Fitch: Proposed US Tariffs to Have Limited Impact on China Metals Producers

Fitch Ratings-Hong Kong/Shanghai-March 02: Plans by the US to impose import tariffs of 25% on steel and 10% on aluminium will have limited impact on the Chinese producers of these metals as the US is not a significant market for them, says Fitch Ratings.

The proposed import tariffs may come into effect as early as next week. However, China's steel exports to the US accounted for just around 1% of its total steel exports in 2017, as most of its steel shipments went to regional markets, particularly in south-east Asia. Contrary to market perception, steel product exports from China accounted for only 2.75% of total US imports of steel in 2017, according to the American Iron and Steel Institute. In 2017, US imported a total of 29.6 million tonnes (Mt) of steel products, of which only 0.8 Mt came from China.

Chinese steel exports were down around 30% in 2017 to around 75 Mt, driven by supply side reform and domestic demand recovery. We expect China's steel market to remain stable in 2018, and total exports to remain at 75Mt-80Mt.

The Chinese aluminium market was in surplus in 2017, where production was estimated to be around 36.7Mt and demand estimated at around 35.4Mt. However, with supply side reform still in full swing, aluminium capacity additions slowed down in 2017 and are likely to continue to do so in 2018. At the same time, we expect demand to increase by around 6% in 2018, which would mean total exports are likely to shrink.