European dispute

Steel Woes Spark Fears of China Trade War

steel_
Europe’s steel firms worry that the sun could be setting on their industry.
  • Why it matters

    Why it matters

    Thousands of steelmaking jobs in Europe are at risk from cheap Chinese imports — but the punitive tariffs being called for could trigger a trade conflict that could do wider economic damage.

  • Facts

    Facts

    • Seven E.U. governments have called on the European Commission to take tougher action to curb imports of cheap Chinese steel.
    • The E.U. is the second largest producer of steel in the world after China, contributing 11 percent of global output.
    • Several German politicians warned Monday of the risk of triggering a new trade dispute between China and Europe.
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    Audio

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Leading German politicians warned of a new trade dispute with China after seven countries, including France, Britain and Germany, urged the European Union to take tougher action to protect the bloc’s steel industry from cheap Chinese imports.

“A trade war hurts all sides more than it helps,” Joachim Pfeiffer, economic policy spokesman for Chancellor Angela Merkel’s conservatives, told Handelsblatt. The 2013 row over Chinese solar panel imports to the bloc did a lot of damage to the European solar industry, he said.

Dieter Janecek, economic policy spokesman for the opposition Greens, said: “Punitive tariffs can only be the last resort.”

Ministers from France, Britain, Germany, Italy, Poland, Belgium and Luxembourg sent a joint letter to the European Commission, the E.U.’s executive arm, on Friday. It said the bloc’s steel industry was suffering from “chronic use of unfair trade practices.”

“The European Union cannot remain passive when rising job losses and steelwork closures show that there is a significant and impending risk of collapse in the European steel sector,” the ministers wrote in the letter seen by Handelsblatt.

“The European Union cannot remain passive when rising job losses and steelwork closures show that there is a significant and impending risk of collapse.”

Letter from European Ministers

The European Union is the second largest producer of steel in the world after China. It makes over 177 million tons a year, accounting for 11 percent of global output, according to E.U. data.

Chinese steelmakers dominate the world market. Six of the world’s 10 biggest steel makers are based in the country. They have massively increased their capacity in recent years, partly to satisfy domestic demand. But that demand is now declining due to weakening Chinese economic growth, and as a result, surplus capacity is flooding the world market.

European steel makers have long been accusing Chinese firms of dumping.

The ministers, including German Economics Minister Sigmar Gabriel, appealed to the Commission to “use all available means and to take strong measures to overcome this new challenge.”

The Commission must “quickly make comprehensive use of the E.U. trade policy instruments to counter unfair trade,” the letter said. It also called for government assistance for steelmakers, for example through support for innovations.

The ministers accused the Commission of having acted too hesitantly in the past. The state of the steel industry will be on the agenda of economic talks between French and German ministers in Paris today.

Anti-dumping proceedings against China relating to a number of steel products are underway but should be quickly completed and implemented, the joint letter said. The Commission shouldn’t “wait until the damage to our industry caused by unfair practices is irreversible.”

Europe has lost 85,000 steel jobs since 2008, or more than 20 percent of the workforce, according to European Steel Association Eurofer.

In Britain alone, some 5,000 steel industry jobs have been lost since October, about a quarter of the workforce, and more cuts have been announced.

On Monday, an alliance of the German Steel Federation, the economics ministry of the regional state of Lower Saxony and engineering trade union IG Metall weighed in on the debate, saying Europe should speed up the process of imposing tariffs.

“The instruments available so far are very sluggish compared with other world regions,” the group said in a statement. At present, the E.U. authorities only consider legal action if evidence is provided of a substantial damage to business over a period of 12 months, it added.

Axel Eggert, director general of Eurofer, said on Monday: “We are staunch advocates of free and fair trade. Dumped steel imports from China, volumes of which have doubled in 18 months, are flooding the E.U. market and directly causing irreversible closures and job losses across the E.U. steel sector.”

“China has domestic steel overcapacity of around 400 million tons, almost three times the total E.U. steel demand of 155 million tons. This overcapacity has arisen as a result of persistent state intervention in the Chinese economy.”

The crisis has sparked demonstrations and led to almost weekly meetings between industry leaders, trade union chiefs and governments to try to avert insolvencies in the steel sector.

European steel employers and trade unions plan to demonstrate in Brussels on February 15 to protest against what Eurofer called “Chinese dumping on the E.U. market.”

An E.U. Commission spokeswoman said Monday that the E.U. is prepared to take action as soon as possible against steel dumping. She said the Commission had proposed modernizing the current system to speed up proceedings in 2013. But the reform was blocked by the E.U.’s powerful Council of Ministers due to resistance in particular from Britain, officials said.

 

Ruth Berschens heads Handelsblatt’s Brussels office, leading coverage of European policy. Dana Heide is a correspondent for Handelsblatt in Berlin, focusing on energy policies, small and medium-sized companies and innovation. Martin Wocher is an editor with Handelsblatt, focusing on the the mechanical engineering and steel industries. To contact the authors: berschens@handelsblatt.com, d.heide@vhb.de, wocher@handelsblatt.com

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