China market economy status will kill off EU steel

20 January 2016

Granting China market economy status this year would threaten nearly all the 330,000 jobs in Europe's steel sector despite any safeguards the EU might impose, the head of steel industry body Eurofer said.

The warning came a day after Europe's second largest steelmaker Tata Steel announced another 1,050 job cuts in Britain. Its chief executive warned the entire EU steel sector is at risk without fast action against unfairly traded imports.

But EU trade policy looks to be heading in the opposite direction.

Although fierce debate is raging, all signs point to the EU accepting China as a market economy after December 2016. Beijing says this is its right after 15 years as a member of the World Trade Organisation.

The status would make it harder for Europe to impose anti-dumping duties on cheap Chinese goods.

"We do not see any way to maintain a similar level of trade defence measures if China is granted market economy status. Most of the EU steel industry may disappear," Axel Eggert, director general of EU steel industry body Eurofer, told Reuters.

Europe has lost some 85,000 steel jobs since 2008, over 20 percent of the sector's workforce, as steel prices crashed to decade lows due to overcapacity, shrinking demand and a flood of cheap imports, mostly from China. ST-CRUEU-IDX

The EU also has some of the world's highest energy costs and green taxes.

Brussels has promised to consult industry before a final decision on China's status, and will also seek safeguards like maintaining existing duties until their natural expiry and raising duties imposed for illegal subsidies.

China makes half the world's 1.6 billion tonnes of steel and has an overcapacity of about 400 million tonnes - more than twice the EU's output. Its exports to the EU have doubled over the past 18 months.

Free trade advocates say Europeans gain overall from cheaper Chinese imports, though a study by 25 European manufacturing federations estimates up to 3.5 million EU jobs could be lost if the status is granted.

Eurofer says even profitable mills making high tech steels that China doesn't produce would struggle if China gets market economy status because the tonnages involved in this market do not justify running an entire blast furnace.

High tech steelmakers like Voestalpine and Thyssenkrupp cannot buy Chinese steel and process it into speciality products because of quality and specification issues.

"Europe cannot just produce high tech steel, it's not economical," said Eggert.

China has also struggled with over-capacity. Its major steelmakers lost 53.1 billion yuan ($8.07 billion) from January to November and 2015 steel output dropped 2.3 percent, the first yearly fall since 1981.