Two of China’s top-five steelmakers have attacked a report from the US steel industry complaining about $52bn of government subsidies allegedly handed to the Chinese steel business.
They say the report suffered from methodological flaws and contained figures that were “not true”.
Zhang Xiaogang, president of Anshan Iron & Steel, said the US report, unveiled two months ago, was “not reasonable” and suffered from “flaws” in the way it was compiled. Anshan is China’s third-biggest steel producer.
Hu Wangming, vice-president of Wuhan Iron & Steel, the country’s fifth-biggest producer, said: “The people who produced this report used the wrong statistics and have not fully understood the Chinese steel industry.”
The US report was produced by the American Iron and Steel Institute, the main trade body representing US steelmakers.
It was supported by several leading US steel companies, including Nucor.
In comments that may exacerbate the tensions between the two sets of producers, Dan Dimicco, chief executive of Nucor, called the complaints from the Chinese steelmakers “hog-wash”.
“The report has had a lot of attention around the world and was firmly based on what has been happening in China,” Mr Dimicco said.
“Rather than the numbers in it being too high, they were probably too low; the $52bn estimate was conservative.”
The US study said China’s steel industry – by far the biggest in the world – has benefited over the past 10 years from the “pervasive influence” of financial transfers from central and local government bodies, some of which are alleged to break World Trade Organisation rules.
Much of the subsidy stems from the fact that 91 per cent of the production of the top 20 steelmakers in China was from government-owned entities, the study said.
Mr Zhang’s comments came at the Berlin annual conference of the International Iron and Steel Institute. He said that, since the 1990s, most of China’s steel companies, even if they remained owned either by Beijing or regional governments, operated according to the rules of conventional businesses.
“We think the report is unreasonable and the figures in it are not true,” said Mr Zhang, who is also chairman of the China Iron and Steel Association, the trade body for China’s steel producers.
Mr Hu said the report had generated the figure of $52bn for the country’s alleged total subsidy to the industry by adding up sums of money that had been granted to companies for purposes unrelated to steelmaking, such as running local schools.
It was incorrect to think that Chinese steel companies had been given special low-cost loans by government bodies, he said.
“Steel companies in China do not get preferential treatment,” he added.
Steelmakers in several countries allege that one reason China’s steel industry has grown so big is that its costs have been helped over the years by special loans and favourable tax treatment by governments.
Critics allege that this special treatment has enabled Chinese steelmakers to ramp up exports at artificially low prices.
Mr Zhang said he wanted to challenge the idea that Chinese steelmakers were concerned purely with exporting cheap commodity grades of steel.
“We have spent a lot of effort building up relationships with foreign businesses such as General Motors, General Electric, BMW and Hyundai, supplying these companies with high grades of steel both in China and outside,” he said.
Chinese steel exports are on a downward trend, says Zhang Xiaogang, president of Anshan Iron & Steel.
This year, net exports of steel from China (exports minus imports) are thought likely to be 50m-60m tonnes compared with 35m tonnes last year. Much of this steel has been produced with the help of government subsidies, steelmakers in the US allege.
However, Mr Zhang said action by Beijing to rein back exports was beginning to take effect.
“In the past four months of 2007, the level of exports will fall,” he said.
Beijing has come under pressure from other countries to reduce steel exports and is trying to achieve this through measures such as removal of tax incentives for steel exporters...
Here is more commentary by the head of China's steel trade group from China Daily:
Western anger over surging Chinese steel imports is "unreasonable" and runs against the concept of globalization, Zhang Xiaogang, chairman of China Iron and Steel Association said on Sunday.
Zhang, also President of Anshan Iron and Steel Group Corporation, one of
's biggest steel producers, said that some western countries have been using "double standards" when it comes to trade and competition in the steel industry. China
Rising steel production in
has been fueled by rapid economic development as well as a global economic recovery in recent years, said Zhang, who is attending an annual meeting of the International Iron and Steel Institute in China . Berlin
The world's steel production rose by 8.8 percent last year and China's steel production, though still ranking the highest in the world, has been growing slower than countries such as India, said Zhang.
's steel production growth is expected to fall below 10 percent next year, which is largely attributed to the recent national policies to curb the overheating of the steel industry. China
[If you will recall,these were mostly in the form of reduced export tax rebates, supposedly to discourage pollution-intensive production.]
