China braced for steel backlash from US and EU

Posted on November 13, 2016

Beijing is bracing for a US and European backlash against Chinese steel, as the rise of Donald Trump threatens to escalate overseas opposition to a domestic industry that accounts for half the world’s output.

China’s domestic steel consumption fell last year but exports have so far soaked up excess production, helping mills defy Beijing’s efforts to rein in surplus capacity. That export crutch could weaken as attitudes harden in other big steel-producing regions.

In the US, president-elect Mr Trump campaigned on a platform of limiting Chinese imports, while the European steel industry has lobbied hard against granting China market economy status by December as stipulated in the terms of its 2001 entry to the World Trade Organisation.

Over the weekend, China’s ministry of commerce protested after the EU closed in on a deal to impose punitive anti-dumping tariffs. “China has expressed great concerns and worries about the EU’s trade protectionist tendency over steel,” the ministry said on Saturday, in a statement on its website.

“The European steel industry’s problems are due to weak economic growth, not because of competition with Chinese steel products,” it said, while calling for better communication and exchanges “to properly solve problems that the steel industry is facing”. 

Chinese steel exports for the first 10 months of the year rose about 1 per cent to 93m tonnes, and are likely this year to come close to last year’s record 112m tonnes. Asian countries account for more than half its exports.

This year China and the EU agreed on a bilateral ‘platform’ to track Chinese steel shipments, a model that some have indicated the US and China could also adopt. But big international steel producers also face a second, harder-to-fight threat from China’s overcapacity — Chinese shipments to developing regions including Africa and the Middle East erode those regions’ purchases from developed countries. 

As for the US, Chinese editorials have warned Mr Trump against a trade war, although many officials believe he will prove a pragmatist once in office.

“I don’t think he will launch a trade war. He’ll take into account all the interests, including the national interest,” said Li Xinchuang, head of the China Metallurgical Industry Planning and Research Institute. “The American steel industry is already very weak and lagging behind. There’s no point in protectionism because the US steel industry already doesn’t meet its own needs.”

@HornbyLucy

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