Kunal Bose: Steel world puts China in the dock for underpriced exports

It was a given that at the recent annual meeting of World Steel Association (WSA) in Dubai, the principal subject for discussion would be a single country holding most of global surplus steel capacity and its unfairly priced steel exports. Chinese steel exports of 111.6 million tonnes (mt) in 2015, which became tidal waves washing several markets including India, and lingering doubts about provincial governments carrying out Beijing’s order to phase out 150 mt of the total capacity in the next five years remain major points of concern for all other grey metal producing countries. India’s imports of 13.3 mt in 2015, in which China had a major share, denied local steelmakers the benefit of demand rise as they kept the prices below production costs. There might have been some moderation in steel exports by China in the past few months. Even then, between January and September, Chinese overseas steel despatches were up 2.4 per cent to 85.1 mt. No wonder, then, that China turned out to be the favourite bogeyman for steelmakers from the rest of the world. The importing countries hosting injured steelmakers peppered their comments about unfair trade practices by a single nation with the strongest possible words. But then, the defendant China, however weak might be its case, made attempts to raise the spectre of protectionism and building walls against free movement of goods.

An idea of the kind of sneering that was part of Dubai proceedings could be had from interviews given to the media by some participants on the sidelines of WSA meeting. For example, Nucor chairman and CEO John Ferriola, who was elected president of WSA for 2016-17, was unsparing in his criticism of Beijing as he spoke to S&P Global Platts on the positive outcome of the series of US trade action against steel imports from China. Giving some examples of successes of steel products based trade action, Ferriola said imports of flat-rolled sheet were down. He was hopeful that the ongoing trade cases on imports of steel plates and rebar would yield similar result. Chinese industry representatives were in for a big shock when Ferriola said: “So many cases are being filed and they are being so successfully prosecuted are testimony to just how blatant the cheating has become... It’s about time we’re taking action... We have laws in place. When people break them, they need to be held accountable for breaking law.”

Tata Steel’s managing director T V Narendran made the point that an industry having made huge investments to build steelmaking capacity should not be made to suffer “because of unfair trade”. At repeated urgings by the beleaguered industry and also due to official concern about piling up of non-performing assets of steelmakers exceeding ~3 lakh crore, New Delhi since September 2015 had taken trade actions such as safeguard duty, minimum import price and anti-dumping duty on products principally originating in China. Relief by way of shrinking of imports has come the industry’s way. Expectedly, those exporting steel to India are not happy about our trade measures. Narendran says, “The Indian industry is prepared to deal with any such reactions.”

If anything, China’s anger over attempts to make exports of underpriced steel increasingly difficult is directed more against the US and the European Union (EU) than India. But don’t expect China to take things lying down. In a well-calibrated response to vituperative outbursts against Chinese steel policy, China Iron & Steel Association secretary-general Liu Zhen Jiang said while Beijing was making “great efforts” to cut steel capacity to size, the other countries had “little to show in capacity phasing out”. The fact, however, remains the industry in the US and EU has over the years scrapped many high-cost and environment-damaging mills. For example, the US steel production between 2000 and 2015 fell from 102 mt to 79 mt. India, which is recording the fastest rate of growth among the world’s major economies will need growing volumes of steel to meet the requirements of infrastructure, construction, automobile and white goods sectors. After a few revisions, the government has asked the industry to chase a stiff 300 mt steel capacity target by 2030 against the present capacity of 118 mt. Poor global demand growth resulting in low prices that hit the industry for nearly five years was the principal reason for steel majors such as ArcelorMittal and Posco to put their ambitious India projects on hold. But, they are all keen to work in the value-added segment in partnership with Indian companies.It was a given that at the recent annual meeting of World Steel Association (WSA) in Dubai, the principal subject for discussion would be a single country holding most of global surplus steel capacity and its unfairly priced steel exports. Chinese steel exports of 111.6 million tonnes (mt) in 2015, which became tidal waves washing several markets including India, and lingering doubts about provincial governments carrying out Beijing’s order to phase out 150 mt of the total capacity in the next five years remain major points of concern for all other grey metal producing countries. India’s imports of 13.3 mt in 2015, in which China had a major share, denied local steelmakers the benefit of demand rise as they kept the prices below production costs. There might have been some moderation in steel exports by China in the past few months. Even then, between January and September, Chinese overseas steel despatches were up 2.4 per cent to 85.1 mt. No wonder, then, that China turned out to be the favourite bogeyman for steelmakers from the rest of the world. The importing countries hosting injured steelmakers peppered their comments about unfair trade practices by a single nation with the strongest possible words. But then, the defendant China, however weak might be its case, made attempts to raise the spectre of protectionism and building walls against free movement of goods.

An idea of the kind of sneering that was part of Dubai proceedings could be had from interviews given to the media by some participants on the sidelines of WSA meeting. For example, Nucor chairman and CEO John Ferriola, who was elected president of WSA for 2016-17, was unsparing in his criticism of Beijing as he spoke to S&P Global Platts on the positive outcome of the series of US trade action against steel imports from China. Giving some examples of successes of steel products based trade action, Ferriola said imports of flat-rolled sheet were down. He was hopeful that the ongoing trade cases on imports of steel plates and rebar would yield similar result. Chinese industry representatives were in for a big shock when Ferriola said: “So many cases are being filed and they are being so successfully prosecuted are testimony to just how blatant the cheating has become... It’s about time we’re taking action... We have laws in place. When people break them, they need to be held accountable for breaking law.”

Tata Steel’s managing director T V Narendran made the point that an industry having made huge investments to build steelmaking capacity should not be made to suffer “because of unfair trade”. At repeated urgings by the beleaguered industry and also due to official concern about piling up of non-performing assets of steelmakers exceeding ~3 lakh crore, New Delhi since September 2015 had taken trade actions such as safeguard duty, minimum import price and anti-dumping duty on products principally originating in China. Relief by way of shrinking of imports has come the industry’s way. Expectedly, those exporting steel to India are not happy about our trade measures. Narendran says, “The Indian industry is prepared to deal with any such reactions.”

If anything, China’s anger over attempts to make exports of underpriced steel increasingly difficult is directed more against the US and the European Union (EU) than India. But don’t expect China to take things lying down. In a well-calibrated response to vituperative outbursts against Chinese steel policy, China Iron & Steel Association secretary-general Liu Zhen Jiang said while Beijing was making “great efforts” to cut steel capacity to size, the other countries had “little to show in capacity phasing out”. The fact, however, remains the industry in the US and EU has over the years scrapped many high-cost and environment-damaging mills. For example, the US steel production between 2000 and 2015 fell from 102 mt to 79 mt. India, which is recording the fastest rate of growth among the world’s major economies will need growing volumes of steel to meet the requirements of infrastructure, construction, automobile and white goods sectors. After a few revisions, the government has asked the industry to chase a stiff 300 mt steel capacity target by 2030 against the present capacity of 118 mt. Poor global demand growth resulting in low prices that hit the industry for nearly five years was the principal reason for steel majors such as ArcelorMittal and Posco to put their ambitious India projects on hold. But, they are all keen to work in the value-added segment in partnership with Indian companies.