EU Steel Lobby Warns China of Complaint on Hot-Rolled Coil

1 October 2015

The European Union steel industry sounded a fresh alarm about low-priced imports of hot-rolled coil from China, signaling an imminent push for EU tariffs on Chinese producers.

Chinese shipments to the EU of hot-rolled coil, a bread-and-butter steel product used in everything from cars to construction, doubled to 660,000 metric tons last year and surged to more than 700,000 tons in the first half of 2015, according to the European Steel Association. European manufacturers include ArcelorMittal and ThyssenKrupp AG.

China now accounts for almost 5 percent of the EU market for such steel, which was worth about 10 billion euros ($11.2 billion) last year. The association, also known as Eurofer, is seeking to collect enough data to file a complaint to the European Commission alleging that Chinese exporters are selling hot-rolled coil in the EU below-cost, a practice known as dumping.

‘Very Soon’

“That can be very soon, but it can also be some more months,” Axel Eggert, Eurofer’s director general, said in an interview in Brussels on Tuesday. “It’s very clear that the Chinese are undercutting production prices.”

A Eurofer dumping complaint against China over hot-rolled coil would give the commission, the 28-nation EU’s trade authority, 45 days to decide whether to open an inquiry that could ultimately expand the list of Chinese steel products subject to European import levies. The EU, whose dumping probes last as long as 15 months, already imposes anti-dumping duties against China on goods ranging from stainless steel and electrical steel to wire rod and steel wires. The Brussels-based commission doesn’t comment on potential trade cases.

An EU trade case involving Chinese hot-rolled coil would also highlight European concerns about excess capacity in the steel market in China, which accounts for about half of global production and faces the slowest economic growth in a quarter century. Chinese steel overcapacity is about 340 million tons, double the EU’s total production, according to Eurofer.

“The Chinese are offering prices which are below their and our production costs, and that is drawing down the whole market,” Eggert said. “The proliferation of steel-trade cases is just the result of this unfair trade.”

EU imports of steel from China rose to 4.5 million tons last year from 1.2 million tons in 2009, giving Chinese producers such as Baoshan Iron & Steel Co., Wuhan Iron & Steel Co. and Shanxi Taigang Stainless Steel Co. an average of about 3 percent of the European market, according to Eurofer. It said Chinese steel shipments to the EU during the first half of this year reached 3.1 million tons.

Dumping Complaint

Eurofer is obliged under EU rules to wait for more trade data on EU imports of Chinese hot-rolled coil before being able to file a dumping complaint to the commission, according to Eggert.

“If the situation remains as it is, then it could be just a matter of time,” he said. “We are monitoring this product and once we have a solid case, then it’s clear that we would have to go to the commission.”

While the volume of Chinese shipments so far has affected individual EU nations such as Italy, the price signal resulting from dumping has been felt across the bloc, Eggert said. The Chinese are offering hot-rolled coil in Europe for about 320 euros a ton -- and as low as 300 euros a ton in Italy -- compared to a European industry sales price of 360 euros a ton, which is itself depressed as a result of Chinese offers, according to Eggert.

“It’s a completely new evolution -- a sudden surge in imports which we have never seen before,” Eggert said.

As the EU weighs whether to recognize China as a market economy, steel trade highlights the risks for European industry as a whole of such a step, he said.

Market-economy status for China would signal more European trust in China by ensuring the EU uses Chinese data for trade investigations affecting the country. The bloc currently uses other nations’ figures to calculate anti-dumping levies against China, allowing higher duty rates.

Under the agreement that led China to join the World Trade Organization in 2001, WTO members pledged to scrap in December 2016 a shortcut for applying a non-market economy standard in calculating anti-dumping duties on China. At the same time, the expiration doesn’t grant China blanket status as a market economy.

The ambiguity has left EU policymakers assessing the legal and political implications of the whole matter. It also has prompted more than 25 European industry associations, including Eurofer, to band together to argue against any change to the status quo.

Eggert said that the Chinese government is engaged in a campaign aimed at persuading EU governments to recognize China as a market economy and that yielding to the Chinese pressure would deprive the bloc of an important trade-policy tool.

“It would lead to duties at such low levels that they are meaningless,” he said. “They are embracing us and then the embrace will become ever stronger and they will strangle us.”