One answer to punitive West: Upgrade steel

Anti-dumping measures could prompt a rethink on production in China, according to experts, executives

All Chinese steel manufacturers will be forced to upgrade their products and expand sales channels if the European Union and the United States continue to use the surrogate country system in anti-dumping investigations, trade experts and company executives say.

Their comments came on Dec 12, after China notified the secretariat of the World Trade Organization that it had requested dispute consultations with the US and the EU regarding the special calculation methodology they use in anti-dumping proceedings.

Those countries already impose high tariffs on Chinese steel products, leading to a sharp fall in exports of China's seamless steel pipes and tubes.

The European Commission, the EU's executive body, conducted 15 trade remedy investigations against Chinese goods between 2014 and February this year, and eight of them involved steel products.

"We are paying close attention and are worried about the tendency of the EU and US toward steel protectionism," says Yao Lin, vice-president of Ansteel Group in Liaoning province.

Eager to restore its earning ability, Ansteel has taken measures to avoid financial losses in exports to those markets. It opened a new plant in April to make high-end steel products for automotive and home appliance manufacturing to offset the weak demand for low-end steel.

The facility, constructed in the southern metropolis of Guangzhou, is part of a joint venture with Guangzhou Automobile Group and German multinational ThyssenKrupp. The first phase cost 1.5 billion yuan ($217 million; 205 million euros; 171 million) and has an annual production capacity of 450,000 tons of steel plate.

"The EU has frequently resorted to restrictive measures since the start of 2016, as it blames Chinese steel products for its glutted industry," Yao says. "It is groundless, as Europe's steel woes stem from a weak economy. The EU should be rational and take an objective view, instead of adopting protectionist policies that impede competition.

"The Pearl River Delta is an important base for auto and home appliance manufacturing. Building a presence there allows us to bring our steel products to many of China's most important buyers."

Shen Danyang, spokesman for China's Ministry of Commerce, says: "As many domestic steel-makers are expanding their export channels in other emerging markets - especially those along the Belt and Road Initiative - it is also practical for them to focus more closely on new fast-growing regions, as well as localization strategies for domestic production bases."

The infrastructure, trade and service network proposed by the Chinese government in 2013 envisions a Silk Road Economic Belt and a 21st Century Maritime Silk Road, covering about 4.4 billion people in more than 60 countries and regions in Europe, Asia and Africa.

Shen says Chinese iron and steel smelters should cut risks by further diversifying their export destinations to places such as Africa, the Middle East, South America and member countries of the Association of Southeast Asian Nations.

Bai Ming, a researcher at the Chinese Academy of International Trade and Economic Cooperation, the think tank of the Ministry of Commerce, says: "A trade war would certainly harm all of us because it would change the method for determining a fair price. The recovery of the global economy is proving to be more complex than anticipated."

Liu Zhenjiang, secretary-general of the China Iron and Steel Industry Association, notes that many countries in Europe are having elections soon, and because companies in their steel and solar energy sectors have reported losses in recent years, politicians are trying to use excuses such as overcapacity to subsidize certain industries to affect China's lawful rights and foreign trade activities.

"If China takes retaliatory measures by imposing higher taxes on imports from the US and the EU, their manufacturers will also suffer more financial losses," Liu says.

"China is a large steel exporter and a big importer of special steel used in shipbuilding, weapons, automobiles and machine manufacturing. Yet import prices are three times the export price on average," says Xue Rongjiu, vice-director of the Beijing-based China Society for WTO Studies.

Xue says the country needs to improve the quality of its steel products and move up the value chain.

zhongnan@chinadaily.com.cn