Electrical steel becomes a key product in China’s steel industry

Global decarbonization is turning electrical steel into one of the key products of China’s ferrous steel industry, and its exports have been growing rapidly in recent years, Fastmarkets writes.

In 2021, a total of 860.96 thousand tons of electrical steel were shipped from China, up 64% year-on-year. In 2022, this figure grew by 49% y/y – to 1.28 million tons, and in 2023 it fell by 4% y/y – to 1.23 million tons. Last year, India was the largest buyer of Chinese electrical steel, accounting for 15% of China’s total exports of these products.

In the first quarter of 2024, China’s exports of electrical steel amounted to 356.73 thousand tons, up 30% year-on-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 tons. 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 tons per year electrical steel project was launched in Inner Mongolia. Its first phase (500 thousand tons 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 tons by 2026, up from 16.67 million tons 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.

As GMK Center reported earlier, 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 tons. Export volumes reached their highest level since 2016.