China industrial indicators show continued weakness in October

Chinese industrial output increased by 5% YoY in October, slowing from the 6.3% print in September, according to the country’s latest economic data release. Fueling some of the weakness was a string of lockdowns in the country leading up to the National Party Congress which started on October 16th.

Meanwhile, Chinese steel production declined to its lowest total since February, declining by 8.3% MoM to 79.8 MMT. Many mills are said to be reducing output as margins remain capped amid a demand picture that has yet to show a turnaround. Further, this has incentivized some producers to begin maintenance work while the market is suppressed. Keeping with this year’s theme of Chinese steel exports, the country exported 3.3 MMT of steel (excl. scrap) in October, rising by 17.3% YoY. One bright spot in today’s release was the country’s aluminum output, which totaled 3.45 MMT in October, an increase of 5.5% YoY. This is the country’s third largest monthly production figure on record, reflecting the robustness of its aluminum industry this year, given its reduced exposure to the property sector compared to steel.

Russia plans 23.5% tax on fertilizer exports

Russia’s trade minister has announced plans for a 23.5% tax on fertilizer exports from 1st January 2023, coming into force only when the market price exceeds $450 per tonne. Russian fertilizer exports totaled 2.2 MMT in October, increasing by 19.6% YoY. This comes despite a 25% YoY decline in exports to its main fertilizer buyer, Brazil, which totaled just 480k tonnes. Russian producers have taken advantage of tight global fertilizer supplies to diversify their exports. From January-October 2022, Russian fertilizer exports to India more than tripled YoY to 2.8 MMT. While India generally produces enough urea domestically, it relies on imports of nitrogen and potassium fertilizers. Indian authorities have been working to secure supplies of affordable fertilizers following exports quotas imposed by China last year. Exports to EU countries also increased by 80% YoY in October to 550,000 tonnes as Europe’s natural gas shortage limits domestic production of mineral fertilizers. To note, this trade remains unsanctioned. Other new markets for Russian fertilizer in October include Indonesia (150k tonnes), Egypt (120k tonnes), and Bangladesh (100k tonnes).