Australia's exports to China have slumped while China's steel industry profits have recovered

  • Tuesday, September 15, 2020

  • Keywords:Australia,China,Steel,Iron Ore,Manganese,Chrome,Nickel,Vanadium
[Fellow][] Australia's exports of goods to China fell by more than 26% in August, sparking fears of deteriorating relations between the two countries.

[] According to The Australian, data from the Chinese General Administration of Customs showed that Australia's exports to China fell by more than 26% in August and the total value of Australia's exports to China fell by 7.5% year on year, down to $75.7 billion.

  According to the article, Bloomberg cited the latest data released by China customs on Monday. It showed that Chinese imports from Australia fell by 26.2% year on year to $8.81 billion in August, while total Chinese imports fell by 0.5% in the month. Chinese imports from Australia fell by more than any other country.

  The article also pointed out that in July, according to the Australian Bureau of Statistics, Australian merchandise exports to China fell by 16% year on year, including a drop in iron ore and coal exports. This is a big shift comparing with Australia's former strong export sales to China from March to June.

  But Chinese imports from Australia fell by just 7.2% in July, according to official Chinese data, likely reflecting time delays and fluctuations in exchange between the two countries. In summary, according to the data from Australia and China in July and August, there’s a sharp short-term decline in trade between the two countries.

  According to the Australian Bureau of Statistics, Australian merchandise exports to China rose to a new record of $150 billion in the fiscal year by June 2020, higher than $135 billion by June 2019 due to high iron ore prices and huge sales of beef and wine. It is reported that Iron ore is Australia's single largest source of exports to China, accounting for 56 percent of all Australian merchandise exports in the fiscal year from 2019 to 2020.

  The article also compared the growth of trade between China and Brazil. Brazil is Australia's biggest rival in iron ore supply but according to trade figures of China and Brazil, Chinese imports from Brazil rose by 21.1% in August, up 5.5% year on year, to $54.5 billion.

  The relationship between Australia and China is not going well this year. During the coVID-19 epidemic, Australia kept hyping up the "source of the virus" and pointing the finger at China. In an interview with the Australian Broadcasting Corporation (ABC) on April 19, Australian Foreign Minister Marise Payne said she was very concerned about the "transparency" of information on the outbreak in China. She also called for what she called an "independent international investigation" into the origin of the outbreak and did not think WHO should be involved.

  On the other hand, with the orderly progress of the resumption of work in July, the domestic market demand for steel was strong. The operation and economy of steel industry remained stable.

  According to data, in July, the output of country's pig iron, crude steel and steel products respectively rose by 8.8%, 9.1% and 9.9% year on year. CISA's key statistics showed that enterprises realized 14.8% year-on-year growth in operating income and 33.4% year-on-year growth in total profit.

  Due to the impact of COVID-19 epidemic, the data of the first quarter showed that the steel market was in the downturn and the benefits of steel industry were reduced. Key statistics showed that the sales revenue of enterprises decreased by 5.6% year on year, the total profit decreased by 50.8% year on year, and the profit margin of sales decreased by 1.89% year on year.

  The economic recovery of steel industry is inseparable with the rising market in China. At present, China's economy continues to recover, the demand for steel increases. According to a demand forecast released by the World Steel Association in early June, global steel demand would shrink by 6.4 % in 2020 while Chinese steel demand would grow by 1%.

  It is worth noting that, driven by the strong demand in the domestic market, steel production is surging and the pressure on the supply side is also rising. From April to July, crude steel output increased by 0.2%, 4.2%, 4.5% and 9.1% year-on-year respectively, showing an accelerating trend month by month. The daily output of China's crude steel reached the highest level from May to July.

  At the same time, the international market demand is still in a shrinking state. Chinese steel exports drop while imports increase significantly. From January to July, Chinese steel exports fell by 17.6% year on year while steel imports rose by 49.3% year on year, which also made the supply and demand balance of domestic steel market face greater challenge.

  According to the research and judgment of the industry, the overall pattern of oversupply in the current steel market has not been changed. It is difficult for enterprises to improve economic benefits under the situation of huge steel inventory and high price.

  "The contradiction between a higher level of capacity release and a phased decline in real consumption will lead to a decline in steel prices, a decline in industry efficiency, and erosion of the dividend of supply-side structural reform." Shen Bin, President of China Iron and Steel Association, recently reminded that the steel industry strengthen industry self-discipline, organize production according to the needs, make the organic link among production, supply and marketing, forming a joint force to maintain market stability.

  The high price of iron ore has seriously eroded the benefits of steel companies, making the whole industry worried. From January to July, China's iron ore imports rose by 11.8% year on year. According to China Iron Ore Price Index monitoring, as of August 14, the price of imported iron ore (62%) rose to $120.49 per ton, up 31.30% from the beginning of the year. While the steel index fell by 1.49% from the beginning of the year. The price of imported iron ore and steel differed too much from each other, which brought great profit reduction effect to steel enterprises.

  It can be seen that it is very important and urgent for China's steel industry to change from big industry to strong industry. In such a rising market, the steel industry should unswervingly deepen the supply-side structural reform and focus on---controlling capacity expansion, promoting industrial concentration, ensuring resource security---these three industry pain points to overcome difficulties.


  • [Editor:zhaozihao]

Tell Us What You Think

please login!   login   register
  • Buy & Sell

Please be logged in to comment!