Chinese steel exports increased rapidly in March, defying some analyst forecasts. Volumes are set to decline in the coming months as high domestic prices discourage mills from exporting, but 2016 as a whole is still set for strong volumes, Kallanish notes.

China exported 9.98 million tonnes of steel in March, up 29.67% year-on-year and 23.06% month-on-month, according to Chinese customs statistics. That works out at almost an annualised 118mt. Over the first three months of the year, exports were up 7.9% y-o-y to 27.83mt, or an annualised 112mt.

The rapid increase of Chinese steel prices over the last two months has made mills withdraw export offers, while those offers that are being made are often not competitive even against steel from Korea and Japan, Southeast Asian importers say. Export volumes are therefore likely to drop dramatically over the second quarter.

China’s domestic price rally is not expected to hold however, and how far prices slump will be key in determining export volumes. The faster the decline and the lower domestic prices fall, the greater the pressure to export steel later in the year. Some traders are already saying that some mills are trying to offer material for export quietly to lock in current price levels, suggesting they also believe prices could drop sharply in the coming weeks.