Western groups complain to China about steel industry glut

22 April 2015

European and American steel industry bodies complained to China on Tuesday about what they see as inadequate measures to rein in the country's bloated steel industry and curb record exports.

China, the world's top steel producer, boosted exports of the alloy some 50 percent last year to an all-time high of 94 million tonnes, though sales to overseas markets have started to edge back this year.

This was after Chinese authorities removed some tax rebates for certain steels, and as anti-dumping measures around the world have intensified.

Beijing has also introduced measures to cut excess steel capacity including tougher environmental enforcement and offering stricken mills incentives to close.

But steel groups like Eurofer and the American Iron and Steel Institute said China's 'Steel Adjustment Policy' still does not address the root causes of its high steel exports.

"The policy does not meaningfully address China’s steel overcapacity. It continues a strong role for the state rather than true market forces," Eurofer, AISI and another six steel bodies said in formal comments filed with Beijing.

"The only way to make meaningful reductions in excess steel capacity is to remove government support and subsidies from the industry and allow basic market forces to determine industry outcomes," they added.

China's excess steel capacity is estimated at about 300 million tonnes.

Earlier, the World Steel Association said output in China fell 1.2 percent in March. But more data for the first 10 days of April from the China Iron & Steel Association (CISA) showed average daily output from the country's large steelmakers rose 5.1 percent.

"While we expect China's steel production to contract by between 1 and 2 percent this year, there is little to suggest that a major rationalization of the sector is under way yet," said Caroline Baine, senior commodities economist at Capital Economics.

Steel prices are languishing near six-year lows due to structural oversupply and falling demand for the alloy as top consumer China's economic growth slows, entering a less industry-intensive phase of development.