Major steel producers fail to reach deal on overcapacity

China hits back at US criticism; tensions also erupt involving others like India, Japan, S. Korea

BRUSSELS/BEIJING • China and other major steel-producing countries failed to agree on measures to tackle a global steel crisis as they argued over the causes of overcapacity, prompting US criticism of Beijing's approach and an angry response from Chinese officials.

A meeting on Monday of ministers and trade officials from over 30 countries, hosted by Belgium and the Organisation for Economic Cooperation and Development (OECD), sought to tackle excess capacity, but concluded only that it had to be dealt with in a swift and structural way.

Washington pointed the finger at China over the failure of the talks. "Unless China starts to take timely and concrete actions to reduce its excess production and capacity in industries including steel... the fundamental structural problems in the industry will remain and affected governments... will have no alternatives other than trade action to avoid harm to their domestic industries and workers," US Secretary of Commerce Penny Pritzker and US Trade Representative Michael Froman said in a statement.

Asked what steps Beijing would take, Chinese Commerce Ministry spokesman Shen Danyang told reporters yesterday: "China has already done more than enough. What more do you want us to do?"

The OECD said global steelmaking capacity was 2.37 billion tonnes last year, but declining production meant that only 67.5 per cent of that was being used, down from 70.9 per cent in 2014. Britain in particular has felt the squeeze as its largest producer Tata Steel has announced plans to pull out of the country, threatening 15,000 jobs.

China, the world's top steel producer, has been ramping up steel exports in recent years, as it battles to steer its economy into services-led growth and away from manufacturing, while keeping employment levels high. Chinese steel exports jumped 30 per cent from a year ago to 9.98 million tonnes in March despite global anti-dumping moves.

But blaming China for the global steel woes is simply a lazy excuse for protectionism, and such finger-pointing will be counter-productive, China's official Xinhua news agency said on Monday.

At a news conference following Monday's meeting, deep divisions between China and other producers were clear. European Union Trade Commissioner Cecelia Malmstrom insisted governments should not grant subsidies that keep unviable plants running and should subject state-controlled firms to the same rules as the private sector.

Chinese assistant commerce minister Zhang Ji said China had cut 90 million tonnes of capacity and had plans to reduce it by a further 100-150 million tonnes.

Tensions have also erupted between other producers, with Japan leading criticism of Indian minimum prices for imported steel, and Japan and South Korea coming under fire for exporting steel products cheaper than they sell them at home. In a step by Beijing to reduce trade frictions with Washington, it has agreed to scrap some export subsidies on a range of products including steel, the United States said last week.

REUTERS

A version of this article appeared in the print edition of The Straits Times on April 20, 2016, with the headline 'Major steel producers fail to reach deal on overcapacity'. Print Edition | Subscribe