G7 pledges to tackle steel glut; doubts over impact
27 May 2016
Leaders of the Group of Seven (G7) pledged on Friday to tackle a global glut in steel, though their statement did not single out China, which produces half of the world's steel and is blamed by many countries for flooding markets with cheap steel.
While not included in the text, China was brought up in the discussions among leaders of the G7 industrial powers, a senior Japanese government spokesman told reporters.
China insists that its steel exports do not violate trade rules nor are its policies designed to encourage mills to sell overseas. It also says it has sought to reduce tax rebates on exported steel.
But with steel mills from Australia to Britain under threat of closure, pressure is mounting on Beijing to cut capacity after output hit a record high earlier this year.
"We recognize the negative impact of global excess capacity across industrial sectors, especially steel, on our economies, trade and workers," said the statement.
"We are committed to moving quickly in taking steps to address this issue by enhancing market function, including through coordinated actions that identify and seek to eliminate ... subsidies and support," it added.
Leaders of the G7 - which comprises Britain, Canada, France, Germany, Italy, Japan and the United States - met this week near Nagoya, a Japanese car production and steel manufacturing center.
"The reference to steel overcapacity is significant as it underlines that the G7 nations are firmly united in dealing with the issue," a Japanese industry ministry official told Reuters.
But Yusuke Miura, senior economist at Mizuho Research Institute, saw little direct impact from the G7 call.
"China's main focus is domestic issues rather than foreign concerns, such as protecting jobs and preventing bankruptcies,"
China has cut 90 million tonnes of steel capacity and plans to cut another 100-150 million tonnes through 2020.
Yet China's crude steel output hit a record high of 70.65 million tonnes in March as rising prices and better margins prompted some mills to resume production.
"China knows it needs to slash capacity, but it will take time," Miura said, predicting trade actions and price competition worldwide to continue.
EU lawmakers rejected this month any loosening of trade defenses against China, whose eligibility for market economy status is being debated by the European Union.
Meanwhile, the United States slapped Chinese steelmakers with import duties of 522 percent on cold-rolled flat steel used for car body panels and construction.
The G7 should acknowledge that government subsidies and China's state-owned steel mills are the major contributors to the global excess capacity, Philip Bell, president of the U.S. Steel Manufacturers Association, said in an email.
Source : reuters.com