What is the impact of US additional steel tariffs on China's steel industry?
During the Dragon Boat Festival holiday, a piece of news drew investors' attention to ferrous metals.
According to CCTV News, on May 30, local time, US President Trump said he would raise tariffs on imported steel from 25% to 50%. The White House issued an announcement on social media that day, stating: "To further protect the US steel industry from foreign and unfair competition, starting next week, US tariffs on imported steel will increase from 25% to 50%. "
Liu Huifeng, chief researcher of ferrous metals at Donghua Futures, introduced that considering the previous Section 232 of the US Trade Expansion Act and Section 301 of the Trade Act, the tariffs on some steel products directly exported from China to the US have reached 70%.
Currently, the steel market is in the off-season, and market expectations for future demand are not optimistic. Meanwhile, June's home appliance production data has significantly weakened. The news of the additional steel tariffs may further exacerbate the already pessimistic market sentiment." Liu Huifeng believes that from a macro perspective, the news has triggered market concerns about a further escalation of the trade war. During the Dragon Boat Festival holiday, the EU stated it would take further countermeasures against the US tariff policy, leading to increased market risk aversion. The decline in overseas financial markets on Friday night may further drag down domestic steel prices trend.
According to customs statistics, in 2024, China's cumulative steel exports totaled 110.716 million tons, a year-on-year increase of 22.7%; cumulative steel imports totaled 6.815 million tons, a year-on-year decrease of 10.9%. In 2024, China's cumulative exports of steel billets were 6.3382 million tons, a year-on-year increase of 93.28%; cumulative imports of steel billets were 1.784 million tons, a year-on-year decrease of 45.38%. Converting steel into crude steel, China's net export of crude steel in 2024 was 115.0968 million tons, an increase of 27.2 million tons year-on-year, setting a historical high. In 2024, China's cumulative exports of hot-rolled coils were 27.4738 million tons, a year-on-year increase of 31.05%, accounting for 24.81% of total steel exports; cumulative exports of bar and wire rods were 13.4809 million tons, a year-on-year increase of 24.74%, accounting for 12.18% of total steel exports.
In addition, in 2024, US steel imports were 26.225 million tons, a year-on-year increase of 2.5%. In terms of imported varieties, hot-rolled coils, cold-rolled 、 galvanized and other sheet materials were the main imported varieties, while the proportion of bar materials such as rebar was relatively small. In terms of import sources, the top three steel suppliers to the US were Canada, Brazil, and Mexico. Last year, the US imported a total of 13.228 million tons of steel from these three countries, accounting for 50.4%. In Asia, the top three countries exporting to the US were South Korea, Vietnam, and China (including Taiwan), with the US importing a total of 5.3 million tons from these three countries last year, accounting for 20.2%. Europe is the third largest source of steel imports for the US.
Liu Huifeng believes that in 2024, China's steel exports to the US were only 891,700 tons, accounting for 0.81% of China's total steel exports. Therefore, the impact of the additional tariffs on China's direct steel exports to the US can be ignored. However, considering the impact of transshipment, the pressure on China's steel exports will further increase. According to data from the American Iron and Steel Institute, in 2024, the top five countries importing steel into the US were Canada, Brazil, Mexico, South Korea, and Vietnam, with import volumes of 6.557 million tons, 4.498 million tons, 3.517 million tons, 2.809 million tons, and 1.363 million tons, respectively. Last year, China's steel exports to these five countries were 675,400 tons, 3.7621 million tons, 1.171 million tons, 8.1934 million tons, and 12.7664 million tons, respectively. If China's steel exports to these five countries are then exported to the US, the policy of imposing additional tariffs will affect China's steel exports to these five countries. In total, the additional tariffs will affect approximately 11 million tons of China's steel exports. However, considering China's price advantage in steel exports, the actual impact may be less than this scale.
Regarding the current situation of steel exports, Chen Yuqian, deputy secretary-general of the China Iron and Steel Association, once said that under the US's additional tariff policy, the "rush for exports" effect in China is obvious. In March this year, China's steel exports once again exceeded 10 million tons, reaching 10.456 million tons, a year-on-year increase of 5.7%. Data shows that from January to March this year, China's cumulative steel exports were 27.429 million tons, a year-on-year increase of 6.3%, better than the same period last year.
"In the short term, the US's additional tariffs may lead to higher steel prices overseas, putting pressure on China's steel market; in the medium term, the trend of steel prices will still depend on the supply and demand relationship, and China's steel exports will still have strong resilience this year. It is expected that China's crude steel production and export volume will decrease in 2025, while steel billet exports will increase, and the annual apparent consumption of crude steel will decrease by 2.82% year-on-year." Qiu Yuecheng, chief research director of Everbright Futures' ferrous metals research, said.
What is the impact of the "US's additional tariffs" on steel price trends? Liu Huifeng believes that the increase in tariffs may further exacerbate market expectations of weakening steel demand, and the steel market may experience a further short-term decline after the Dragon Boat Festival holiday. However, in April and May, the steel market showed a pattern of strong reality and weak expectations, and actual demand still has some resilience. As of the end of May, rebar futures' main contract's discount to spot prices has widened to around 160 yuan/ton, hot-rolled coil futures main contract's discount to spot prices has widened to 94 yuan/ton, both at high levels in recent years. The high discount is a direct reflection of the pattern of strong reality and weak expectations. Therefore, after the Dragon Boat Festival holiday, the key to determining the steel price trend lies in whether the weak demand expectations will materialize. If demand continues the resilience of April and May, prices may rebound temporarily; otherwise, they will continue to weaken.
