Chinese exported 101.7 million metric tons, or 112 million short tons, of steel in the first 11 months of 2015, according to customs data reported by Bloomberg. Exports increased by 22 percent year over year, almost as much as the total annual capacity of U.S. steel mills of 120 million tons. As China’s economic slowdown has weakened domestic steel demand, producers have turned to exports to make up shortfalls in profit.
The preliminary October steel import data from AISI and the U.S. Census Bureau shows finished steel imports from China to the U.S. at 68 thousand net tons, down 52.8 percent from the previous month’s total of 144 thousand tons and 19.8 percent less year-to-date compared 2014. The three month rolling average for Chinese steel imports was 123 thousand tons, down 52.6 percent from the average in the three months prior.
The U.S. may be getting less of China’s still significant export share, but the wave of trade cases worldwide indicate other countries are struggling under the burden of increased exports and low pricing.
China’s annual crude steel capacity is estimated at 1.25 billion tonnes and according to latest data from the World Steel Association crude steel production in China was 675.1 million tons in the first 10 months of 2015, a reduction of 2.2 percent year-over-year. That total far exceeds the 141.6 million tonnes for the whole European Union for the same period or all of North America at 94.5 million tonnes. Apparent steel consumption in China fell 5.7 percent to 590.47 million tonnes in the first ten months of this year.
Koji Kakigi, president and CEO of Japanese steelmaker JFE Steel expects that excess steel capacity is not likely to disappear soon and that China will continue to export steel at low prices.
In an interview in the Nikkei Asian Review, Kakigi said, “China’s steel companies are expected to lose a combined 1 trillion yen ($8.05 billion) this year. This situation will not be sustainable for long, despite government subsidies. Abnormally low prices will be corrected. But if China is to deal with the issue of excess plants, it will have to create jobs for surplus workers in the steel industry. It will take time for China to resolve the issue.”
According to the vice president of Baosteel, China’s capacity utilization rate is at 69.3 percent, down from 70.69 percent in 2014. China hopes to raise the utilization rate by cutting up 80 million tonnes of excess capacity in the next three years. Analysts have speculated that it will take even longer than that before the Chinese steel sector can restructure, more like 5 to 20 years.
That isn’t soon enough for nations that have seen market share dwindle along with profits.
U.S Rep. Rick Nolan (D-Crosby) of Minnesota recently introduced bill, HR 40130, that would ban all imports of steel and steel products into the U.S. for five years.
“We must confront and stop the illegal dumping of millions of tons of low-grade, foreign government-subsidized steel that has sent the Iron Range taconite mining industry – and America’s steel industry – into the steepest decline in decades,” Nolan stated.
“We are asking the president for action the equivalent of what President Bush did in 2002 when our mining and steel industries faced similar dire crises,” Nolan said in a statement. “Bush used his executive authority to impose dramatic tariffs that had the effect of a moratorium. President Reagan acted in similar fashion in the 1980s, and in both cases our mining and steel industries quickly rebounded. If those dedicated ‘free traders’ could see the light and stand up for American jobs and American workers, there’s no reason President Obama can’t do the same today.’’
Nolan, and other House members, are also working to defeat the proposed Trans-Pacific Trade Partnership agreement that they say will allow “partner” nations to flood the U.S. with even more foreign steel.
“The fact is, the Department of Commerce is currently administering 157 anti-dumping or countervailing duty orders against foreign steel and they haven’t made a dent in steel dumping – because every time we enter into a trade agreement, we’re stuck with enforcement provisions that aren’t worth the paper they’re written on. Our trade enforcement system is broken; it’s riddled with loopholes; it takes too long; and as we’ve seen on the Iron Range, it allows horrific economic damage to be done before what little enforcement powers we have can even begin,” Nolan added.
The United Steel Workers President Leo Gerard agrees with the House members calling TPP a “prescription for disaster.”
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