China’s steel producers, which account for around half of the global supply, saw their production drop in 2015 for the first time in a quarter century. But exports have gone up, and they are expected to increase in 2016; a combination of slumping domestic demand, excess inventory and production, and an increasing gap between supply and demand means that the world will need to start bracing itself for a flood of more cheap Chinese steel.
A Perfect Storm for Exports
According to official statistics, Chinese steel production decreased 2 percent to 803.8 million metric tons last year. China’s domestic demand for steel dropped, and steel mills faced excess capacity on lower steel prices due to a slowing global economy. The decline will likely continue for 2016, as analysts expect another drop of between 2 and 3 percent this year.
While steel production and domestic demand are down, Chinese steel mills have found a new outlet for their goods—foreign markets.
