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Home » Archives » Business

China steel surplus spills into EU

Producers seek protection against unfair competition

By Michael Heitmann
Staff Writer, The Prague Post
November 7th, 2007 issue

COURTESY PHOTO
ArcelorMittal, the world's largest steel manufacturer, is a principle player in the complaint against China.
Steel imports from China are flooding the European market at cut-rate prices, putting thousands of jobs in the Czech Republic, Slovakia and the rest of Europe at risk.
That’s the contention of the European Confederation of Iron and Steel Industries, known as Eurofer, which filed a formal complaint with the European Union last week. The European Commission, the EU’s executive branch, now has until mid-December to decide whether to launch a formal investigation into Eurofer’s allegations.
ArcelorMittal, the largest steel manufacturer in the Czech Republic and worldwide, supports Eurofer’s complaint.
“China is clearly critical to the future of the steel industry,” said ArcelorMittal spokesman Mark Mann. “However, it is important to ensure that the Chinese steel industry does not grow faster than demand dictates, leading to a massive oversupply.”
The Chinese surplus could plunge the industry back into its escaped legacy of oversupply, which it has left behind through recent consolidation, Mann said. Despite this threat, ArcelorMittal will continue to invest more money into its Czech operations and expand capacity, he said.
The Czech Republic’s major steel producers — ArcelorMittal Ostrava, Třinecké železárny, Evraz Vítkovice Steel and ŽDB Group — are all members of Eurofer. Some have been actively involved in collecting evidence on anticompetitive behavior in countries like China, according to the Steel Federation (HŽ), an association of Czech and Slovak steel producers.
Despite no real cost advantage compared with their European competitors, Chinese steel imports have undercut local prices up to 25 percent, according to Eurofer. Because of this, EU steel producers have lost market share and are not producing at their full capacity, it said.
Steel imports from China to the EU grew 137 percent to 8.9 million metric tons from January to September this year, compared with the same period last year, according to EU statistics. Meanwhile, imports of metallurgic products from China to the Czech Republic have quadrupled within the past year, whereas exports from the Czech Republic to EU countries have stagnated at 3 million tons.
The worldwide price for a ton of steel ranges between $600 ($32) and $850, and Czech prices mirror those. Chinese prices sit well below that, according to the HŽ.
The Chinese prices have been fueled by generous state subsidies, Eurofer said. In response, it is seeking anti-dumping duties on stainless steel cold-rolled flat products from China (along with South Korea and Taiwan) as well as hot-dipped sheet and strip originating in China.
Not all European companies agree with Eurofer’s complaint. Trade association Orgalime, which represents engineering industries in Brussels, defended its members’ rights to choose suppliers as they saw fit.
“Our companies must have access to the supplies of steel they need at competitive market conditions,” said Adrian Harris, Orgalime’s secretary general. “If our traditional suppliers in Europe can provide these, all the better. If not, we need to find alternatives for our companies to be able to continue manufacturing here.”
Manufacturers in Europe already have to shoulder the highest steel prices worldwide for many grades, in what is becoming a premium market for steel producers, Harris added. Trade restrictions could lead to even higher prices.
“It just does not make sense to hit the competitiveness of the EU’s metalworking and mechanical engineering SMEs [small and midsize enterprises], which provide over seven million jobs throughout the EU,” he said.
Eurofer’s complaint is a bit of an about-face for the European steel industry, which for years has criticized the United States for abusing anti-dumping legislation to protect its steel industry. But such redress is necessary for truly fair competition, said U.S. Steel Košice, a Slovak subsidiary of the multinational.
“We strongly believe that the Eurofer action goes toward fair competition in Europe,” said Ján Bača, spokesman for the steelworks. “The economically irrational growth of Chinese steel capacities driven by state intervention is problematic.”
While the Eurofer complaint is only the first act in what promises to be a protracted epic, the EU’s trade commissioner, Peter Mandelson, has already expressed sympathy for the industry’s plight.
“I have indicated … to steel producers that, on the face of it, they have a case for opening such an investigation,” he told BBC News. “But I can’t say what conclusion will be reached.”

Michael Heitmann can be reached at mheitmann@praguepost.com


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