Steel exports from China will surge to more than 100 million metric tons this year as local mills benefit from cheap iron ore to produce more than Asia’s top economy needs, according to Cliffs Natural Resources.
“It’s like a bad virus,” Lourenco Goncalves, chief executive officer of the largest US iron-ore producer, said in a phone interview from the company’s headquarters in Cleveland. “Australia continues to give iron ore to China almost for free, allowing them to produce more than they need.”
Shipments from the biggest producer are headed for a record this year as slowing local demand prompts mills to seek overseas buyers, driving down prices and spurring trade tensions from the US to India.
At the same time, the largest iron-ore miners including Australia’s Rio Tinto Group are boosting output to expand sales. China’s steel shipments were called extraordinary by Credit Suisse Group, which said last month they were now in line with total output from Japan, the No. 2 producer.
“What China is exporting alone is bigger than the second-biggest producer of steel in the world: it is crazy,” Goncalves said on Wednesday. “With the massive sales of iron ore to China – enabling China to produce a lot more than China actually needs for consumption – there’s a glut of exports.”
Shipments of steel from China surged 9.5 per cent to 9.73 million tons in July, according to customs data. In the first seven months, exports rose 27 per cent to 62.13 million tons, the highest ever for the period, data compiled by Bloomberg show.
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