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11/22/2024 06:20:57 am

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Supply Surplus of Chinese Steel Met with Anti-Dumping Probes

Chinese steel

(Photo : REUTERS) China exported 8.5 million metric tons of steel in April, and the European Commission has slapped anti-dumping duties on the importation of electrical grade steel products.

As China's steel exports rose to 32.7 percent year-on-year from January to April 2015, Europe and several other countries like Canada, Peru, and Brazil have decided to launch investigations into claims that both China and Russia have been dumping steel products to get rid of surplus inventory.

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China exported 8.5 million metric tons of steel in April, and the European Commission has slapped anti-dumping duties on the importation of electrical grade steel products. Duties of 28.7 percent were imposed on China's Baosteel and Wuhan Iron and Steel Corp for their grain-oriented electrical steel, used mainly by power producers and distributors. Turkey has also hiked its tax on steel imports from China, while Mexican businesses are calling for a government anti-dumping tariff.

"There is significant overcapacity in Europe as in many other places," said John Kovacs, an analyst at consultancy CRU. "The steel industry has traditionally been the first to be protected by governments."

On the other hand, China has defended its steel exports, saying that the exports have risen sharply due to "higher demand in the global market," and that "China steel products have strong export competitiveness."

Ministry of Commerce spokesman Shen Danyang said, "Under such circumstances, I feel that it's quite normal for Chinese steel exports to these countries to be rising, and it's quite justifiable."

Still, the facts do not lie: Weakening global demand for steel has led to lower margins and significant excess in Europe, with an estimated 80 percent of capacity used last year. Only about five percent of Europe's capacity has been cut since the financial crisis, hence contributing to overall global overcapacity. European companies are reluctant to take on the costs of closing plants and losing market share, while governments are also reluctant to let steelmakers cut production and eliminate jobs in their barely expanding economies.

China is also targeting a reduction of 80 million tons of overcapacity by the end of 2017, since construction and infrastructure growth are slowing down in the country, which account for about two-thirds of China's steel demand.

"China is caught with all this capacity, there's always an incentive to keep on producing and offload the material rather than cut production and lose out to a competitor," said Jeremy Platt, analyst at steel consultancy MEPS. "Because there's so much excess capacity in China, it's going to take a long time to get to a normal level."

With the plummeting prices of steel in the global market also comes a drop in the price of nickel-an essential component in the steelmaking. Despite the current low demand in nickel, analysts are expecting the metal to recover soon due to rising demand and decreasing supply. One of the potential nickel sources in the future is Amur Minerals Corporation (AIM: AMC), which has finally secured its mining permit from the Russian Government in order to start pre-production for its flagship Kun-Manie nickel copper sulphide project. It is expected to produce approximately 831,000 tons of nickel, making one of the largest nickel deposits in the world.

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