US tariffs? Chinese steelmakers say they have other things to worry about

Beijing’s drive to tackle pollution and curb excess capacity is causing bigger headaches, according to steel industry representatives

PUBLISHED : Thursday, 08 March, 2018, 7:17am
UPDATED : Friday, 23 March, 2018, 12:05pm

Chinese steelmakers say US President Donald Trump’s move to slap across-the-board duties on steel imports is not a huge concern, given that China supplies just a small proportion of them.

They are more worried about Beijing’s campaign to fight pollution and curb excess steelmaking capacity.

We have other things to worry about – the United States is not our market
Zhang Wuzong, Shiheng Special Steel Group

“We have other things to worry about – the United States is not our market,” said Zhang Wuzong, head of Shiheng Special Steel Group in eastern Shandong province.

Hou Jun, vice-chairman of the China Iron and Steel Association, which represents 80 per cent of the country’s steel producers, agreed that the US move would have a “limited” impact on Chinese companies.

Both of the steelmakers, who are in Beijing this week for the annual session of the National People’s Congress, China’s legislature, said domestic challenges were the more pressing issue for the industry. 

Trump came the closest yet to a long threatened trade war this week, with his move to impose tariffs of 25 per cent and 10 per cent on all steel and aluminium imports at the final stage of confirmation.

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Although it is the world’s largest steelmaker, China supplies about 2.9 per cent of American steel imports, while the US buys just 1 per cent of China’s steel exports. But Beijing has vowed to stand by the other affected countries if Washington applies the tariffs.

“The unilateral trade action taken by the US in imposing tariffs does not meet international trade regulations, so this is going to affect the whole trade system [for steel]. Taking protectionist measures ... will harm fair competition in the global market. But this will ultimately affect their steelmakers more than us,” Hou said.

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The industry association would support Beijing in international arbitration, he said, including taking the issue to the World Trade Organisation.

But steelmakers in China are more focused on Beijing’s latest plan to cut excess capacity.

Ten years on, will China still need so much steel?
Zhang Wuzong

Premier Li Keqiang announced on Monday a target of cutting 30 million tonnes of steelmaking capacity in 2018, after 170 million tonnes had been slashed in the past five years.

For private steelmaker Zhang, although his company saw a threefold increase in earnings last year from 2016 because of surging steel prices, the future was looking less rosy.

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“Ten years on, will China still need so much steel? Are there still going to be so many houses to build? Urbanisation will also have reached full capacity by then,” Zhang said. “Demand will be down by at least 30 per cent.”

Zhang added that although he supported stricter environmental policies, his company had to absorb the cost of them. The latest is a standard for waste water discharge, and complying with it added 20 yuan (US$3) per tonne of steel made, for a total cost of 103 to 104 yuan a tonne, he said.

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A crackdown on air pollution over winter that saw the government curbing steel production also meant the company had to ease off for 58 days last year, costing them 160 million yuan. 

“We’re considering a business transition. Maybe we’ll produce other things and not [make] steel any more,” Zhang said.