G20 States Look to Balance the Steel Playing Field

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With steel overcapacity touching a historic high at about 737 million tons (MT), and China adding to new capacity, this remains a huge industry concern.

Not only is the demand-supply market askew, jobs are being lost, especially in the United States, which, by one reckoning, has seen about 35% of steelmaking jobs vanish in the last two decades or so.

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So, when representatives of G20 member states met at the end of November for the Global Forum on Steel Excess Capacity in Berlin and announced they had come to a basic understanding on the need for restructuring of the sector and dismantling market-distorting subsidies to ensure a level-playing field, many welcomed the move.

In the meeting, China and the U.S. may have locked horns — but China’s neighbor, India, on the other hand, seemed more content regarding the developments coming out of the meeting.

Beijing, of course, insisted, as it has before, that where it was concerned, much had been done on its part to combat the overcapacity problem. But the U.S. representative said his country would continue to protect its borders from unfairly traded steel.

At the end of the day, the Forum declared it would do its best to phase out subsidies and cut over-capacity. According to the agreed package, Global Forum members must: ensure market-based outcomes in the steel industry, refrain from market-distorting subsidies and other government support measures that contribute to overcapacity; provide a level playing field between state-owned and private companies; and enact effective adjustment polices.

While the U.S. and the European Union welcomed the move, others, like China and Korea, may have been left fuming behind closed doors because of their role in the dumping of cheap steel in other markets.

According to some reports, Indian officials who were part of the meeting were of the opinion that the deal was more a statement of intent and fell short on actual deliverables.

Indian Steel Minister Birender Singh, who presented the Indian side of the story, said his country had always supported fair trade in steel.

He said India did not provide any financial support for setting up new steel capacities and is committed to fair global trade. According to the minister, the central concern expressed by the leaders was to tackle global problem of excess steel capacity and, therefore, to remove all market-distorting subsidies and other types of support which lead to excess capacity.

On the basis of certain guiding principles, the Forum had made “a very few” key recommendations, he said. While most of the key recommendations in the draft report generally have been agreed by all members, some members have expressed caution about a few of the recommendations, an official statement quoting Singh said.

An area of concern, he said, for India was the basis of prescribing key recommendations. While India was of the view that policy recommendations cover all market-distorting subsidies and other types of support provided by government or government-related entities, there should be acknowledgement of existing World Trade Organization (WTO) agreements, too.

The Indian Minister’s rider is understandable.

As is being reported by Metal Miner since 2013 and even before, faced with an inundation of cheap steel, India has been stipulating various anti-dumping duties to safeguard its local mills (even raising import duties). One outcome of this was it was getting into regular spats with its WTO partners.

The problem of steel dumping has even led to a mini-crisis in the Indian steel industry, with many companies, such as Essar Steel and Monnet Ispat defaulting on their loans, and creating bad debt for banks and other financial institutions.

The government swung into action and tried to help out these distressed steel firms.

Along with the U.S. and Brazil, India is said by the WTO to be one of the world’s leading initiators of anti-dumping investigations. Earlier this year, India added to the range of minimum import prices it sets, and its steel industry is pushing for MIPs on 173 steel products to be extended beyond August (when they were due to expire).

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Steel analysts here are now hopeful that with the contentious topic of steel dumping being taken up by the global forum, the market would, in the long run, become an even playing field — though they are still not sure if China will ultimately convert its words into action for the overall good of this sector.

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