China's steel industry faces increasing trade frictions

By Zhang Lulu
0 Comment(s)Print E-mail, August 16, 2016
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Workers are busy at a manufacture base of Dongbei Special Steel Group Co., Ltd. in Dalian, northeast China's Liaoning Province, Oct. 13, 2015. [Xinhua]

A branch of China's Ministry of Commerce made statements last week concerning South Africa's latest probe into China's cold rolled steel sheets, the 27th time this year the Trade Remedy and Investigation Bureau has responded to trade frictions in the steel industry. In addition to the United States and Europe, which often carry out trade remedy probes against China, such investigations are being increasingly brought up by India, Brazil, Vietnam, Malaysia, Australia, Germany and South Africa.

Record high exports and frequent trade frictions

China exported a total of 112.4 million tons of steel in 2015, the first time it reached 100 million tons, but it came with an increasing number of trade frictions. Forty-six trade remedy investigations were targeted at China's steel industry last year, an increase of 19 from the year earlier and accounting for 46.9% of all the trade remedy probes in China in 2015. Worse still, China's steel industry has been accused by some of being responsible for the steel overcapacity that has gripped the world.

Chinese industry insiders, however, have cited rapidly rising exports and the surge of trade protectionism as the real cause of the simmering trade frictions.

In late May, the United States issued hefty anti-dumping and anti-subsidy duties on corrosion-resistant steel not only from China, but also from India, Italy and South Korea. Moreover, Japan is also the target of a number of anti-dumping cases, demonstrating worldwide surging frictions in the steel industry.

"The international steel market has become a buyer's market with the steel glut worldwide. International buyers choose to buy China's steel, thus contributing to the growth of China' steel exports," said Li Xinchuang, the head of the China Metallurgical Industry Planning Association, recently. The surge in China's steel export is a result of the increasing competitiveness of China's steel products, he added.

China's steel export: less than the global average

China did not become a net exporter of steel until 10 years ago: The country was a steel importer for half a century when it was a poor, agricultural country. Even today, China's steel exports account for less than 15% of its output, only half of the world's average level.

In a steel-related symposium in Brussels in April, Zhang Ji, the assistant minister of commerce, emphasized the fact that China did not subsidize any steel exports, but has on the contrary imposed tariffs on some export products. Moreover, the country still imports large amount of steel products, making it the world's fifth largest steel importer.

The way out

Experts have proposed several ways of tackling the steel overcapacity and trade frictions. Lu Feng, a professor with the National School of Development of Peking University, said that expanding China's steel exports can move forward with the cooperation with developing countries.

He took the example of China and Pakistan. China's steel exports to Pakistan increased from 370,000 tons in 2011 to 2.56 million tons last year, a nearly six-fold increase in 4 years.

"The steel trade between China and Pakistan in recent years is mainly carried out in new projects under the Belt and Road initiative, thus it will not jeopardize the existing interest of other countries, but will help Pakistan better develop its economy," he said.

As a matter of fact, China's steel exports in recent years have increased significantly in countries involved in the Belt and Road initiative and developing countries. Data shows that the value of China's steel exports to Belt and Road countries has jumped from US$10 billion in 2009 to more than US$30 billion last year.

Lu Feng also said that digging deeper into China's domestic market and encouraging mergers of steel companies will also help the country's steel industry.

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