Anti-Dumping

While US steel producers have reason to celebrate the signing of a trade package that includes Trade Promotion Authority (TPA) and Trade Adjustment Assistance (TAA), other manufacturing organizations will also benefit from the opening up of new markets. However, procurement professionals may perceive the legislation less favorably.

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MetalMiner asked Jennifer Diggins, Director of Public Affairs at Nucor, to explain why these trade initiatives are so important for all manufacturers and specifically how the legislation will positively impact metal buyers.

jennifer diggins nucor stillMetalMiner: A lot of your customers purchase imports. How is this legislation helpful to them in any way?

Jennifer Diggins: The legislation is not targeting fairly traded imports. The American steel industry does not have a problem with imports; imports will always be part of our market. But we do have a problem with unfairly traded imports, where governments break trade rules they agreed to and provide illegal subsidies that allow foreign steel producers to sell products below costs.

If a company cheats on price, it raises serious questions about other ways they may be cutting corners to gain an advantage, which could ultimately come back to hurt their customers. We know China has tried to evade duties on some of their steel products by routing them through third-party countries to hide the point of origin and avoid the trade duty. Steel producers in China have also added chemicals to products to avoid trade duties. Several years ago, China added boron to cut-to-length plate to avoid a duty. Nucor brought that case to the attention of the Department of Commerce who ruled that the boron added did not change the product and was subject to the trade duty.

Behavior like this should raise concerns for any customer. If China is willing to bend the rules like this, can you trust claims of product quality? Do you really know what you are buying? A free, transparent marketplace is best for both producers and consumers.

MM: Arguably the Chinese have done a lousy job curbing excess production and shutting down excess capacity. Do you think this legislation will provide the stimulus necessary for Beijing to finally shutter excess and obsolete production? Why/why not?

JD: The main goal of the legislation is to provide more effective tools to enforce our trade laws to ensure that countries sending products to our market are playing by the rules. The provisions in this legislation should create a disincentive to dump products in our market, but the legislation is not intended to address overcapacity issues in China.

The capacity problem is a much larger issue and won’t be meaningfully addressed until China gets serious about moving away from being a state-run economy to a market-based economy. Unfortunately, there are few signs they are serious about doing this. Earlier this year, China issued a draft of its Steel Industry Adjustment Policy, saying – as it has for years now – that this new policy will resolve its excess capacity problems. The major steel industry associations from North America, Latin America and Europe issued a joint response, expressing their disappointment that the Policy still shows that China insists on a top-down, state-controlled approach to the steel market. We are all in agreement that the Policy actually is less interested in eliminating excess capacity in China, but instead would seek to transfer capacity overseas through government-supported foreign investments and acquisitions.

It’s clear that China has no interest in letting market forces dictate the size of its steel industry. And so long as China maintains this state-supported approach to market competition, it’s hard to see how they can have a place in any free market economy. This legislation is an important step, and should help any company from any nation that fairly competes in the American marketplace. But so long as China can be successful dumping steel in other foreign markets, it is unlikely the Chinese government will get out of the steel business. We need more concerted action from our trading partners to force China to comply with WTO rules.

MM: Why, in general, is excess capacity (steel production capacity) a bad thing for steel buying organizations? Most might say it’s a good thing because buyers can get lower prices. How do chronically low prices harm the industry and eventually your customers?

JD: I think it’s important to note here that we are talking about artificially low prices – not competitively low prices. In a free market economy, overcapacity would be eliminated through the balancing of supply with demand. So in a situation of excess production, customers would buy steel from the companies that best meet their needs, and the other steel companies would go out of business. This kind of competition drives quality up and prices down. In a truly free market, efficient producers survive while inefficient ones go out of business.

However, the global steel market is not a true free market. Chinese steel companies are being artificially sustained by their government, creating the risk that efficient foreign steel companies will go out of business while inefficient Chinese companies survive. With state support, they can produce an overabundance of steel at absurdly low prices, and drive their competition out of the marketplace. The market will not be well served if inefficient steel producers survive at the expense of efficient ones. At some point, customers will have no choice but to buy product from those steel companies. There will be no diversity in the market place – no competition. Just one source of state-owned suppliers. And they won’t be accountable to their customers for their success. The only entity they will have to keep happy is their government’s bureaucracy. In that scenario, you can bet the absurdly low prices will disappear with no guarantee that customers will be getting a quality product.

