The on-going dispute between China and Japan over islands in the East China Sea has caused a dramatic fall in Chinese galvanized sheet exports. Many Chinese steel plants have been struggling to keep galvanized sheet production at a normal level, with some reporting that they have cut production by as much as half.
China and Japan’s close economic ties have been repeatedly strained by a territorial row over a group of islands in the East China Sea. The islands, known as Senkaku islands in Japan and Diaoyu islands in China, are close to strategically important shipping lanes, offer rich fishing grounds and are suspected to contain rich oil deposits. They are currently controlled by Japan.
Although tensions over the islands have rumbled for a number of years, the row was renewed in September following the Japanese government’s acquisition of three of the islands from their private Japanese owner. This has triggered public protests in a number of Chinese cities and a stall in Chinese/ Japanese exports.
As a result of rising tensions, China’s commodity industry has seen a massive fall in zinc consumption in galvanizing plants. Some plants are operating at only a fraction of their capacity. As well as having a devastating impact on Chinese galvanized sheet exports, the tensions have also had an effect on the Japanese car industry. Exports fell 15% in September on a year ago. As China and Japan make up some of the world’s largest economies, a continuing dispute could have a significant impact on global commodity pricing.
