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China's Steel Exports Surge Amid Weak Domestic Demand

In May, China's finished steel exports saw a significant increase of 15.3% year-on-year and 4.4% month-on-month, reaching 9.631 million metric tons. This boost in exports comes amid a persistent slump in domestic demand, according to the latest customs data.

Export Levels Remain High

The recent data marks the highest export volume since March, when exports reached 9.888 million metric tons, the largest amount since July 2016. Despite a potential slight decline, exports are expected to maintain high levels throughout 2024, according to industry sources.

Yearly Export Growth

From January to May, China's finished steel exports surged by 24.7%, totaling 44.655 million metric tons, a significant increase from the previous year. In contrast, May saw a decline in steel imports by 3.2% month-on-month, although there was a 1% increase year-on-year, totaling 637,000 metric tons. Over the first five months of 2024, steel imports decreased by 2.7% year-on-year to 3.043 million metric tons.

Net Exports Climb

The net exports of finished steel from January to May rose by 27.3% year-on-year to 41.612 million metric tons. Despite the recent volatility in prices within the Chinese market leading to cautious buying from overseas, domestic prices are not expected to see substantial increases soon. The ongoing downturn in the property sector continues to suppress domestic steel consumption, suggesting that steel exports will likely remain robust through 2024.

Potential Pressure on Domestic Prices

June might witness stronger pressure on domestic steel prices, which could further enhance the competitiveness of Chinese steel in international markets. Despite the seasonal dip in end-user demand typically seen in June, Chinese steelmakers' profit margins remain favorable, preventing a reduction in production levels. Margins for rebar and hot-rolled coil sales are approximately Yuan 100 per metric ton and Yuan 200 per metric ton, respectively.

Stable Production Levels

Utilization rates at China’s blast furnaces remained stable at 88% in early June, matching levels from late May. Steelmakers are currently benefiting from declining raw material costs, which have dropped more sharply than steel prices since late May. This coincides with sluggish demand from both the construction and manufacturing sectors.

Domestic Market Challenges

China's domestic demand for steel may have decreased even more significantly than the previous year, contributing to a depressed local market. The price for domestic hot-rolled coil was Yuan 3,820 per metric ton on June 7, down Yuan 40 from the end of May and Yuan 280 from the beginning of 2024.

Export Prices Adjust

On the international front, the export price for SS400 hot-rolled coil of 3 mm thickness was $526 per metric ton FOB China on June 7, showing a decline of $14 since late May and $44 since early January.

Exploring Clean Energy versus Fossil Fuel Investments

In a dynamic shift, global spending on clean energy has now nearly doubled that of fossil fuels, signifying a significant turn towards renewable sources. However, investment in oil and gas remains robust, exceeding the levels necessary to meet the stringent climate goals set for 2030. This imbalance presents a crucial dialogue on future energy consumption and investment trends.

Global Upstream Spending: A Closer Look In 2024, investment in global upstream oil and gas is expected to rise by 7% to $570 billion, continuing the trend from a 9% increase the previous year. Despite this growth, spending remains 30% below its peak in 2015, thanks in part to cost efficiency improvements. This year's investments, while slightly down, are still significantly above what would be necessary to meet the 2030 climate goals fully.

The Disparity in Clean Energy Investments Contrastingly, global investment in clean energy sectors such as renewable power and energy efficiency has surged, now accounting for nearly twice the investment in fossil fuels. This surge is critical as it aligns more closely with future energy needs and sustainability targets.

Investment in Fossil Fuels Versus Climate Targets Although there's a marked increase in clean energy funding, the persistent high investment in fossil fuels raises concerns. Current levels are about 35% higher than what would be needed to achieve the climate objectives by 2030, posing a significant challenge in aligning with the Paris Agreement's goals to curb global warming.

The Future of Oil and Gas Investments Despite the push for renewable energy, the investment in oil and gas projects remains high, fueled by the demand projected in various global scenarios. However, the International Energy Agency emphasizes that there is no need for further development in oil and gas fields beyond those already discovered, given the expected demand and rapid growth in renewable energy sources.

Navigating the Energy Transition Total energy investments are set to surpass $3 trillion for the first time in 2024, with a substantial portion directed towards clean technologies. This transition underscores a growing preference for sustainable and renewable energy sources over traditional fossil fuels, reflecting a global shift towards environmental consciousness.

The Impact on Demand and Investment Strategies The diversification in investment and the shift towards clean energy are reshaping the global energy landscape. With oil and gas demand expected to peak by 2030, and investments in clean technologies on the rise, stakeholders are urged to reconsider their strategies to align with long-term sustainability goals.

This evolving scenario offers significant opportunities for investors, especially those interested in fostering sustainable and profitable energy solutions. By adjusting investment strategies to favor renewable over fossil fuels, investors not only contribute to a sustainable future but also position themselves advantageously in an evolving market.

What Does This Mean for You? For investors and stakeholders, understanding these shifts is crucial. Adjusting investment portfolios to include a higher proportion of renewable energy projects can offer better alignment with global climate goals and potentially higher returns as demand for clean energy continues to grow.

Conclusion The contrast between clean energy and fossil fuel investments highlights the need for a strategic reevaluation of energy funding. As the world moves towards a more sustainable future, aligning investments with this direction is not just beneficial for the planet but also for the financial health of investors globally.

Rising Copper Smelting Projects in China to Intensify Concentrate Supply Squeeze

China is set to launch two significant copper smelting projects in the second half of 2024, amplifying the existing strain on the tight copper concentrate supply. This development is poised to impact copper treatment and refining charges considerably, as the industry grapples with limited raw material availability.

New Smelting Capacities Emerging

These upcoming projects are anticipated to further challenge the copper industry, adding substantial capacity in an already competitive market. The completion of these projects could push total production capacity significantly higher, marking a notable increase from last year's output, which constituted a substantial share of the national total.

Construction Progress and Potential Delays

Construction is well underway for both projects, with one expected to commence operations by the end of the year and the other in early autumn. However, the realization of these timelines is uncertain due to the ongoing global scarcity of copper concentrates triggered by disruptions in several mines.

Maintenance and Material Substitutions

In response to the dropping copper concentrate treatment charges, numerous Chinese smelters plan maintenance over the coming months. Additionally, there has been a shift towards using more secondary materials, which has somewhat mitigated the shortfall in copper concentrate supplies.

Market Dynamics and Price Adjustments

The market faces continuous adjustments as copper concentrate treatment charges have seen significant reductions since last quarter, reflecting the sustained pressure on supply. Moreover, the anticipation of increased copper concentrate exports in the latter half of the year could further influence market dynamics.

Broader Implications for the Global Market

The latter half of 2024 is expected to be particularly challenging as additional smelting capacities come online not just in China, but also in Indonesia and India. This expansion is likely to tighten the concentrate market even more, emphasizing the need for strategic planning in copper procurement and production.

Copper's Role in Energy Transition

As one of the largest producers of copper globally, China plays a crucial role in the supply of this essential material, vital for various applications including energy transition technologies. The developments in China's copper industry are closely watched by global markets, given their potential impact on worldwide supply and pricing strategies.

In conclusion, the upcoming increase in smelting capacities in China represents a significant development in the global copper market, with implications for supply dynamics and pricing. Stakeholders in the industry will need to navigate these challenges carefully to maintain competitive and sustainable operations.