- China’s Steel Exports Face Decline Amid New U.S. Tariffs and Increased Trade Barriers.
- China’s Steel Export Trends: Monthly Fluctuations and Forecasted Decline.
- Freight Vessel Market Adjusts to Shifting Steel Export Patterns.
The latest reintroduction by the United States of a 25% tariff on steel imports, which comes into effect on March 12, 2025, promises to have substantial effects on the dynamics of international trade as well as the industry of freight vessels. While the policy hopes to support in-country manufacturing, its effects will be most acute on steel export patterns, including those from China, and also on the freight market, as it will be forced to make changes in how it operates amid the changing market, reports Break Wave Advisors.
Impact on China’s Steel Exports
China, which accounts for over 50% of the world’s steel production, has registered a significant rise in steel exports, with estimates showing that it will hit a record high of 109 million metric tons in 2025, its highest level in eight years. But the newly introduced U.S. tariffs are likely to severely impact this trend. The tariffs will not only directly affect China’s exports to the U.S. but also interfere with its practice of transshipping steel via third countries to avoid trade barriers. This practice, which represents about 10% of China’s steel exports (worth about $7 billion), will no longer be as effective, resulting in a general decline in China’s steel exports.
In retaliation for the tariffs, China can expect to have more trade barriers imposed on it globally. From early 2024 to February 2025, there was a significant rise in anti-dumping actions against Chinese steel exports. Indeed, 29 significant trade cases were filed against China during this timeframe, a sharp increase from the 15 trade cases in 2020 to 2023. These increasing trade tensions will exacerbate the difficulties created by the U.S. tariff, constraining China’s access to important markets and making its export plans more complicated.
China’s Steel Export Trends and Monthly Fluctuations
Monthly variations in China’s steel exports disclose some significant trends. Analysis by the Signal Ocean Platform indicates that China shares 33.5% of the global total steel exports. North China, with 67.6%, and Central China, with 27.9%, are the major export regions in China. Major ports like Tianjin, Bayuquan, and Luojing are responsible for processing over half of the nation’s steel exports.
Chinese steel export quantities usually reach a peak in August and January, owing to pre-holiday inventories and cycles of seasonal demand. The biggest markets for Chinese steel are the Arabian Gulf, Indonesia, and Vietnam, representing more than 27% of total exports combined. The readoption of the U.S. tariff is bound to have a significant effect, with projections that steel exports are likely to decrease from 109 million metric tons to 96 million metric tons by 2025.
Implications for Freight Vessel Size Categories
China’s changing steel export trends in response to tariffs and international trade restrictions are likely to bring far-reaching implications for the shipping industry. Historically, bulk shipping like Capesize and Panamax ships has been preferred for shipping steel because of their size and economic efficiency. But with mounting trade volatility, greenhouse gas emissions regulations, and geopolitical interruptions, there has been a clear trend towards smaller, more adaptable ships.
Supramax ships, which have a 69.4% market share of steel shipments today, are well-placed to adapt to this change. Supramax ships are valued for their versatility and flexibility in calling many different ports. Handysize and Handymax ships also serve the regional trades and smaller developing economies, transporting 12.4% and 8.7% of shipments, respectively. As Chinese steel exporters seek to diversify shipping approaches in the wake of tariff-facilitated trade realignment, demand for smaller, flexible, and energy-efficient vessel segments is likely to increase, which could diminish dependence on large-capacity bulk carriers.
Freight Vessel Market Shifts
The shifts in the steel export strategies of China, coupled with monthly changes in exports, indicate a significant shift in the freight market. An increasing trend for mid-size vessel types like Supramax and Handymax is becoming visible, as they are more flexible and fuel-efficient in operations. The trend is likely to translate into demand for vessels that are capable of coping with fluctuating world trade conditions while also complying with tighter environmental norms.
For instance, Capesize freight rates from Brazil to North China have recently jumped over $20 per tonne from about $16 per tonne during mid-February. Panamax rates from the Continent to the Far East are also at $29 per tonne, although down slightly from the last week. Supramax freight prices on the Indo-ECI line have been steady at about $9 per tonne, while there has been an increasing trend since the beginning of March. Handysize NOPAC Far East route rates have advanced by a significant 25% since February, still holding above $30 per tonne.
Prospects of the Freight Market
The prospects of the freight market are still unclear despite these variations in freight prices. Ballasters, i.e., cargo-less ships or empty ships, have been one of the central market sentiment indicators. Early March statistics paint a mixed picture, with some categories of vessels recording a declining trend, while others are recording increased activity. For example, Capesize vessel congestion in Southeast Africa has increased, which suggests a more positive outlook for the bigger bulk carriers. On the other hand, the Panamax sector has recorded a decline in vessel congestion, which is in contrast to earlier estimates that anticipated increased congestion levels.
Congestion at Chinese Dry Bulk Ports
Congestion at major Chinese dry bulk ports has been moving in a rising trend, with significant rises in most categories of vessels. By early March, Chinese port congestion for Capesize vessels had increased by 90, a slight rise from the week before. Panamax vessel congestion dipped below 160, opposite to initial expectations of a rise in congestion for March. At the same time, Supramax vessel congestion crossed the 300 threshold, indicating a growing trend, and Handysize congestion also jumped by more than 10 vessels against the close of the last week.
The early part of March has unveiled some changes in sentiment between vessel types. Whereas Capesize ships presented a signal of correction upward following consistent decreases, Panamax has also reflected a return to life. Supramax growth rates have still continued to be the outliers compared to other vessel types, following an unchanged path of ascent. In the meantime, Handysize vessels experienced growth rates which have tended toward more consistency with Panamax following late February decreases.
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Source: Break Wave Advisors
