China’s steel exports shift towards emerging markets as developed economies tighten trade barriers

• • China’s steel exports decline 8% y-o-y to 44.6 mnt in January-May

• • Southeast Asia, MENA region account for nearly 60% of total exports

• • Europe and the CIS emerge as the only major growth regions

Morning Brief:China’s finished steel exports declined 8% year-on-year (y-o-y) to 44.6 million tonnes (mnt) during January-May 2026, according to China Customs data. The decline reflects softer overseas demand, mounting trade restrictions and a gradual moderation from the exceptionally strong export performance recorded in 2025. However, exports rebounded to 10.3 mnt in May from 9.5 mnt in April, suggesting Chinese mills continue to find overseas outlets despite a more challenging global trading environment.

The regional distribution of exports indicates that China’s overseas steel trade is becoming increasingly selective rather than uniformly weaker. Emerging markets across Southeast Asia, the Middle East and Africa continued to absorb the bulk of Chinese steel shipments, while exports to mature industrial economies in East Asia and North America declined further. Europe and the Commonwealth of Independent States (CIS) were the notable exceptions, recording double-digit growth despite an increasingly protectionist trade environment. The evolving trade pattern suggests Chinese exporters are increasingly redirecting shipments towards markets where infrastructure investment, manufacturing activity and supply gaps continue to support demand.

Emerging markets remain the foundation of China’s export strategy

Southeast Asia retained its position as China’s largest steel export destination, importing 13.5 mnt during January-May, down 5% y-o-y but accounting for almost one-third of total exports. Vietnam remained the largest individual buyer despite imports falling 19% to 3.31 mnt, while Thailand also recorded lower purchases. By contrast, Indonesia, the Philippines and Malaysia broadly maintained import volumes, highlighting continued resilience across much of the region despite softer manufacturing activity.

The Middle East and Africa remained the second-largest destination, receiving 12.8 mnt, down 17% y-o-y following exceptionally strong imports during 2025. Nevertheless, the region showed renewed momentum in May, with exports increasing 23% month-on-month (m-o-m) to 2.74 mnt. Saudi Arabia almost doubled imports compared with April, while shipments to the UAE surged nearly threefold, indicating infrastructure projects and construction activity continue to underpin steel demand despite the broader slowdown.

Together, Southeast Asia and the Middle East & Africa absorbed 26.3 mnt, or nearly 60%of China’s total steel exports during the first five months of 2026, underlining the growing importance of emerging markets in sustaining Chinese export volumes.

Developed markets continue to diverge:

The sharpest declines continued to occur across mature industrial economies. Exports to East Asia, comprising Japan, South Korea and Taiwan, fell 16% y-o-y to 4.49 mnt, reflecting subdued manufacturing activity and weaker regional steel demand. Japan recorded the steepest decline among the three major markets, while South Korea and Taiwan also imported significantly less Chinese steel than a year earlier.

North America remained constrained by trade barriers, with exports to the United States, Canada and Mexico declining 13% y-o-y to 0.82 mnt. Continued tariff measures and trade protection policies have steadily reduced China’s presence in the region, limiting opportunities for meaningful export growth.

Europe, however, presented a markedly different picture. Chinese steel exports to the region increased 24% y-o-y to 2.49 mnt, driven by stronger shipments to Belgium, Spain and the United Kingdom. While Europe remains a relatively small destination compared with Asia and the Middle East, the increase suggests Chinese exporters continue to identify opportunities in selected product categories despite safeguard measures, CBAM implementation and heightened trade scrutiny.

Regional demand becomes increasingly uneven:

Elsewhere, Central and South America remained relatively resilient despite exports declining 7% y-o-y to 5.54 mnt. Peru, Colombia and Ecuador all increased imports from China, offsetting weaker demand from Brazil and Chile.

South Asia remained broadly stable, with exports easing only 1% to 2.94 mnt. The regional picture, however, was mixed. India’s imports declined 19% y-o-y as domestic production remained robust and safeguard measures supported local mills, while Pakistan increased imports by 39%, partially offsetting weaker demand elsewhere in the region.

The CIS emerged as another bright spot, with exports rising 19% y-o-y to 1.45 mnt. Higher shipments to Russia, Uzbekistan and Ukraine indicate that regional demand remained relatively firm despite broader global trade uncertainty.

The increasingly uneven regional performance reflects widening differences in economic activity, infrastructure spending and trade policy across global steel markets. While demand has softened across many developed economies, emerging markets continue to provide Chinese mills with significant export opportunities.

Outlook:

China’s steel exports are likely to remain elevated through the coming months, although the pace of growth will increasingly depend on regional demand rather than broad-based global recovery. Chinese mills continue to benefit from a pricing advantage over many international competitors, allowing exports to remain competitive even as overseas demand moderates. At the same time, rising trade protection measures across major importing regions are expected to limit further expansion in developed markets.

The regional export mix suggests emerging economies will remain the primary destination for Chinese steel during the second half of 2026, supported by infrastructure investment and construction activity. However, continued trade investigations, safeguard measures and weakening global manufacturing demand are likely to constrain overall export growth, with any near-term improvement expected to reflect tactical shifts in trade flows rather than a sustained recovery in international steel consumption.