Britannia Radio

Since such dumping will not be tolerated we seem to be heading 
straight to a protectionist trade war.  That's exactly what the world 
does not need.

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TELEGRAPH 9.4.09
EU warns China over increasing steel exports
A simmering trade conflict between Europe and China is nearing the 
boil as state-supported Chinese steel companies ramp up capacity 
despite drastic cuts by the rest of the world.

By Ambrose Evans-Pritchard

ArcelorMittal, the world's biggest steelmaker, yesterday told its 
European workforce that production cuts of 50pc would continue 
indefinitely due to the "exceptional economic environment", raising 
fears that chunks of Europe's steel industry face closure.

"It is a catastrophe, particularly as management does not say when 
production will be resumed," Jaques Laplanche, secretary of Mittal's 
European Works Council, said.

A 166-page report by the European Parliament has accused China of 
systematic distortion of its steel market, resulting in "irrational 
capacity extension". This is promoted, it said, by "artificially 
depressed cost levels" and export rebates.

The European Commission, the EU's trade enforcement arm, said some 
Chinese measures to support the steel industry are permissible under 
World Trade Organisation rules but there has been an escalation into 
"borderline" subsidies.

"The EU is taking this very seriously and we're in discussions with 
the Chinese," Lutz Gullner, the commission's trade spokesman, said.
"While steel production is declining all over the world to reduce 
over-capacity, it is still going up in China. This puts pressure on 
world markets," he said. The EU steel industry employs 440,000 
workers. China's steel exports to the EU were 1.6m tonnes in 2005, 
5.6m in 2006, 11.5m in 2007 and almost certainly higher in 2008.

China cut output late last year as steel prices collapsed, but the EU 
authorities are worried that China is shifting to a strategy of long-
term support - effectively opting to offload extra capacity on the 
rest of the world rather than accepting a surge of unemployment at home.

Beijing says 20m workers have already lost their jobs since the 
crisis began. Sporadic riots have occurred in the Pearl River 
industrial hub.

Europe's steel lobby Eurofer said there had been a worldwide dash 
towards steel tariffs and subsidies since the first G20 summit in 
November pledged to avoid the sort of "beggar-thy-neighbour" 
protectionism that blighted the 1930s. Renewed vows of piety at the 
second G20 last week may prove no better.

Eurofer said India, Russia, Turkey, Egypt, Indonesia, and Vietnam had 
all imposed steel tariffs, while others have used tricks such as 
licensing requirements to shut out foreigners. Congress inserted a 
"Buy American" clause in its stimulus package.

ArcelorMittal said its latest troubles stemmed from the slump in the 
EU industrial production, down 16.3pc in January. The group relies on 
sales of flat steel to the car industry, which has suffered a 
catastrophic winter despite a pick-up in Germany due to bonuses for 
scrapping old cars. Sales fell 39pc in Spain and 30pc in Britain last 
month.