Right now, as the Chinese government takes action to guide the devaluation of the renminbi, the market expects the aforementioned exports to the price-sensitive metal industry may accelerate growth. So far this year, exports of related metals have increased by more than 25%, and how much the Chinese producers ’market share will increase will depend on whether the yuan will fall further after the initial depreciation.
Analysts said that a 3% depreciation of the renminbi against the US dollar may not in itself stimulate overseas sales, although the devaluation of the renminbi has added some competitiveness to Chinese manufacturers. Exports from these companies have led politicians in the United States, Europe and India to call for punitive trade measures.
Economists point out that one reason China adjusts its exchange rate policy is to stimulate domestic exports. The export of related metal industries was originally one of China's rapidly growing export industries. According to data from Citi Research, in the first seven months of this year, China ’s aluminum exports increased by 28.3% year-on-year to 2.87 million tons, and steel exports increased by 26.6% to 62.13 million tons.
Market analysts said they were skeptical that exchange rate changes would immediately affect industrial metal trade trends. Ilya Feygin, managing director of Wallachbeth Capital, pointed out that he does not think that the devaluation of the yuan itself is sufficient to promote China's substantial increase in exports of steel and aluminum. He believes that at the current stage, the devaluation of the yuan will be more restrained. At the same time, China will tackle threats to financial stability.
The global metal market has felt the impact of large-scale expansion of production capacity of Chinese large metal companies in recent years. Due to the slowdown of China's domestic economic development and declining demand in industries such as residential construction, these companies have too much capacity available. This is why a large amount of cheap Chinese steel has poured into the global market.
This move has angered steel producers in many countries. Take India as an example. Last week the country announced an increase in import tariffs on some steel products, the second increase in two months.
Analyst Daniel Hynes of Australia and New Zealand Banking Group Ltd said that the situation of steel is the most prominent, and China's export of cheap steel to Europe and North America has encountered huge resistance in these countries; even China's Export prices can be lowered, and the ability of production companies to benefit from the devaluation of the renminbi may also be offset by such complaint actions initiated against the World Trade Organization (WTO).
The WTO, headquartered in Japan and abroad, has received increasing numbers of complaints about dumping at below-cost prices. Last year, 89 cases of dumping of steel and aluminum products against China or other trading partners reached 89, more than double the 43 cases in 2010.
Matt Meenan, the media director of the US-based Aluminum Association, said it is clear that China's export situation has been changing and they are watching this closely. The association represents primary aluminum producers in the United States and other countries.
However, analysts at ANZ said that although the devaluation of the renminbi added a challenge to the global metal market, only a significant decline in the renminbi would trigger a new wave of China that some people expected when the devaluation of the yuan hit the market Export wave.
The Chicago Mercantile Exchange (CME Group) chief economist Blu Putnam pointed out that it is important to remember that the RMB has shown an incredibly strong trend against most global currencies. Chicago Commercial Exchange trades all metal futures contracts. Putnam said that a slight devaluation of the renminbi is unlikely to trigger significant market fluctuations in major importing countries such as Brazil. These importing countries are also facing weakness in their economies.
But if China's metal exports surge again, the impact will spread globally.
Australia's BlueScope Steel Ltd. said the company is working to maintain the competitiveness of Port Kembla's business relative to low-cost steel from other regions, while also working to find transformative ways to reduce costs and maintain the plant's operations.