China’s real goal is not only to dominate global steel production, but also to transfer the global downstream supply chain to China (in order to maximize job creation in China). To ensure the reliability and survival of the supply chain in the United States, including both suppliers and downstream consumers, we need to ensure that global supply chains are free from market distortions.

Disclaimer: Nucor is a sponsor of MetalMiner.

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The US Steel industry has long said that a wave of cheap and illegally subsidized imports is crushing its ability to compete.

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While not turning a blind eye to the situation, Washington has not been as responsive to the situation as many in the domestic steel industry would like. The lobbying efforts of domestic steel have largely fallen on deaf ears when it comes to enforcing existing trade laws and placing tariffs that would be punitive enough to stop foreign nations such as China from overproducing.

Yet, today, a key bill supporting tougher anti-dumping enforcement has passed the House, has a path to passing the Senate and even more customs protections could be passed as early as next week. All from a Congress known more for not passing legislation than passing it. How did this happen? First, let’s see how we got here.

WTO Claims Chinese Imports Aren’t Subsidized

Some relatively modest tariffs were revoked a year ago when the World Trade Organization said the US broke the rules for imposing duties on Chinese steel products, solar panels and other goods.

The WTO’s judges said that under the 1964 Marrakesh accords (which also set up the WTO) countervailing duties can only be levied when there is clear evidence that state-owned or partially state-owned enterprises passing on the subsidies are “public bodies.”

The panel found that Washington had produced insufficient evidence to prove subsidization, and was also at fault in its calculations of the value of the subsidies to Chinese firms. This was a very novel reading for the WTO as there is…

Actual Proof That Chinese Steel is Subsidized

Last year, and now, evidence exists that Chinese steel is subsidized on the state and national level and exports are sold below cost.

This history of ignoring evidence is why we didn’t expect big things for steel this week. Maybe more ambiguous language about actually enforcing existing law as a sweetener in the Trade Promotion Authority bill that both the president the republican congress support, but nothing more.

How, then, did steel become the big winner?

TPA Goes Down in Flames

When democrats in the House refused to approve TPA it looked like the bill, that would ensure an up or down vote for future trade agreements such as the Trans-Pacific Partnership, wouldn’t move forward.

When TPA was separated from a worker aid package for those displaced by future trade deals known as Trade Adjustment Assistance, we still didn’t think it would result in help for domestic steel, yet competing interests that put free-trade Republicans and the Obama administration on one side and more liberal democrats on the other worked in the industry’s favor.

Long Live TPA

TPA, once separated from TAA, passed the House and then the Senate. It still looked like more trade deals and no help for steel or US manufacturing. But with TAA still stuck in the House, guess what the perfect sweetener to get democrats on board become? Support for the US steel industry. The Congressional Steel Caucus is a bipartisan group that spans several key states. Senators and congressmen and women from the midwest, south and southwest coalesced around their support for local steel.

TAA Passes With Stronger Steel Support

Not only did the House leadership promise new safeguards for the steel industry as part of the revamped TAA bill that passed yesterday, but a customs enforcement bill that would force US Customs and Border Protection to enforce anti-dumping laws as written also passed both houses earlier in the week. It awaits a conference committee negotiation, one that the American Iron and Steel Institute favors the Senate version of the bill in. Everything’s suddenly coming up steel.

TPA passed both houses by midweek and TAA passed the Senate and, after being sweetened with support for the steel industry, the House yesterday. Even more customs enforcement protections are still waiting in the conference committee.

“We commend the House for passing legislation today that will improve the effectiveness of our anti-dumping and countervailing duty laws to combat unfairly traded imports,” said Thomas Gibson, president and CEO of the AISI. “These modifications to the trade laws come at a critical time for the steel industry, as we are currently faced with a surge in steel imports that are causing injury to the domestic industry, including significant reductions in domestic steel production and job losses. We look forward to President Obama quickly signing this bill into law.”

It’s about time.

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Sources told Reuters that steelmakers in China were selling their products below cost and President Obama hosted a picnic at the White House with members of Congress ahead of a key trade vote.

