China has a problem of plenty. It is making far too many goods for its own consumption. Due to low demand and the crisis in the real estate sector, it is buried in overcapacity. From solar panels to electric vehicles, various Chinese goods head to overseas markets where they kill the local industry due to their ultra low prices made possible by Chinese state subsidies and various other incentives. As China exports its problem of overcapacity to other countries, it is facing a blowback. Europe an ..
India too is grappling with this Chinese problem in the steel sector. With its own market bereft of demand, China is dumping low-priced steel into India where demand is robust. A flood of cheap Chinese steel prevents Indian steelmakers from growing since they can't match the prices of Chinese steel which is highly subsidised by the Chinese government at different stages.
Reuters reported that the steel ministry has now asked the commerce and industry ministry to investigate cheaper steel imports from China, and Vietnam too which imports steel from China and manufactures steel products to export to India.
India, the world's second-biggest crude steel producer after China, turned net steel importer in the fiscal year through March and the trend continued with finished steel imports scaling a five-year high in April and May, according to provisional government data. Meanwhile, the government is set to extend the anti-subsidy duties already imposed on welded stainless steel pipes and tubes from China and Vietnam, ET has reported. The Directorate General of Trade Remedies (DGTR) has proposed the gove ..
China produces roughly half of the world's steel, consuming much of it domestically but exporting the rest. It has become the biggest producer of steel in the world on the back of its huge drive to build infrastructure and industry in the past two decades. But now when its public infrastructure spending has come to a halt due to local government debt and its property sector has gone bust, it has no way to consume the huge quantities of steel it produces. Also, after the pandemic when supply chai ..
Tang Zujun, vice-president of the China Iron and Steel Association, was reported by SCMP as saying at a recent meeting of steelmakers, “In the past, [the steel industry] was mainly supported by investments such as real estate, infrastructure construction, and factory equipment renovation. In the future, it will be driven by consumption and innovation-based strategic emerging industries and future industries. The era of large-scale construction in our country is over.”
Almost a decade ago, China tried to deal with massive overcapacity in steel and aluminum. It forced the industry to rationalize and closed down less-efficient producers.
Tang compared the status of China’s steel industry to a field that has been planted with too many seeds, leading to poor growth of the crop. “But now it’s difficult to decide which one to pull out,” Tang said, adding that everyone should be “mentally prepared” and avoid “falling off a cliff”.
China’s biggest wave of steel exports since a global glut in the mid-2010s is inflaming trade tensions across the world as the metal reaches a wider range of destinations. China has churned out about 1 billion tons of steel every year since 2019, but the rapid downturn in construction activity has left mills struggling. Many have switched from making construction products like reinforcement bars to hot-rolled coils that find readier buyers in other industries, as well as overseas.
The soaring exports are worsening trade frictions around the world. President Joe Biden is calling for tariffs of as much as 25% on certain Chinese steel products. While the US takes very little steel from Asia’s largest economy, it’s part of a broader move by Washington to push back against what it says is Chinese overcapacity across industries from metals to solar.
Last month, the US took steps Wednesday to prevent China from circumventing its tariffs on Chinese steel and aluminium by routing those imports through Mexico. The US will now impose a 25% tariff on Mexican steel that is melted or poured outside of North America before being turned into a finished product. Previously, that steel would have entered the country duty free.
Further south, steel exports to Brazil jumped 29% in the first quarter from a year earlier, and shipments to Colombia and Chile climbed 46% and 32%, respectively, according to Kallanish Commodities. All three countries have launched or are preparing trade measures to tackle the surge. Chilean steelmaker Cap SA reversed a decision to shutter its mills after the government imposed tariffs on some Chinese products. Chinese steel exports to Egypt shot up by 95% in the first quarter, while those to t ..
Indian steelmakers not competitive yet
Industry players say the anti-subsidy duties on welded stainless steel pipes and tubes, which are now up for review and likely to be extended, are required to protect them from the cheap imports from China and Vietnam. But an ET report cited experts who said these players had duty protection from 2019, yet they have not been able to improve their processes and products. They are still not globally competitive and have not been able to bolster the go ..
The main reasons why Indian producers can't match the Chinese are the economies of scale achieved by the Chinese producers over decades, high subsidies by the Chinese government, and a focus on robotics and R&D, ET has reported. Industry leaders argue for extension of duties on welded stainless steel pipes and tubes, saying the challenges faced by domestic manufacturers, a large number which are MSMEs, are multifaceted and need long-term strategic actions by the government.
Ajay Srivastav, Co-Founder of Delhi-based trade think tank Global Trade Research Initiative (GTRI), has told ET Online that policymakers should now actively encourage manufacturers to use this opportunity [extension of duties on Chinese steel] to improve their products. “We must ensure domestic manufacturers do not use high tariff walls to jack up their prices and increase profits. They should use the high import tariff wall to invest in R&D and scale up to be globally competitive."
Source Name : Economic Times