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Global decarbonisation is making electrical steel one of the main products of China's ferrous steel industry, and the country has been exporting more of it recently. China shipped 860.96 thousand tonnes of electrical steel in total in 2021, an rise of 64% from the previous year. This number increased by 49% YoY to 1.28 million tonnes in 2022 and decreased by 4% YoY to 1.23 million tonnes in 2023. With 15% of China's total electrical steel exports last year, India was the country that purchased the most of the country's electrical steel.
China's electrical steel exports reached 356.73 thousand tonnes in the first quarter of 2024, a 30% increase from the same period the previous year. The five largest buyers in January-March were India, Turkey, Mexico, Italy and the United States (the total share of shipments to these countries was 57%).
One market participant notes that the main reason for the active export of these products is the expansion of the electric vehicle industry outside of China. Overseas supplies will be an opportunity for more Chinese steel mills as they need to sell growing volumes of electrical steel. According to the data published by the China Society of Metals, in 2023, the country increased its electrical steel production by 15% y/y – to 15.28 million tonnes. Some steel mills are still ramping up their production capacity in anticipation of increased demand.
For example, in September 2023, construction of a 1 million tonnes per year electrical steel project was launched in Inner Mongolia. Its first phase (500 thousand tonnes per year) is scheduled to be launched in May this year. Industry analysts expect China’s annual electrical steel production capacity to reach 18-20 million tonnes by 2026, up from 16.67 million tonnes in 2023.
According to market participants, good margins amid strong demand at home and abroad have prompted Chinese mills, including leading steel mills, to increase their electrical steel production capacity. Given the downturn in the country’s steel industry, large mills have already strategically adjusted their product portfolios to increase competitiveness.
This is exemplified by large investments in non-oriented electrical steel, including Baowu Group, the world’s largest steel producer, and Shougang Group. In January-March 2024, Chinese steel companies increased their exports of steel products by 30.7% compared to the same period in 2023, to 25.8 million tonnes. Export volumes reached their highest level since 2016.
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