China says it has done more than its share to cut steel production as global forum is scrapped

An international forum aimed at slashing excess steel production has been scrapped, after China said it had done enough to reduce global capacity.

The last meeting, in Tokyo, of the Global Forum on Steel Excess Capacity failed to produce any major agreements from the participating countries, with China calling for the organisation to be dissolved.

China’s Ministry of Commerce said in a statement on Saturday evening that China had made “the greatest and most outstanding” contribution to global efforts to reduce excessive steel capacity as it was the only country that had imposed a mandatory target upon itself.

“China has slashed total steel production capacity by more than 150 million tonnes since 2016, or 114 per cent of the global steel capacity cut … and China has redeployed 280,000 steel workers, which is more than the combined deployed number of steel workers in the US, the EU and Japan,” according to the ministry.

The Chinese ministry said the global excess steel capacity issue was caused by a demand slump following the financial crisis of 2008 and what was required was a combined effort by all relevant countries. The burden should not be just on China, it said.

The forum was a non-binding initiative launched by the G20 and other industrialised countries to curb the world’s steel output. China, which produces half of the world’s steel, was the obvious target. Many members, including Washington and Brussels, have complained that China’s steel output has continued to rise, despite Beijing’s promises to slash capacity.

In the first three quarters of this year, China’s steel products output rose 8.4 per cent to 748 million tonnes from a year ago, while its crude steel output rose 10.6 per cent to 909 million tonnes, according to data from China’s Ministry of Industrial and Information Technology.

China’s commerce ministry, however, said the country’s steel industrial policies were in line with World Trade Organisation rules and “did not distort the market to cause excessive capacity”.

“While China’s steel capacity and output accounted for half of the world’s total, China’s domestic steel consumption accounted for nearly half of the world’s total as well – 93 per cent of China’s steel output is used at home with only 7 per cent being exported, and China is not disrupting global markets,” the ministry said.

As such, the three-year forum had “sufficient basis and reasons” to dissolve, it said. “China regretted that the ministerial meeting failed to reach consensus on the ministerial report,” it added.

Japan’s Industry Minister Hiroshi Kajiyama, who chaired the forum meeting, told reporters in Tokyo that China had decided to call an end to the forum although a majority of members wanted to extend the forum beyond next month, Bloomberg News reported.

The forum’s end showcased the difficulties between China and its major trading partners in coordinating their domestic industrial policies.

While China has complained that it has shared the excessive burden of cutting steel capacity, Washington a year ago also blasted the forum for lacking the teeth to achieve any meaningful goals.

The US issued a statement in September 2018 questioning the value of the forum, saying the US “has been an active and committed partner in this process [of reducing excess steel capacity] … unfortunately, what we have seen to date leaves us questioning whether the forum is capable of delivering on these objectives.”