China Finding New Outlets to Export Overcapacity
By Metal Center News Staff
on Jun 10, 2015
June 10, 2015 China Finding New Outlets to Export Overcapacity In any gathering of global steel executives, such as AMM’s Steel Success Strategies conference in New York this week, talk quickly turns to China. This year’s event was no exception, with mill representatives and industry analysts opining extensively on China’s overcapacity, currency rates and global export practices. Accenture’s John Lichtenstein, however, took the topic down a different path, one that has more troublesome implications for the North American service center industry. Lichtenstein said Chinese direct exports of steel products may start to wane, but will be replaced by a greater concentration of indirect steel exports—that is, steel that is already part of some product. Exports of durable goods from China grew at a 50 percent higher annual rate than exports of non-durable goods between 2000 and 2014. For example, Chinese exports of cookers and refrigerators accounted for just 4 percent of the global market in 2000. Today, the Chinese products account for a 21 percent share, more than double the next-highest producer, Mexico. On top of that, Lichtenstein said, recent low-key announcements from China’s central government could be the precursors of much larger developments. In its Silk Road strategy, government officials cited the desire to assist contiguous countries in Southeast Asia in development of infrastructure, energy and manufacturing. Such a comment could merely be an acknowledgment of what’s already taking place, or it could hint at a more aggressive global expansion to come. A second announcement supports the latter interpretation, Lichtenstein said. In April, the Chinese government reversed a long-standing policy that banned foreign companies from establishing ownership in China, a move that should help the Chinese industry with debt and other issues. However, there may be more to it than that, he said. “I think this is a pre-emptive move to eliminate the lack of reciprocity as a basis for blocking Chinese ownership and investment in steelmaking assets around the world. This means that besides facing direct and indirect steel imports, steel producers around the globe may, in the future, have to contend with China-tied companies entering and operating within their home markets,” he said.