Angang Steel slipped to a net loss of 3.25 billion yuan ($450 million) last year, after posting a net profit of 108 million yuan the year before. The core listed arm of Ansteel Group -- the third-largest steel producer by volume in 2022, according to the World Steel Association -- acknowledged in its latest annual results published at the end of last month that the steel sector had "entered a new round of an adjustment cycle."
Management, led by Chairman Wang Jun, predicted a "high level" of supply, coupled with weak demand through 2024. It said that domestic competition is likely to only grow more severe, while a "rise of protectionism abroad and exacerbation of risk on international trade will create certain pressure on exports of steel products."
A few weeks later, on Wednesday, Biden told American steelworkers that he was calling for tariffs on Chinese steel and aluminum to be tripled. "Because Chinese steel companies produce a lot more steel than China needs, it ends up dumping extra steel on the global markets [at] unfairly low prices," Biden said. Although Chinese steel accounts for only a small percentage of American demand, a U.S. official said the administration was looking to act pre-emptively "to get ahead of China's new export surge."
According to China's National Bureau of Statistics, the country's crude steel production last year was virtually flat at 1.019 billion tonnes. Exports of steel products reached 90.26 million tonnes, up 36% on the year, while imports were down by 28% to 7.65 million tonnes.
Angang has already been expanding abroad. While its domestic sales dropped by 15%, year on year, to 106.34 billion yuan in 2023, its exports grew 18% to 7.16 billion yuan. Even though most of its revenue is still derived from the home market, exports were profitable at the gross level, while domestic sales were losing money.
Management stated in its disclosure that it has "actively expanded its overseas sales channels" by adding new products in its overseas lineup. "New breakthroughs were achieved" in exports including "container steel, 50-meter fixed foot heavy rail and EPS [electric power steering] automobile steel," the company said.
Maanshan Iron & Steel, an affiliate of China Baowu Steel Group, the world's largest steel producer by volume, reported another net loss of 1.32 billion yuan for last year, worsening from 858 million yuan of red ink the year before. It, too, flagged the excess material in the market.
"Oversupply of iron and steel made it difficult for enterprises to improve quality and efficiency," the company said in the management discussion and analysis section of its latest annual results. The report, signed by Chairman Ding Yi, said the excessive supply was compounded by falling demand for domestic crude steel "due to the downturn of the real estate industry." This led to a sharp decline in sales prices, reflected in the benchmark Composite Steel Price Index (CSPI), which was down by over 9% last year on average, as well as a more than 10% fall in the index for long steel products.
As with Angang, a key part of Maanshan's business plan for 2024 is to make gains abroad. The company vowed to "increase the proportion of exported products [and] will take the initiative to expand overseas markets and deepen international operation to explore new areas for profit growth."
Xinjiang Ba Yi Iron & Steel, another listed affiliate of Baowu, also warned of overcapacity in its annual results published Monday night.
"The issue of excess production capacity in the steel sector is prominent in 2024, especially where China is the largest producer and consumer in the world, and the contradictions between supply and demand will get even more acute," the Shanghai-listed company said, after reporting two consecutive years of net losses: 1.16 billion yuan for 2023 and 1.36 billion yuan for 2022.
The company echoed its peers, describing adjustments in the sector as an "unprecedented challenge," with players under pressure for a "great reshuffling," and facing a "stern ordeal for survival."
While Ba Yi's main market remains the Xinjiang region, the company said it has expanded to other provinces and regions, as far as Shanghai and its vicinity, as well as beyond China's borders to Central Asia and Russia.
Other midsize and small steelmakers have also been looking to export their way out of their crucible.
State-owned Shandong Iron & Steel said it exported its products to Europe, South Korea, Southeast Asia and the Americas last year, as its bottom line slipped to a 399.59 million yuan net loss from a net profit of 553.64 million yuan.
Hunan Valin Steel, a Shenzhen-listed state-owned player, said it had "exported a small amount" in its annual disclosure. The company, which saw its net profit fall 20% last year, said total exports came to 1.56 million tonnes, a year-on-year increase of 26%. Its overseas "focus" areas are the Middle East and Southeast Asia.
While these companies grapple with the industry's realities, the Chinese government is rejecting U.S. and European allegations about overcapacity triggering a flood of cheap exports into the global market.
Jin Xiandong, director general of the policy studies office at the National Development and Reform Commission, shrugged off recent criticism from U.S. and European leaders. "The balance between supply and demand is relative, while imbalance is common," he said at a news conference hosted by the Chinese government's information office in Beijing on Wednesday. He argued that linking more exports to overcapacity "is not tenable."
"China imports a substantial amount of chips, airplanes, soybeans, crude oil and more, but do exporters of these products all have an overcapacity issue?" he asked.
On the Biden administration's tariff proposal, Jack Shang, Hong Kong-based analyst at Citi, said the real impact on Chinese steel manufacturers would be "insignificant," given their relatively low exports to the U.S. Shang said the story would be the same with aluminum.
Even so, the call heralds growing global resistance at a time when these companies are increasingly desperate to offload surplus output. Their predicament also casts doubt on China's own efforts to curb industrial overcapacity under President Xi Jinping in recent years.
A policy of "supply-side structural reform" was introduced in 2015, mainly targeting the steel industry along with aluminum, cement and coal. Spearheaded by the late Premier Li Keqiang, China claimed to have made progress on this front. But now, as Beijing strives to manufacture its way out of a shaky post-COVID recovery, the issue is once again front and center.