Posted on 10 Nov 2016
Futures for steel and raw materials on China's main commodity exchanges rallied more than 4% Wednesday, making it tempting to draw a connection between market movements and Donald Trump's likely victory in the US election.
But more likely, prices were still reacting to the more pressing issue of there seemingly being no end in sight to soaring coking coal prices.
Steel and China's dumping of it in the US featured in two of the three US presidential debates, with Trump accusing Hillary Clinton of not having done enough during her three decades in public service to stave off Chinese steel.
His bark, however, may prove to be worse than his bite: The businessman built his own empire in part using Chinese steel, and could end up being more sympathetic than Clinton to the need for US businesses to keep costs down.
But what is really at stake if Trump were to adopt a hawkish stance on the trade front? Not much for steel at least, it seems.
Already, the slew of antidumping and countervailing duties that the US has slapped on Chinese steel imports has seen it fall in the ranking of top Chinese steel buyers to No. 15 last year from No. 6 a year earlier.
The US accounted for just 2.2% of China's steel exports in 2015. It has at least 22 steel-related trade barriers in place, of which 10 target Chinese steel, from rebar to seamless pipe.
US imports of Chinese steel have been on a further downward trajectory in 2016, totaling just 615,690 mt in the first three quarters of this year, less than half the 2.2 million mt it imported in full year 2015 and down from a peak of 2.9 million mt in 2014, according to Platts Steel Data and Analysis.
Even if ongoing US investigations find China guilty of circumventing existing trade measures on cold rolled coil and sheet through Vietnam, market participants doubt it would have much of an impact.
"So what? It can go elsewhere," one Shanghai-based trader said. Market participants might shrug the same way even if Trump carries through on a promise to impose a 45% tariff on Chinese goods.
China, the world's biggest producer, consumer and exporter of steel and largest consumer of iron ore and metallurgical coal, can rest easy in these positions during the likely Trump presidency.
Global prices of these commodities are in one way or another linked to China-related benchmarks with a freight netback or net forward. Steel prices in other regions lag FOB China prices.
If anything, a US opposed to the Trans-Pacific Partnership may give China room to expand trade and political ties with the rest of the world, especially parts like Southeast Asia, which need Chinese steel, but where end-users lack organization and clout to speak out against the steel lobby at home.
One view on the street in China was that a Clinton administration was expected to see a continuation of the tough stance she adopted during her term as Secretary of State.
Trump, a blank slate in terms of political experience, is seen as more of a pragmatist open to dealmaking, regardless of the sabre-rattling he made headlines for during the campaign to garner votes.
"I know China very well," he told one rally.
And at other rallies and interviews, he said: "I go to China." "People think I don't like China. I love China." "People from China, they love me."