Confirming What We Already Knew

Some Chinese steelmakers are selling their products abroad at a loss, traders and a producer told Reuters, as a group of global industry bodies urged governments to take action over rising shipments from China.

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Chinese mills had sold steel overseas at a loss of up to 200 CNY ($32) a metric ton and cut the export price of hot-rolled coil by 5% to $340-$350 per mt, free-on-board basis, this week compared to last week, traders and a producer in Hebei, China’s top steel-producing province told the news service.

These mills were also selling at a loss to the domestic market, the sources said.

“The domestic market is too weak to consume high output and our prices are competitive, so some mills are still keen to step up exports, hoping to ease high inventories and maintain market share,” said a senior official at a privately owned mill in Hebei.

Preesident Has Picnic With Lawmakers Ahead of Trade Re-Vote

President Obama hosted members of Congress yesterday for the congressional picnic amid a fierce trade debate on Capitol Hill.

This year’s gathering took place before the House was expected to hold a vote today to revive the president’s stalled trade agenda, and less than one week after Democrats killed a key part of the legislative package.

House Minority Leader Nancy Pelosi (D-Calif.) was in attendance at the picnic. The president has not spoken with her personally since she led the Democratic revolt against the trade bills.

The event is seen as an opportunity for the president to get face time with lawmakers in a low-pressure setting. That could prove to be important for Obama with the House set for a re-vote on fast-track trade authority and a measure to provide aid to US workers displaced by international trade.

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The American Iron and Steel Institute said in a telephone press conference that the House of Representatives’ passage last Friday of a customs bill, which includes new trade remedy provisions for collecting tariffs on imports determined to have been illegally subsidized or “dumped” by their origin nations, was a major win for the US steel industry.

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The House voted in favor, Friday, of trade promotion authority (TPA), a major free trade power desired by President Obama, but the House also rejected Trade Adjustment Assistance (TAA) in a separate vote. In order for TPA to advance to the President for his signature, the House had to pass both TPA and TAA. So, TPA was pronounced not to have passed yet, either.

What Now For Trade Authority?

Speaker of the House John Boehner (R. Ohio) has already moved to reconsider the vote on TAA and the House rules committee will extend the time for a second vote to occur sometime between now and July 3oth. While it was certainly a setback for the President in getting fast approval of TPA, there was a separate vote on a customs bill that includes trade remedy provisions that passed.

“We specifically advocated for provisions to provide for more effective remedies against imports that are dumped or subsidized,” said Thomas Gibson, president and CEO of AISIS. “As regulars on this call know, steel imports have reached historic levels in the past few years due, in large part, to unfair trade practices.”

New Customs Enforcement Passes

Finished steel imports in 2014 increased 36% compared to 2013. Total steel imports over the same time frame were up 38%. Last year, imports captured 28% of the market surpassing the prior record of 26% and this year the finished import steel market share has continued to thrive and is already at 32% on the year-to-date. Not surprisingly, year-to-date raw steel production is down 7.3% and shipments through April were down 9.5%.

Approval of the House customs bill was NOT dependent on the passage of the TPA/TAA package in the House, either. So, both the senate and house have passed customs bills. The Senate passed its ENFORCE (Enforcing Orders and Reducing Customs Evasion) bill in April

The two bills now go to conference committee to resolve their differences. One difference between the House and Senate bills is the so-called “enforcement act” provisions which would create a new procedure for industries to petition for action to address trans-shipment and evasion of already-determined customs duties. The ENFORCE Act creates procedures for a federal agency or interested party to make good faith allegations of a company’s evasion of anti-dumping and countervailing duty orders to US Customs and Border Protection.

Senate ENFORCE Act Better for US Producers

“AISI has long-supported the senate version of the bill and will continue to push for adoption of its approach in the conference committee,” Gibson said, “but the bottom line is the steel industry is one major step closer to getting trade remedy provisions signed into law after last Friday and that’s a good thing.”

Gibson also said the infrastructure bill authorization runs out again at the end of July and the House ways and means committee and the senate finance committee are holding hearings this week to find a long-term solution for funding the Highway Trust Fund for upkeep of federal roads, bridges and other infrastructure.

