EU Steel Sector Blames Mainland China for Dumping Steel
16 October 2015
Hong Kong traders with interests in mainland China’s steel industry should know that the European Steel Association, also known as Eurofer, is collecting the required data to file a complaint to the European Commission claiming that Chinese exporters are dumping hot-rolled coil in the EU.
With the UK steel industry fighting for survival, in the light of global overproduction of steel and what is believed to be a significant increase of exports from mainland China, a lobbying campaign has started, aimed at putting into place EU anti-dumping measures.
The threatened closure of Redcar, one of the UK’s largest steelworks, which would result in the loss of 2000 jobs, raises doubts over the viability of the UK’s steel sector in general. In addition to the context of global steel overproduction, the UK industry faces environmental taxes, high energy costs, a recent strengthening of the pound, as well as an increase of cheap imports. The sector is calling on the UK government for emergency loans and a structural alleviation of costs.
In addition, the local industry is also accusing mainland China of dumping its vast stockpiles of steel, and is urging its government to address the alleged unfair practices.
Since economic growth in mainland China has started to slow down, steel exports have apparently increased by 28% to 43.5 million tonnes in the first six months of the year, despite production decreasing by 2%.
Mainland China’s mills are reported to have a capacity of 1.1 billion tonnes of metal per year. This currently results in 340 million tonnes of excess capacity, more than double that of the EU’s total steel production.
Whereas imports from mainland China represented 2% of the UK’s steel demand in 2011, they are expected to account for 8% this year. UK Steel, the industry’s lobby group, claims that this is pushing prices down to unsustainable levels. Moreover, steel demand in Europe is expected to slow this year.
UK Steel’s call to investigate steel exports from mainland China has not remained unanswered. UK’s Business Minister, Anna Soubry, has stated that she would protect the steel industry from alleged mainland Chinese dumping, and has, it is reported, raised the issue in Beijing on her recent visit to mainland China.
At EU level, the European Union steel industry association, Eurofer, is currently collecting data in order to file a complaint at the European Commission. Eurofer’s Director General, Axel Eggert, stated that “it is very clear that the Chinese are undercutting production prices”. The complaint would be aimed at hot-rolled coil, a steel product which is used in a wide variety of industries.
Eurofer claims that the sudden surge in imports from mainland China is unprecedented, and has used the current situation as an example of the risks of granting mainland China market economy status.
According to Eurofer, EU imports of hot-rolled coil from mainland China have doubled in 2014, reaching 660,000 metric tonnes. These imports account for approximately 5% of the EU market for hot-rolled coil, which was worth around €10 billion in 2014. During the first half of 2015, the imports from mainland China have, supposedly, already risen to more than 700,000 metric tonnes.
The industry association still has to wait for more trade data before it can file a complaint to the Commission. It believes that this will simply be a matter of time, if the situation remains unchanged. Eurofer illustrated this by comparing the price of imports from mainland China to European industry prices. Imported hot-rolled coil supposedly amount to between EUR 300 and 320 per tonne, whereas the European industry’s like product equate to EUR 360 per tonne. Eurofer has added that European prices are already depressed by the wave of cheap imports from mainland China.
Once Eurofer’s complaint is filed, the European Commission has 45 days to make a decision as to whether it will open an investigation. Such an investigation could then lead to the imposition of anti-dumping duties on Chinese-origin hot-rolled coil, if the Commission were to conclude that the imported products are sold below their cost. The European Commission has thus far not commented on the potential trade proceeding.
Mainland China’s Commerce Ministry is reported to have stated that anti-dumping measures, to restrict the country’s steel exports, would not provide a lasting solution to the increasing trade tensions in the sector. Its Ministry added that the sector is suffering from overcapacity on a global scale. Spokesperson for the Commerce Ministry, Shen Danyang, stated that “blindly determining any case involving China as dumping is unfounded and unjustified”, and noted that the Chinese steel costs reflect the crash of global iron ore prices.
The China Iron and Steel Association has warned its members about trade frictions, and the related risks of increasing dependence on export. It has also dissuaded its members from selling below costs overseas.
- Raw Materials