Global Steel Protests seen Stemming Record Trade from China

14 October 2015

The flood of cheap steel exports from China that’s hurt prices and damaged mills’ profits around the world will probably peak this year as producers step up complaints, according to the South East Asia Iron & Steel Institute as figures Tuesday showed record shipments last month.

More than 20 trade cases have been lodged against China’s cargoes, with about seven from Southeast Asia, Chairman Roberto Cola said in an interview. Efforts within China to stem local steel output to protect the environment may also help curb overseas sales, said Cola, who’s spent more than three decades in the industry.

Mills in the world’s largest producer have shipped unprecedented volumes this year as demand slowed at home. While the exports have acted as a safety valve for Chinese mills, enabling them to sustain production, they’ve spurred a surge in trade tensions from Asia to the U.S. amid complaints the exports are unfair. Mills in Southeast Asia are now running at less than 50 percent of capacity, according to Cola.
‘A Lot of Protest’

“There’s around 300 million tons of excess capacity in China, that’s the problem, so they’re forced to export,” Cola said by phone from Manila on Monday. There’s “a lot of protest from a lot of other countries.”

Cargoes from China jumped 16 percent to 11.25 million metric tons in September from August, the customs data showed. Imports by Southeast Asia -- which groups economies including Indonesia, Thailand, the Philippines and Singapore -- will probably increase to about 33 million or 34 million tons this year from 23 million in 2014, according to Cola.

The group that Cola chairs was founded 44 years ago and represents mills from Southeast Asia. With a secretariat based in Shah Alam, Malaysia, its role is to promote the iron and steel industry across the region, liaising with producers in Australia, Japan, South Korea and Taiwan.
Depressed Prices

China’s exports are subsidized with state rebates, which is why global steel prices are depressed, Cola said. Complaints are filed by companies or industry associations to their own governments, which can then impose penalties after an investigation, he said. Exporters affected by the additional duties can seek recourse through the World Trade Organization.

Cola’s prediction that China’s steel shipments may level off echoes a forecast from JPMorgan Chase & Co., which said in an Oct. 4 report the flow will probably peak in 2015 amid wave of protectionism. Net exports from China will plateau at about 90 million tons a year, with gross shipments seen at 105 million tons, JPMorgan said.

China Iron & Steel Association vice chairman Wang Liqun told reporters last month the country may try to rein in exports as it considers other countries’ positions, possibly by adjusting taxes. Still, shipments will top 100 million tons this year as overseas sales remain strong, Wang said.

“It will peak this year,” said Cola, referring to China’s exports. While the shipments from China are helping to lower construction costs in Southeast Asia, they are also harming local producers, he said.