平陆运河开通，西南大宗商品物流格局生变

The newly opened Pinglu Canal in Guangxi province is expected to stimulate demand for steel and related commodities, lower transport costs and alter trade flows across Southwest China. However, persistently high electricity prices in the region continue to undermine the competitiveness of energy-intensive industries and may limit the scale of supply-chain development, market participants told Fastmarkets.

Steel, iron ore, bauxite, manganese ore and chrome ore markets are among those expected to be most directly affected by the canal, given Guangxi’s role as an import gateway and industrial hub.

Pinglu Canal, a new waterway to reach the sea

The Pinglu Canal officially opened to navigation on September 16, 2026. It is the first river-to-sea canal planned and constructed at the national level since the founding of the People’s Republic of China and forms a key part of China’s New International Land-Sea Trade Corridor.

The 134.2-kilometer waterway is classified as a Class I inland shipping route and can accommodate vessels of up to 5,000 tonnes. It connects the Xijiang River system in the north with Qinzhou Port in the Beibu Gulf in the south, linking Southwest China directly to international shipping lanes.

The canal shortens the shipping route to the sea by more than 560 kilometers compared with traditional transport routes and is expected to strengthen connectivity between Guangxi, Yunnan, Guizhou and Chongqing and overseas markets.

Location of the Pinglu Canal

New source of stainless steel demand

The canal is expected to create new demand for marine-grade stainless steel while supporting broader growth in shipbuilding, offshore engineering and industrial manufacturing sectors in Southwest China, according to market participants.

“Our 304-grade high-end marine stainless steel products have already been used in tanks, refrigerated containers and cargo holds of vessels operating on the Pinglu Canal,” Guangxi-based stainless steel producer BG New Materials said.

Sources said demand generated by shipbuilding activities could support the development of related sectors including stainless steel smelting, processing, fabrication and trading.

Market participants also expect improved regional economic connectivity to support longer-term consumption growth for stainless steel products.

“The opening of the Pinglu Canal presents a rare development opportunity for companies across the local stainless steel supply chain,” BG New Materials said.

Lower freight costs and faster logistics

Steelmakers and alloy smelters in Guangxi and nearby provinces are expected to benefit from lower transportation costs and shorter delivery routes for both imported raw materials and exported finished products.

“The cost of transporting manganese ore or chrome ore to our plant is about 70 yuan ($10) per tonne by truck. Using river transport, the cost falls to around 40-50 yuan per tonne,” a Guangxi-based ferro-alloy smelter told Fastmarkets. “That translates into savings of about 50-60 yuan per tonne of ferro-alloy produced.”

The smelter, which produces ferro-chrome and silico-manganese, said the canal provides a more cost-effective route for moving imported raw materials from Qinzhou Port to inland production facilities.

Other producers across Guangxi and neighboring provinces could also benefit, given substantial inventories of imported raw materials stored at ports connected to the canal network, including Qinzhou, Beihai and Fangchenggang ports.

A Guangxi-based mill source said the canal could significantly lower the cost of importing raw materials and exporting steel products for inland mills by around 25%, particularly those in Yunnan and Guizhou provinces.

However, a second Guangxi-based mill said the canal was currently being used mainly to transport steel products, reducing freight costs and shortening delivery times from mills to sea ports.

“We have not yet started transporting steelmaking raw materials from ports to mills through the canal. These shipments still rely mainly on trucks and trains,” the second mill source said.

Industry sources said the benefits extend beyond lower waterway freight rates. The shorter route and improved logistics efficiency are expected to accelerate cargo turnover and reduce overall supply-chain costs.

The canal also changes Guangxi’s logistics network by giving regional steelmakers direct access to international markets without relying on longer routes through the Pearl River Delta.

According to local media reports, a vessel carrying 16,000 tonnes of hot-rolled coil and cold-rolled coil from Liuzhou Steel Group’s Liuzhou production base successfully passed through the canal locks and departed for overseas markets on the opening day.

Liuzhou Steel Group, Guangxi’s largest steel producer, operates production bases in Liuzhou and Fangchenggang with combined annual crude steel capacity exceeding 20 million tonnes.