No Reason to Tie Highway Funding to TAA

“It affects us in two ways: use of the infrastructure for a competitive economy and the public construction market is beholden to its infrastructure for transportation,” Gibson said. “AISI supports a user fee approach, something like a gas tax to provide a long-term funding solution. We think it can be solved this year.”

Gibson stopped short of supporting a solution that combines both a highway bill and TAA as House Minority Leader Nancy Pelosi (D. Calif.) advocated last week after speaking against the TAA bill on the House floor.

“We don’t believe it can get done at the same time at this point,” Gibson said. “We believe those comments were more of an explanation by former Speaker Pelosi of why she was against the bill (TAA) she had said she was for the week before.”

Anti-Dumping Enforcement

Gibson said as soon as the conference committee sends a final customs bill to the President and he signs it, the new language would apply and a petitioner to Customs and Border Protection could take advantage of the new trade law remedy provisions for enforcing existing anti-dumping countervailing duties.

The remedy provisions would not drastically change the standards by which injury is determined and how they are adjudicated. The ENFORCE ACT and the House’s customs deal mainly with the enforcement, addressing evasion, trans-shipments and other ways importers avoid duties at US customs.

“As opposed to bringing cases to the International Trade Commission and Dept. of Commerce, which is the trade remedy provisions, these deal with enforcement,” Gibson said. “That’s exactly why we think the senate version (ENFORCE) is superior to the version that passed the House because it has enforceable deadlines and, if an agency ignored its obligations, you’d be able to go to a court to tell the agency to obey its mandate.”

Trade adjustment assistance expires at the end of September if it’s not reauthorized before then. Gibson said that would be a big loss for proponents of free trade such as the President and congress’ republican majority who have both supported TAA in its current form. He also said the next “pressure point” was Congress’ July 4th recess which actually starts June 30th and AISI expected action on TAA before that.

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Since we remain ever vigilant on DumpWatch here at the Metalminer week-in-review, we couldn’t help but be proud of India, US steelmakers and even the EU who grew a spine and said “no mas” to illegal dumping of steel from several nations, principally China. The petitioning nations’ steel industries deserve mad props for standing up for their markets.

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China, you see, threw down the gauntlet two weeks ago when Ministry of Commerce spokesman Shen Danyang said the rise in steel exports from his country was due to higher global demand and was a natural result of Chinese steel products having “strong export competitiveness.”

Coiledsteel_585

“Export competitive” steel rod just looking for a new home somewhere other than China.

Ya Down With OPM (Other People’s Markets)?

Producing steel for overseas consumption to meet demand would be one thing but, as the American Iron & Steel Institute has long protested, China’s steel companies are subsidized at the state and national levels meaning they can often undercut prices in countries they export to by charging cost or even less than the cost of production thanks to the subsidies and what some say is a purposely devalued currency.

So, by calling Chinese steel “export competitive” Danyang was, essentially, saying “bring it” to all of the nations whose shores China exports its rebar, H-beams and coil products to. So, when six producers with major US operations —including Nucor Corp., ArcelorMittal USA, Steel Dynamics and U.S. Steel. — brought an anti-dumping action against China and four other nations this week over corrosion-resistant steel, they were saying, in international trade terms, “oh it’s already been brung, China!”

You Just Got Served

The US case, however, is the least of Chinese steel companies such as Baosteel‘s worries, as final rulings by the Commerce Department and US International Trade Commission aren’t expected until mid-2016. India has fast-tracked its beef with China’s dumpers and is already collecting duties. And they didn’t stop there. Malaysia and South Korea get their own duties when they try to bring that wack, cheap stainless steel into India.

Anti-dumping tariffs ranging between $180 and $316 per metric ton for industrial-grades of stainless steel have been imposed and are being collected at India’s borders as we speak. Not only are the duties already imposed, but N.C. Mathur, president of the Indian Stainless Steel Development Association (ISSDA) also said they were “long overdue.”

Oh, snap.

Right now, India is just collecting duties on hot-rolled coil products from the three countries but Mathur added that they might add cold-rolled tariffs, too, if the dumpers don’t step off. Okay, so he didn’t say “step off,” but the message was very clear as the tariffs were set for five years.

