It is reported that Brussels and Washington have long complained that China unfairly helps its steel makers. Now the recession and the different way steel firms are responding to it is adding to the angst.
In February 2009, the alliance of European steel manufacturers Eurofer accused China of systematically distorting steel markets through subsidies. The result, say Europe's steel makers, has been irrational capacity extension. The European Commission has slapped duties on Chinese steel pipe imports, and is now threatening World Trade Organization action as well.
On April 8th 2009, the US steel industry filed an antidumping suit with American authorities against Beijing, alleging that USD 2.7 billion of pipe steel was unfairly dumped onto the American market last year.
Eurofer General Director Mr Gordon Moffat calls it a perfect storm for a trade war. He said that "Demand has fallen off a cliff since October. We know China is simply waiting for demand to return before flooding the markets."
Steelmakers around the world have indeed been hit by falling demand from automakers, shipbuilders, construction and heavy engineering sectors. Tight credit and the need to generate cash flows have resulted in a massive drop in steel inventories industry-wide.
But where European and US steel mills are cutting back on production, China seems to be expanding. Luxemburg based ArcelorMittal, the world's biggest steelmaker, is slashing output by half, for instance. Yet state-supported Chinese steel companies are actually ramping up both capacity and output.
The China Iron & Steel Association said that the production of crude steel has risen since December, from 1.2 million tonnes a day to 1.4 million. China's steel makers employ some 2.5 million people and Beijing is desperate to keep those jobs going. But US and European rivals say China isn't playing fair and accuse Beijing of subsidizing steel companies, offering preferential tax rates, giving access to low-priced materials, and exempting steel firms from labor and environmental rules.
European and US steel makers said that those policies have artificially depressed steel prices and helped boost China's share of total EU steel imports from 2% in 2003 to 30% today and its share of US imports from 4% in 2003 to 19% today.
(Sourced from Time.com)
