Steel dumping from China and its global impact
Since 2008, steel production in China has grown at an average of 7.1% while production in the rest of the world registered a negative annual growth of 0.7%. With China’s economic slowdown, the construction sector took a hit and as a result the domestic use of steel came down. With supply outstripping the demand, China began to offload its steel in the global market.
China accounts for 30.8% of the total exports of the ten largest steel-exporting economies. China’s exports to Association of Southeast Asian Nations (ASEAN) have gradually increased, with some diversion in China’s trade with Korea and Chinese Taipei shifting towards ASEAN. The North American Free Trade Agreement (NAFTA) accounts for a lower share of Chinese exports as of 2015, compared to 2004.The weak domestic demand for steel in China has provided a sharp boost to steel exports, which has increased 51%to 92.9 mmt in 2014 and 21% year-over-year to 111.6 mmt in 2015.
The increasing steel exports from China have taken a toll on the global steel industry. Chinese steel imports are priced at an average of 25% below local production costs. This has affected price realizations for the local steel industries in different countries and has made operations of domestic manufacturers unprofitable. ArcelorMittal shut down two of its steel mills in South Africa and brought the operations of its largest unit under scrutiny in September 2015. Several countries have already taken steps to curb the Chinese steel imports.
In November 2015, the U.S. Department of Commerce announced duties of 236% on imports of corrosion-resistant steel from five Chinese companies. According to the South East Asia Iron & Steel Institute, more than 20 cases have been lodged against Chinese cargoes, with about seven from Southeast Asia.
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