Reuters reported that China's slowing demand for steel is driving Chinese steel exports to the highest level in more than three years, flooding the Asian markets.
China boosted first half steel exports to 27.26 million tonnes, the highest for a six month period since 2008, as domestic consumption ebbed and inventories ballooned. Traders said that stockpiles of steel products in major Chinese cities have surpassed 15 million tonnes.
Europe used to soak up most of China's steel exports, but the region's protracted debt woes have forced producers like Baoshan Iron & Steel to turn their shipments to destinations closer to home. The wave of cheap Chinese exports has fuelled price undercutting among Asia's top mills, which are expected to report profit slumps for the three months to June 2012.
Mr Helen Lau, a commodities analyst at UOB Kay Hian in Hong Kong, said that "Before, China was exporting 2 million tonnes per month and now it is suddenly 5 million tonnes. Given that domestic demand in their respective countries is already not particularly strong, local steel producers are clearly afraid. China will continue to export at a high rate for the rest of the year. I understand the Chinese steel mills are making very little money from exporting, but it is still better than closing down their plants and laying off their staff."