EUROFER Comments on China Steel Industry Adjustment Policy

China has developed a steel sector-specific policy frame which is now up to review (the “Steel Industry Adjustment Policy 2015”). The comments which were submitted today to the Chinese government are looking into the specifics of the 2015 draft review. In this exercise, the joining of the regional steel industries covering the EU and the Americas reflects the global dimension of China’s micro-management and subsidization of its steel industry having adverse repercussions for the worldwide steel industry.

If the comments relate to an existing policy, why now this joint initiative?

The joint statement is driven by the unprecedented situation of Chinese excess steel capacities in a context of negative domestic steel demand growth causing Chinese steel exports flooding international markets, up to more than 90 million tonnes in 2014.

To put this surge in context, the EU steel market being the second biggest market after China has the size of around 150 million tonnes; overall China’s steel exports represent now 60% of total EU steel demand.

Today, one out of three tonnes of steel imported into the EU comes from China which compares with one out of five tonnes in 2012-13. In volume, Chinese steel imports into the EU in the first quarter this year are double the volume imported in 2013 for the same period having taken significant EU market share and depressing EU domestic steel prices.

What are the key concerns, and what would you expect from China in this regard?

First, China directs and controls its steel industry; the structure, size, output and location of its steel production; China’s steel policy dictates the steel product mix and its R&D strategies setting targets, and providing state support, for technology improvement ; the policy calls for the government “to support, encourage and promote steel industry’s commercial activity” signaling China’s government intention to continue providing subsidies and other assistance allowing loss-making, inefficient enterprises to continue operating.

Second, the updated Steel Adjustment Policy fails to effectively tackle the massive Chinese steel excess capacity (Chinese own estimation of around 425 million tonnes!) missing the mechanisms that structurally limits capacity expansion and reduce existing capacity.

To turn China’s steel industry into a sustainable industry reaching a balanced production and capacity, capacity closures must be implemented followed by a real commitment to remove government interference from the industry ensuring that commercial decisions and industry development are dictated by market forces.

About EUROFER

Represented by EUROFER, the European steel industry is the world leader in its sector, producing on average 170 million tonnes of steel per year with direct employment of 350 thousand highly skilled people. More than 500 steel production and processing sites in 24 EU member states provide direct and indirect employment for millions of European citizens.