Steel exports from China expected to rise as a result of cheap iron ore supply from Australia

As a result of an abundant supply of iron ore from Australia, the capacity of Chinese steel plants have increased beyond its own requirements, prompting Chinese mills to export steel to overseas buyers. This is expected to boost steel exports from China to more than 100 million metric tonnes this year.

On the other hand, the largest iron ore miners of Australia, including the Rio Tinto Group, are boosting production to expand their sales. The Credit Suisse Group AG, which declared last month that they are at par with the world’s second largest iron ore producer, Japan, called the Chinese steel shipments “extraordinary.”

Lourenco Goncalves, the chief executive officer of Cliffs Natural Resources, the largest iron ore producer of U.S., said in an interview that the entire development is like a “virus,” and that Australia is continuing to supply China with iron ore almost for free, which is allowing them to produce more than they need.

"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."

According to customs reports in July, the export of steel from China has increased by 9.5 percent to 9.73 million tonnes. A data compiled by Bloomberg shows that the exports have soared to 62.13 million in the first seven months, roughly by 27 percent, which is the highest ever for the span.

"The difficult condition in the Chinese steel market is the main driver for the export gains," said Anurag Soin, an analyst at Australia & New Zealand Banking Group. According to Soin, even at the expense of market share prices, the Australian iron ore miners have continued to supply Chinese mills with raw materials at dirt cheap prices.

"Everyone is complaining about Chinese steel exports," Wang Yingsheng, deputy secretary-general of the China Iron & Steel Association, the Sydney Morning Herald quoted him as saying in an interview. According to him, even though the volume of exports indicates growing appetite for steel overseas it also shows weakening demand back in China.

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