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Zhou Xin

Wendy Wu

China’s output of steel products hit an all-time high last month despite Beijing’s repeated pledges to address overcapacity, raising the risk of trade disputes with Washington and Brussels.
Steel is already the biggest source of trade rows between China and its trading partners, and Beijing has showed willingness to work on the issue.
Chinese and visiting European Union officials agreed last week in Beijing to set up a joint team to monitor steel trade data and China’s efforts to cut output.
But official numbers released last week showed few signs of a slowdown in production at Chinese steel mills or shipments of Chinese steel products.
China produced an unprecedented 100 million-plus tonnes of steel products in June, with steel product exports rising by 23 per cent to the second-highest total by volume on record.
Those numbers are expected to help amplify to already loud protests in Brussels against the dumping of Chinese steel products and opposition from industry groups to the EU granting China market economy status by the end of the year.
At the end of the China-EU summit last week, officials revealed that they had agreed to set up a joint team to monitor bilateral steel prices and volume and to track the implementation of Beijing’s policies to address overcapacity.
EU and Beijing to mount joint watch on Chinese steel cutbacks
European Commission president Jean-Claude Juncker announced the joint effort last Wednesday after the issue was raised during talks between Premier Li Keqiang, European Council president Donald Tusk and Juncker.
Juncker did not give details on how the team would work, but said overcapacity, especially in steel, was a big concern in the EU, which would do all it could to protect its steel sector.
With market economy status from the World Trade Organisation, China would be able to expand its dumping into the EU without limitation
Milan Nitzschke, Aegis Europe
Steel overcapacity is understood to have been high on the China-EU summit agenda but the decision to set up the joint team is the only outcome of the talks revealed to the public.
In the lead-up to the discussions, EU industry groups expressed strong opposition to EU leaders in Beijing about the prospect of the bloc granting market economy status to China.
“The EU has appeared extremely weak in China,” Milan Nitzschke, spokesman for Aegis Europe, a group of nearly 30 industrial associations, said after the summit.
“With market economy status from the World Trade Organisation, China would be able to expand its dumping into the EU without limitation.
“Only those countries that meet the European criteria for a market economy should be granted MES. The EU and Germany must not waiver. Any deal would be an unlimited license to dump.”
Nitzschke said the impact of Chinese overcapacity was being felt in “nearly every sector of European manufacturing from A, like aluminium to Z, like zero-emission technologies”.
German Chancellor Merkel to raise EU fears over Beijing’s new NGO law and steel production during China visit
So far this year, Brazil, Vietnam, the United States, the EU, Malaysia, India and Australia have launched either anti-dumping or anti-subsidy investigations into Chinese steel product ­exports.
China has sought to counter the probes by insisting that the challenges in the global steel sector are rooted in weak global economic growth and sluggish demand, and that trade protection will not fundamentally solve the issue.
It is unrealistic for China to control steel exports. But Chinese steel makers can set up plants overseas to circumvent the anti-dumping investigations
Frank Tang, North Square Blue Oak
Frank Tang, an economist with investment bank North Square Blue Oak, said the central government was not expected to put pressure on steel exporters to cut shipments.
“Given the weak domestic demand, the only way is to digest the huge steel inventory is to expand steel exports. It is unrealistic for China to control steel exports. But Chinese steel makers can set up plants overseas to circumvent the anti-dumping investigations,” Tang said.
He said China’s steel exports accounted for just a tenth of the total output, with the Southeast Asia – rather than the EU or United States – the biggest export destination.
“The economic slowdown in the EU and the presidential campaign in the United States have politicised steel overcapacity,” Tang said.


Record Chinese output risks raising steel tensions with US, EU

An employee works at a steel factory in Dalian, Liaoning province. Photo: Reuters

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China

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China Economy

The EU is putting pressure on China to make good on pledges to cut excess capacity but Beijing is unlikely to force cuts in exports, analyst says
