China's steel industry has churned out more than two million metric tons a day so far this month. That is 749 million metric tons on an annualized basis, or almost 10% above the country's prior peak output, according to Steel Market Intelligence.If the wild Chinese ride slows down, there will be trouble in Australia.
Yet China doesn't need it. With the economy slowing, there is excess supply and prices are dropping. SMI's Advance/Decliner Index for Chinese steel prices just recorded a zero reading for the third week in a row. If it goes to a fourth week, says SMI's Michelle Applebaum, it will be the first time that has ever happened.
Reports that some Chinese buyers are delaying purchases of iron ore add to the sense that there is a glut of steel in the country.
To alleviate this, Chinese steel exports have jumped—up 28% in the first four months of this year. But like China, the rest of the world is struggling to swallow all that steel. Output elsewhere, such as North America and Europe, is flat or down. In other words, cut-price Chinese exports are taking market share.