The benefits may extend beyond Guangxi.

“For our Chongqing operations, imported raw materials are typically transported via the Yangtze River,” a Chongqing-based alumina and silico-manganese producer said. “The Pinglu Canal provides an alternative route during the Yangtze’s dry season when water levels are low.”

“For our Guizhou operations, the canal helps reduce freight costs and provides a shorter export route for finished products,” the producer added.

Transformation potential faces structural constraints

Despite the logistical advantages offered by the Pinglu Canal, market participants cautioned that lower transport costs alone are unlikely to transform Southwest China’s commodity markets.

High electricity prices remain a major obstacle for energy-intensive industries such as ferro-alloys, steel and alumina production.

“Smelting consumes a significant amount of electricity,” the Guangxi ferro-alloy producer said. “Power prices in Guangxi are substantially higher than in northern China, and the savings from the canal are not enough to offset that disadvantage.”

According to the producer, industrial electricity prices in Inner Mongolia are around 0.41 yuan per kWh compared with about 0.51 yuan per kWh in Guangxi.

“When higher electricity costs are combined with differences in coke and manganese ore costs, our production costs are roughly 400-500 yuan per tonne higher than those in northern production hubs,” the source said.

Sources noted that steelmaking and alumina refining face similar cost pressures.

In addition to higher electricity costs, southern smelters usually pay more for their raw materials, according to sources.

For instance, Fastmarkets’ weekly manganese ore high grade port index, fot Tianjin, China, was 38.9 yuan per dry metric tonne unit (dmtu) on Friday October 16, and manganese ore semi-carbonate port index, 36.5% Mn, fot Tianjin, China was 33.40 yuan per dmtu.

“Manganese ore prices are currently 1-2 yuan [dmtu] higher than northern ports,” a Qinzhou port contact said.

Geography also limits the canal’s impact.

“The Pinglu Canal starts in Nanning, while our plant is located far from the route,” a smelter based in Guilin said. “We still need to rely on trucking and rail transport, so the impact on our operations is limited.”

As a result, market participants said the canal is likely to improve logistics efficiency and strengthen regional trade competitiveness, but may not be sufficient on its own to restore Guangxi’s former position as a major ferro-alloy production center.

“It is difficult to say that the Pinglu Canal will turn Guangxi back into one of China’s leading ferro-alloy production hubs,” the Guilin producer said. “The extent of its impact will depend on how market conditions evolve in the coming years.”

Canal impact seen as incremental, not transformative: sources

The Pinglu Canal is expected to reshape logistics and trade flows for steelmaking raw materials, ferro-alloys, alumina and steel products across Southwest China. Lower transportation costs, improved export access and greater supply-chain flexibility are likely to benefit producers in Guangxi, Guizhou, Yunnan and Chongqing.

For steel exports, however, market participants said the canal’s impact may be limited.

A Shanghai-based steel trader said the canal would certainly lower transport costs, and that point-to-point freight for Liuzhou Steel would also fall somewhat. But the trader said that whether cargo moves from the mill to the port via the canal or by other routes makes little difference to the cost, so the saving would not be large.

“Because the mill already has a production base at Fangchenggang port, one of the Beibu Gulf ports, which can ship product directly to sea without using the inland waterway, the canal would have limited impact on its exports,” the trader said.

Logistics costs should still become somewhat more economical, as product shipped from its older production base would use the canal, the trader added.

Additionally, a shipowner source said bulk carriers generally load at northern ports such as Qingdao or Tianjin, as most shipowners prefer to load there, and then top up with additional cargo at the Yangtze River estuary. Liuzhou Steel would not ship its cargo to northern ports, but its volumes were small compared with steel volumes at those ports, so the canal opening made little difference to bulk shipping, the source said.

Overall, most market participants expect the canal’s impact to be incremental rather than transformative, with structural challenges such as high electricity costs continuing to play a more significant role in determining regional industrial competitiveness.

This suggests that while the canal may shift trade routes and improve margins, it is unlikely on its own to trigger a major relocation of China’s steel, ferro-alloy or alumina production base.

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