Asian steel exports start to crumble

Asian steel exporters, who have largely withstood the steep decline in US steel imports from a peak level of 41 million tonne (mt) in 2006 to 31 mt in 2007 and further to 30 mt in 2008, finally seem to have lost steam with the advent of the slowdown. The only exception seems to be China, who has boosted market share even in the shrinking markets, with its export share going up by close to 5 percentage points even in the first two months of 2009, when US steel imports dipped by a quarter.

The gain made by the Asian exporters in the US markets is best highlighted by the growing share in market volumes. Numbers show that brunt of the 6.4% fall in steel imports into the US between 2004 and 2008 was borne by the traditional exporters like Mexico, Russia and Brazil. The share of these countries in total US steel imports shrunk from 29% in 2004 to just 18% by 2008 pulling down their export volumes from 9.3 mt to 5.2 mt.

In contrast countries like Canada, China, Korea, Ukraine and India made sizable inroads in the US markets. Canada, which has been the largest supplier of steel to the US in the middle of the decade, saw its share go up from 16% in 2004 to 21% by 2008, with its total steel exports going up by 18.2% from 5.2 mt to 6.1 mt during the period. But the biggest gainer was China whose share in US steel imports more than trebled to 15% with it exports going up by 217.6% from 1.5 mt to 4.8 mt between 2004 and 2008.

The gains made by other Asian countries were less impressive. While Korean steel improved its market share by 2 percentage points to 7%, with exports going up from 1.7 mt to 2.2 mt over the last four years, India?s gains were more marginal with the share going up by just a single percentage points to 4% and raising volumes from 1 mt to 1.3 mt. Japan, the other major Asian steel exporter registered similar gains with its share going up to 5% from 1.3 mt to 1.5 mt.

The surprise was that while two Bric countries, namely China and India gained a larger market share, Brazil and Russia, who were early entrants with a market share of 9% and 7% of volumes in 2004, saw their fortunes ebb with their share dwindling sharply to 3.6% each by 2008.

But the sharp fall in the volume of steel export to US show only one side of the picture as the rising steel prices have had a positive impact on export earnings, especially for countries that saw a steady increase in unit values. Numbers show that while the volume of steel imports fell from 31.7 mt to 29.7 mt between 2004 and 2008, registering a decline of 6.4%, the value of imports rose from $22.2 billion to $39.7 billion?an increase of over 78.8%. This was mainly because the unit prices of steel imports into the US went up from an average rate of $700 per tonne in 2004 to 1.377 per tonne in 2008, an increase of around 91%.

One reason for the steady pick up in the value of steel imported was the changing composition of US imports. The flat and long products of carbon and alloy steel, which accounted for more than four-fifths of the US steel imports in 2004 lost prominence as the share of pipe and tube products, priced much higher than flat and long products, almost doubled to 28.2% by 2008. However, the share of high value stainless steel products rose up only marginally from 2% to 3% during the period.

However, what is more striking is that the gains in unit value realisation of exports varied sharply across the major suppliers of steel in the US markets. The highest gains in unit value of steel exports was made by Mexico, which saw its price realisation, shoot up by 88% from $573 per tonne in 2004 to $1,079 per tonne in 2008. In fact, units prices of steel imports into the US went up even when imports shrunk faster in the first two months of 2009.

Surprisingly, the second major gainer was India with the unit price earned on steel exports going up by 79.9% from $816 per tonne in 2004, to $1,468 per tonne in 2008. The unit price earned by Indian steel exports in the US markets was the second highest after that of German steel, whose unit price was $1,949 per tonne in 2008, but still higher than that of Chinese steel whose import price was $1,452 per tonne.

The reason for the higher unit prices of Indian steel may be accounted by the substantial change in the export components. Numbers show that between 2004 and 2008, the share of flat products in total steel exports was reduced from three-fourths to just around a fourth. However, the share of value added items like pipes and products shot up from 17.4% to around two-thirds. In contrast, the share of high-priced stainless steel products fluctuated between 4-6% of the total exports.

An interesting aspect is that China, which has made much faster inroads into the US steel markets, has followed a different strategy by focusing on both long and pipe products. Numbers for 2008 show that the share of long products in Chinese exports was close to 30%, while that of pipe products was almost double. But despite the gains made by Chinese steel, their share of stainless steel products in total exports was similar to that of India.