Keepin’ Electrical Steel Real

Prior to this week of anti-dumping actions, the European Union got in on the action by imposing duties of 28.7% from Chinese companies, including Baosteel and Wuhan Iron and Steel Corp over imports of grain-oriented electrical steel (GOES) and of 22.8% from South Korean producers such as POSCO. Even US producers such as AK Steel got hit with 22% tariffs. Once again proving that dumping steel in somebody else’s backyard ain’t nothin’ to mess around wit’.

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India’s BJP-led government, more precisely its finance ministry, recently announced that it would impose, for a period of five years, anti-dumping duties ranging between $180 and $316 per metric ton for some industrial-grades of stainless steel imported from China, Malaysia and South Korea. The idea, obviously, is to stop the tide of surging steel imports.

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Subsidized imports, or “dumping,” of steel into a country by producers from other nations can be a vexing issue. Steelmakers from the US, India and Europe have been facing mounting pressure from cheap imports.

US Anti-Dumping Accusations

Earlier this month, for example, MetalMiner reported that six steelmakers with major US operations had filed a trade complaint seeking punitive tariffs for alleged unfair pricing of imported steel from China, India, Italy, South Korea and Taiwan.

The move by the Indian government came after persistent efforts by steel producers to place tariffs on the foreign products for nearly two years. The cheap imports, claimed the Indian steel industry, were damaging its business prospects.

India consumes about one million mt of industrial steel stainless steel, of which, around 40% is imported, largely from China.

Indian Tariffs

The anti-dumping tax obviously was welcomed by domestic steelmakers. N.C. Mathur, president of the Indian Stainless Steel Development Association (ISSDA) was quoted in a news report as saying the move was long overdue. According to Mathur, the duty has been imposed on hot-rolled flat products stainless steel with all its variants originating from China at $309 per mt, $316 per mt from Malaysia and from Korea at $180 per mt. He added the move would give a respite to the domestic industry.

The ISSDA also complained to the government about of abuse of the India–Malaysia comprehensive economic cooperation agreement (CECA). Stainless cold-rolled flat products from Malaysia are being imported to India through a preferential tariff benefit, the association had claimed in its statement. ISSDA demanded that the Ministry of International Trade and Industry, Malaysia, investigate the cold-rolled imports.

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The author, Sohrab Darabshaw, contributes an Indian perspective on industrial metals markets to MetalMiner.

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The imposition of anti-dumping duties by the Indian government should encourage US authorities who have been asked to enforce a similar move. The suit filed by six US companies concerns corrosion-resistant steel, a type of coated steel used in automobile and construction industries. The US has been witnessing an unprecedented flood of imports in the last one year or so.

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As reported by MetalMiner last month, the US steel industry is suffering because the imports hit a record 34% of market share, according to the American Iron and Steel Institute (AISI).

The US slapped duties on imports of steel used in the energy industry from South Korea and five other countries last year but, evidently, those tariffs did not have the desired effect. The AISI in its press briefing last month, asked the US Government to first enforce existing trade laws which would be an immense help to the steel industry.

In India, steel imports had increased to 0.91 million metric tons this May, an increase of 58% as compared to the same month’s figure last year. As compared to April 2015, the import rate was up by about 20 mt, according to a report by the Ministry of Steel.

Many analysts said the Indian stainless steel industry started resembling a sick industry, as cheap imports were leading to a situation of under-utilization of installed capacities. The local industry hopes the anti-dumping duties will send out a clear signal to those sending in cheap imports, and lead to a resurgence in India’s steel sector.

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The author, Sohrab Darabshaw, contributes an Indian perspective on industrial metals markets to MetalMiner.

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A major aluminum producer challenged a US regulator’s authority to intervene in a foreign warehousing dispute and another nation placed tariffs on Chinese silicon this week.

Alcoa Challenges CFTC’s Authority

Alcoa Inc. on Monday challenged a federal commodities regulator’s authority to intervene in the contentious overhaul of the London Metal Exchange‘s warehouse policy that has caused an unprecedented drop in aluminum prices.

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In March, the Commodity Futures Trading Commission deferred a decision about the LME’s 2012 application to be registered as a “foreign board of trade,” telling the exchange it should do more to address concerns about long waiting queues.

Alcoa has questioned whether the agency even has the legal authority to intervene, and on Monday filed a request under the Freedom of Information Act (FOIA) to find out what had caused the CFTC to delay its decision on the LME.

