BEIJING/HANOI (Reuters) - New U.S. steel tariffs are set to disrupt a multi-billion dollar supply chain moving steel from China to the United States via third countries, ratcheting up competition in the global market and undercutting a vital source of sales for China's struggling steel sector.
Since trade barriers in 2016 and 2018 priced most Chinese steel out of the U.S., mills in countries with relatively freer access have bought cheap Chinese steel and sold it on to the United States after various degrees of processing.
U.S. President Donald Trump's 25% steel duty, which comes into force on March 12, will hamper this trade, according to China's four leading steel consultancies, hitting sales estimated at almost a tenth of all Chinese steel exports last year, worth roughly $7 billion.
The prospect of this steel instead flowing onto a global market already awash with Chinese steel is triggering another wave of protectionism, much of it aimed at China in a further blow to its exports.
"The mounting trade frictions will add pressure on China's steel exports," state-backed research house China Metallurgical Industry Planning and Research Institute said in a note last week. "Lower exports and profits may lead to a further decline in the profitability of some companies."
More trade barriers and fiercer competition over a smaller export pie is a problem for all steel-exporting countries. But they are especially tough for China's steel sector, which is likely to be disproportionately targeted by tariffs.
Such a scenario could further undermine China's economic recovery as it has used overseas sales to help offset faltering demand at home because of a protracted property crisis.
A Chinese steel trader told Reuters orders for delivery around the normally busy first quarter were "pitifully low" even before Trump signed the tariffs into law in anticipation of the decision.
"The export orders that we have received for shipments in March and April have fallen by 20%-30% from the same period in 2024," the trader said on condition of anonymity as they are not authorised to speak to media.
Competition for other markets including the Middle East will likely heat up further as more Chinese steel floods into the region, one of the last without major barriers to Chinese steel. Lower prices there may in turn breed a new epicentre for transshipment.
PINNING DOWN TRANSSHIPMENT
China exported a tiny amount of steel to the United States last year even as its total exports hit a nine-year high.