Energy Subsidies Shift Balance of Power Toward Chinese Steel Makers

New report says China's steel industry is based on government interverntion, oversight and subsidies.

Thanks to "massive, trade-distorting energy subsidies" estimated at $25 billion over the past five years, China has become the largest producer and consumer of steel in the world, claims Usha Haley, director of the Global Business Center at the University of New Haven, and a principal of Haley and Associates.

In a report prepared for the Alliance for American Manufacturing, a trade organization that aims to strengthen the U.S. steel industry, Haley observes that "the Chinese steel industry as it exists today stems from government intervention, oversight and subsidies," which she says accounts for a dramatic shift from being a net importer to the largest exporter of steel within a period of two or three years.

"Our analysis shows that energy subsidies have a very strong correlation with Chinese steel exports," Haley says. "In fact, the connection is so clear that, essentially, it's possible to almost perfectly predict China's steel exports from its energy subsidies." These subsidies include support for thermal and coking coal, electricity and natural gas.

Haley's report is available at www.americanmanufacturing.org.

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