Western accusations that
is hogging the world's resources are "unacceptable," Zhang said. China
It is estimated Chinese steel exports to the European Union will amount to 10 million tons this year, double that of last year and some EU officials have been complaining that the imports are "threatening" the health of the European steel industry.
The rise in Chinese steel exports to
Europeis mainly due to economic growth in the EU, said Zhang.
Speaking of which, some Western firms are lining up on the side of Chinese producers who supply them with metal according to Reuters:
European Union steel users sought on Tuesday to counter growing calls by many EU steelmakers for trade barriers against imports from China, saying such measures could drive the industry out of the bloc.
European steel executives meeting in Berlin on Monday said they might ask as soon as this month for EU anti-dumping duties against China's fast-growing imports which they say benefit from massive state subsidies.
But European engineering association Orgalime, representing national groups whose members include big steel consumers such as Siemens , ABB, and Alcatel-Lucent plus many smaller firms, said China is now vital to the sector.
Orgalime Secretary General Adrian Harris said it did not make sense to hurt the EU's metalworking and mechanical engineering sector which employs over 7 million Europeans to protect steelmakers who provide only 250,000 jobs in Europe.
"For us matters are simple -- our companies must have access to the supplies of steel they need at competitive market conditions," Harris said in a statement.
"If our traditional suppliers in Europe can provide these, all the better. If not, we need to find alternatives for our companies to be able to continue manufacturing here."
Orgalime said the EU's engineering industry uses about two thirds of steel produced in Europe but was having to turn to imports due to a lack of supply from local steelmakers which were enjoying record profits thanks to high prices.
EU trade chief Peter Mandelson has warned China that unless if takes measures of its own to slow exports of steel and other politically sensitive products, he might be unable to resist calls from European industry for tough action.
Lastly, bellyaching Western producers have taken another tack to the battle over Chinese steel. In a nutshell, their argument is "Chinese steel is cheap because their production methods are highly polluting." The battle rages on. Will the West apply "protectionist" measures against Chinese steel? Stay tuned--I wouldn't bet against it. From Bloomberg:
China has become the biggest polluter among steelmaking nations as its output of the metal surges, the industry funded International Iron and Steel Institute said.
China now produces about 51 percent of all carbon emissions from steelmakers worldwide, according to a statement released today in Berlin by the institute during its annual meeting. The industry group is funded by the world's biggest steel producers.
``There are inefficient sites in China,'' said Corus Group Plc Chief Executive Officer Philippe Varin, who is heading the institute's initiative to start gathering pollution data from steelmakers. ``The newly industrialized countries must make sure they use the best technologies available,'' he said during a presentation at the meeting.
The steel industry is the world's biggest polluter after the chemical and cement industries, and it has come under pressure from governments and environmental groups to reduce emissions of greenhouse gases in a bid to slow global warming.
Governments that agreed to reduce emissions under the Kyoto Protocol risk driving steelmakers to other parts of the world, according to the institute, known as IISI. Only 39 percent of the world's steel output is in countries that signed the protocol, the group said.
``This is likely to increase, rather than reduce, global greenhouse gas concentration,'' the IISI said today in a booklet.
Steel output in China may reach 500 million metric tons for the first time this year, according to steelmakers Baosteel Group Corp. and Shagang Jiangsu Group Co. Global steel production reached 1.26 billion metric tons in 2006, according to the institute.
China emits more greenhouse gases than other nations because it uses less scrap to make steel, so it burns more coal in the process, IISI said. About 2 tons of carbon dioxide are emitted for every ton of steel produced in a blast furnace.
World leaders, including Chinese President Hu Jintao, aim to cut energy intensity -- a measure of an economy's energy efficiency -- by 25 percent by 2030 and plant 20 million hectares (49.4 million acres) of trees to combat global warming.
China will encourage companies to take additional steps to save energy and cut pollution, according to a report by China's National Development and Reform Commission.
A European Union initiative to apply a surcharge on carbon emissions emitted by industrial companies after 2012 may add as much as 70 euros ($98.71) a ton to the price of steel.
``This could be a threat to European producers,'' Varin said. ``It's only a matter of time'' before the U.S. follows Europe's lead, he said in an interview.
A proposal by U.S. House Representative John Dingell to apply a $50 surcharge on steel production ``would have severe damage on the steel industry,'' said Chuck Bradford, a New York- based metals analyst for Soleil Securities Corp.