SITUATION
Some trade agencies are looking into shared responsibility, with importers, for potential steel export tariff hikes.
“We expect another tariff increase on Chinese steel exports in the second half [of the year] as the country continues prioritizing domestic supply, so we made it very clear in the clause that the cost of potential tariff hikes should be split equally between both parties,” an industry insider said.