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21st Apr 2019

EU, US and China fail to agree on steel production

  • The US and Europe accuse China of flooding the global steel market (Photo: Renate Meijer)

Major steel-producing countries failed to agree measures to tackle global overcapacity during a meeting in Brussels on Monday (18 April).

China, the world’s biggest producer, and other major players agreed that the issue was urgent, but they continued to argue over whether Beijing was causing global overcapacity by subsidising domestic production.

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The OECD, the club of the world's most advanced economies, said just 67.5 percent of global steel was used in 2015, down from 70.9 percent in 2014.

A meeting hosted by Belgium and the OECD brought together ministers and trade officials from 34 countries.

The US and European countries accuse China of putting rivals out of business and threatening tens of thousands of jobs by subsidising the sector and flooding the market.

“This is not an academic exercise, it is real hurt to real people, to real economies,” deputy US trade representative Robert Holleyman said, adding that negotiators “must move beyond talking” and it was “time for action”.

EU trade commissioner Cecilia Malmstroem argued that “state involvement, not market needs, particularly in China, has created incentives” to overproduce, adding that “China produces more than half the world's steel”.

”China's steel companies have over recent years produced around 350 to 400 million metric tons of steel that the global market cannot absorb” she said.

But Beijing rejected that argument.

China’s assistant trade minister, Zhang Ji, insisted that his government does not provide subsidies to steel exports and argued that it could not afford to do so.

“It’s true domestically we have a problem of overcapacity, at the same time only 14 percent of total steel output is exported to international market,” he said, blaming the 2008-09 financial crisis for the reversal in fortunes.

Zhang said the government did not plan China’s steel production, it was a result of market forces.

Yet he added that Chinese output had already declined in recent years, and a further 100-150 million tonnes would be shaved off steel production over the next five years.

Angry steel manufacturers in Europe have urged the EU to mirror the US in punishing China with fresh tariffs.

The EU already has in place dozens of anti-dumping measures against China, but critics say they are not enough.

The steel industry accounts for 1.3 percent of the EU’s economic output, and directly employs about 330,000 people.

But the price of steel in Europe has dropped by 40 percent in recent years.

EU subsidies

EU industry commissioner Elzbieta Bienkowska meanwhile told Frankfurter Allgemeine Zeitung on Monday that the EU should consider allowing members to subsidise their steel industries.

"We have to discuss whether we can't be more flexible in our judgement of state aid," Bienkowska said.

European Commission president Jean-Claude Juncker said last week that the sector was a high-technology industry that needed investment and protection.

Bienkowska said steel-makers including ArcelorMittal, Tata Steel and Thyssenkrupp were at the limits of what they could achieve through the modernisation of production in Europe.

EU still divided on Chinese steel

Despite growing political pressure, trade ministers at a meeting Friday are not expected to reinforce EU trade defense against Chinese dumping.

MEPs: China is not a market economy

China should not be granted market economy status, say MEPs. The EU Commission says it is trying to find a solution to defend EU industry.

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