Earlier this year we wrote an article about how we suspected the export tax rebate reductions and quotas the Chinese government introduced on January 1 would have the affect of reducing Chinese domestic raw material costs making their steel industry more competitive for value added steel products. Well guess what… US trade officials have woken up to the fact and apparently have plans to bring a case under the World Trade Organization WTO for anti-dumping of steel products – made possible by artificially suppressing raw material costs!
To quote the FT article The US is expected to argue that Chinese export quotas and taxes on raw materials such as metallurgical coke, molybdenum, silicon carbide and fluorspar used in steel production artificially deflate domestic prices and inflate global prices, putting US producers at a disadvantage in violation of WTO rules.
China’s steel production has risen dramatically in 2006/7 outstripping domestic demand, but at the same time as China made changes to the rebates on raw materials they also penalized exports of basic steel products which encouraged Chinese steel producers to move up the value chain and promote higher value add products traditionally more in the realm of western producers. Although this will be welcome news to US steel producers, it may not be so good for consumers who have suffered disproportionately this year from the lack of import competition and the domestic producers inclination to take advantage of export markets to the detriment of supplying the domestic market. Just when consumers saw a strengthening US dollar as a chance for more imports to resume, Chinese suppliers will be thinking twice about offering to the US.
Apparently steel raw materials aren’t the only ones in the line of fire. Zinc, bauxite and antimony have also been considered. The US government may have been encouraged by the recent WTO ruling against China on car parts which found in favor of US, Europe and Canada allegations of discriminatory behavior in setting import tariffs. Meanwhile the European Union has three anti-dumping cases running against China for stainless steels. All in all not a happy time for the Chinese steel industry, or for US consumers.