China has warned of the consequences of the EU imposing tariffs on its steel exports, saying the overcapacity in the metal industry is a global problem.

Speaking at a Beijing press conference, Gao Hucheng, minister of commerce, said the issue which has caused more than 5,000 job losses in Britain’s steel industry needed to be tackled on an international basis.

“Steel oversupply is a global problem and requires collaborative efforts by all countries,” he said, but also raised the prospect of the Beijing government hitting back if other countries attempt to stem China’s steel exports with trade tariffs.

“China safeguards the right to defend Chinese businesses in accordance with the rules of the World Trade Organisation,” Mr Gao said in comments first reported by the FT. “Consumers and some other businesses benefit from the lower prices, so let us make the point that this is purely market behaviour, not the behaviour of the Chinese government or the EU governments.”

The minister added the problem is “down to changes in global supply and demand. Overcapacity is a pronounced problem facing all countries”.

European steelmakers are in crisis, caused by a wave of cheaper imports from China flooding onto the market.

China is home to a massive steel industry – it produces more than half of the world’s 1.6bn tonnes of output – but a slowdown in economic growth at home means there is less domestic demand for the commodity. The industry is responding by dumping its products abroad.

Many of China’s steel mills are also state-backed, with the Beijing government subsidising the industry to prevent factory closures.

Gareth Stace, director of trade body UK Steel, has previously called the trade duties imposed by the EU on cheaper imports a “slap in the face” to British steel makers, saying they are not high enough to have any impact and have taken too long to be introduced.

Britain’s steel industry has been hardest hit by the global supply glut of steel, with UK producers facing some of the highest costs in the world and the pound’s strength making Britain an attractive market for imports.

This has resulted in mass redundancies at UK steel plants, with some of the biggest losses at Tata’s plants in Port Talbot and Scunthorpe, and SSI’s blast furnace in Redcar.

Mr Stace hit back at Mr Gao's statements, calling them “galling”.

“China seems to be talking about the importance of dialogue but at the last minute pulled out of OECD talks in Paris in December that were focused on problems in the steel industry,” he said. “It is galling.”

Mr Stace claimed he had witnessed Chinese officials being asked to back up claims they had acted to reduce capacity in their steel industry in talks with steel officials from other countries, but they were unable to provide evidence of having shut plants.

 

Source : telegraph.co.uk

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