“Our goal is to learn the extent to which the CFTC has engaged in substantive discussions with the London Metal Exchange,” Alcoa said in a statement. “The CFTC should examine any LME aluminum contract performance issues only through an open, inclusive and transparent process where all affected market participants have the opportunity to present their views,” it said.

The CFTC declined to comment.

Australia Puts Tariffs on Chinese Silicon

Australia has issued an anti-dumping notice on silicon metal exported from China after an investigation into dumping and subsidization.

Following the investigation the Australian Government Anti-Dumping Commission set dumping and subsidy margins for Hua’an Linan Silicon Industry Co. Ltd., and Guizhou Liping Linan Silicon Industry Co. Ltd. at 18.3% and 6.3% respectively. Both companies will be subject to an effective rate of combined interim countervailing duty and interim dumping duty of 12%, according to a statement by the MOC trade remedy and investigation bureau.

The commission announced dumping margin and subsidy margin for “uncooperative, and all other exporters” of 27% and 37.6% respectively, with an effective rate of combined interim countervailing duty and interim dumping duty of 58.3%.

Australia began its investigation in February last year after allegations of dumping and subsidization of silicon metal goods that originated from China with a total value of $12.78 million dollars, according to the MOC statement.

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Six steelmakers with major US operations filed a trade complaint Wednesday seeking punitive tariffs for alleged unfair pricing of imported steel from China, India, Italy, South Korea and Taiwan.

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The suit, which concerns corrosion-resistant steel used in automobile and construction industries, is the first salvo in the campaign this year by the beleaguered US steel industry to protect itself against a record flood of imports.

The steelmakers are U.S. Steel Corp. , Nucor Corp., Steel Dynamics Inc., ArcelorMittal USA, AK Steel Corp. and California Steel Industries. All are based in the US except multinational ArcelorMittal, the world’s biggest steelmaker, which is based in Luxembourg and London but owns big mills in Indiana and elsewhere in the country.

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ive thanks to all of the service men and women who served our nation and defended our freedom today, let us also remember the international trade pacts and enforcement bodies created to keep wars and conflicts from ever being fought again over such things as one nation illegally exporting millions of tons of its products into another nation. Which only happened at least nine times before.

Why Manufacturers Need to Ditch Purchase Price Variance

Here at the MetalMiner week-in-review, let’s give thanks that such wars are no longer fought in anything but the World Trade Organization and look back at some of the very, very cold trade wars looming and what can be done about them now.

China Now Admitting Dumping

The Chinese have previously taken the tack of apologizing for their domestic steel industry. Highly subsidized at the state and national level, Chinese steel companies have been accused of dumping in the US and EU. Previously, officials from Beijing have thrown their hands up and essentially said “we’re trying to get the situation under control.”

That all changed this week. Ministry of Commerce spokesman Shen Danyang said the rise in steel exports is due to higher global demand and is a result of Chinese steel products having strong “export competitiveness.”

Export Competitive US GOES

What a novel concept! Maybe if our government subsidized AK Steel and Allegheny Technologies at the state and national levels US grain-oriented electrical steel (GOES) could be as “export competitive!”

The EU is already mad at us for, yes, dumping GOES there. Seriously. The European Commission has just set tariffs on imports of GOES following a complaint lodged in June 2014 by the European steel producers association, Eurofer. There are only about 16 manufacturers of GOES in the world, so, apparently everyone manufacturing it is dumping GOES in the EU.

The World’s Dumbest Trade ‘War’

Okay, so trade agreements may not have made the steel industry harmonious and happy. Surely most metals are okay, right? Hasn’t the green energy movement made the production of, say, solar panels seamless? Surely you jest.

The spat between the US and China over solar panels has been called by Slate and others the dumbest trade war in the world. And it is. A German company, SolarWorld, has secured duties against Chinese manufacturers of inexpensive silicon solar panels. And bulk silicon. The fight is threatening adoption of solar in the US and driving up the price of other silicon products.

Thanks a lot, Germany.

While we’re thankful that our trade wars aren’t real wars, anymore, our trade agreements haven’t exactly delivered on the promise of an even international playing field, either. The MetalMiner week-in-review suggests manufacturers do everything they can to stay “export competitive.”

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