China Says OverProtection is Cause of US Steel Lack of Competitiveness

China Says Over-Protection is Cause of US Steel Lack of Competitiveness

June 23, 2016
The world is awash in steel as demand drops in China, which accounts for about half of global production. 

China has pushed back after the U.S. boosted anti-dumping and anti-subsidy duties on some of its steel products, saying mills in the world’s biggest economy lack competitiveness because they are over-protected.

Protectionism in the U.S. steel sector is deeply worrying as these measures will only exacerbate friction without helping to solve the problem of shrinking global demand, China’s commerce ministry said in a statement on June 23. “China believes that the lack of competitiveness in the U.S. steel industry is the result of over-protection,” it said.

The world is awash in steel as demand drops in China, which accounts for about half of global production. To offset declining consumption, overcapacity and weakening prices at home, Chinese mills have boosted exports to record levels. That’s raised trade tensions worldwide, spurring a backlash from rival producers and forcing policy makers to try to address the problem, including at May’s Group-of-Seven meeting in Japan.

“China urges the U.S. to abide by the World Trade Organization’s rules and to use trade remedy measures judiciously,” the commerce ministry said after the U.S. ruling, which came  on June 22 from the International Trade Commission, a federal body.

‘Materially Injured’

The U.S. has been “materially injured” by imports of the cold-rolled steel flat products from China, as well as Japan, which have been determined to be sold at less than fair value and subsidized, the ITC said in a statement. All six of the ITC’s commissioners backed the move, it said.

In May, the U.S. Department of Commerce, which conducts parallel investigations into accusations of unfair trade, recommended tariffs of as much as 522% on cold-rolled steel from China to counteract dumping and illegal subsidies. The Department recommended anti-dumping duties of 71% on shipments of the product from Japan, which it found had not unlawfully subsidized production of that type of steel.

Steel Revival

A revival in steel prices in China earlier this year spurred mills to fire up capacity, prompting Axiom Capital Management Inc. to predict that the country’s exports will probably stay elevated. Shipments of steel from China will remain at high levels as local demand shrinks, the country’s Metallurgical Planning Institute said in April.

To tackle the problem in China, the government has announced plans to cut as much as 150 million tons of excess steel-making capacity over five years. Shinzo Abe, Japan’s prime minister who hosted G-7 leaders in May, said then that China isn’t doing enough to tackle oversupply in the industry.

Shares of U.S. Steel Corp. have more than doubled this year as domestic prices and mill utilization have climbed along with tumbling imports. Imports of all steel goods from all trading partners dropped by 34% this year through April, according to the most recent data available from the U.S. Census Bureau.

By Jasmine Ng

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Licensed content from Bloomberg, copyright 2016.

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