China’s Steel Exports Destabilize The Market
According to a joint statement by steel industry associations around the world—including U.S., Canada, Mexico, Latin America and Europe—China, the producer of half the world’s steel, is destabilizing the market with “massive and increasing overcapacity in an era of slowing growth.”
China has exported more of the alloy in April than any other country produced, causing all regions to suffer from a dramatic increase in unfair imports.
Prices have slumped worldwide as China ships excess output overseas amid slowing domestic demand. While the government plans to reform the industry by merging the dominant state-owned suppliers, overseas steelmakers say it’s maintaining unfair state support that’s prolonging the glut.
“Whenever there is trade friction you will hear these complaints,” says Helen Lau of Argonaut Securities (Asia) Ltd. in Hong Kong. “The bottom line though is that China’s steel industry is in decline. China is exporting more because domestic demand is not very strong, but at the same time there is export demand.”
COUNTRIES ACT TO REDUCE IMPORTS FROM CHINA
The industry groups representing steelmakers are calling on governments to address the global overcapacity and take into account China’s steel policy when considering whether it should be recognized as a market economy by the World Trade Organization.
Some countries are already acting to reduce imports from China. This month, the European Union renewed tariffs on steel wires used in construction for another five years while Mexico imposed levies on some exporters. U.S. steelmakers including U.S. Steel Corp. and Nucor Corp. filed a complaint alleging imports of corrosion-resistant metal from China and four other countries are being sold at unfairly low prices.
China exported a record 10.3 million tons in January and shipments in the first five months of the year were 28 percent higher than the same period in 2014. It made a record 822.7 million tons of the compound last year.
“Our producers are having difficulty competing,” says Sahap Ataman, director of economic affairs at the Turkish Steel Producers Association. “There are many, many, many different types of subsidies in China at the central and local government level. And as their economy slows they are following an aggressive pricing policy.”
China’s government plans to consolidate the country’s steelmakers to create three to five major producers. The 10 biggest suppliers should be in control of at least 60 percent of output by 2025, according to the latest policy update in March. This will be more effective than previous attempts at encouraging mergers, suggests analysts at Sanford C. Bernstein.
Source: Hellenic Shipping News