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The US Steel Export Declines Because of Chinese Import

30/11/2015

US Steel Export

The world industry is facing the problem of the lowest steel prices in decade due to slight demand growth and overcapacity.  US industry is blaming a stream of Chinese imports for the crisis. Many countries including the USA complaint about China, whose steelmakers are disrupting their industries and they say China is the main target of criticism. China is surely influencing and shaking the world economy. It manufactures much steel; the amount of it is equal to the amount, produced by the rest countries. Most of steel companies in China are led or backed by local governments: as these companies are huge employers and tax payers, the plants are not going to close or reduce production. Moreover, steel producers get benefits from low-cost labor. All this leads to overcapacity. China Iron and Steel Association supported by state realize the problem of excess steel. This Association wants steel producers to stop or, at least, to slow down exports. This country is increasing its exports and this process may have a huge negative impact on many other countries including American and European ones. The US steel industry is not an exception as it suffers from "steel dumping". China supports its industry setting low prices for steel export. So, businesses are more interested in this cheap steel than in expensive American steel.

Chinese cheap steel measures

The US and other countries including European have started the move to prevent Chinese cheap steel affecting their markets and economies. In the US, big steel producers begin to look for any kind of support including political. Earlier, the US local governments seemed unwilling to take measures in order to overcome the crisis. Steel producers appealed to International Trade Organization in order to withstand significant rise in steel imports. Trade lawyers are talking about anti-dumping or in other words selling abroad below the production cost with the aim to get shares because this process is illegal according to the law of World Trade Organization and may be castigated. In case of imposition of these anti-dumping duties imported steel will become cheaper and less competitive in comparison with domestic steel makers. This process may influence positively on steel industry.

The American Iron and Steel Institute has claimed that the steel production in the US has dropped notably in the first months of the year. The growth of steel import has caused the reduction of domestic shipments. Steel exports from Chinese companies have increased for 25% compared to the last year. Steel prices in the US have been falling down since the last year. This decline may be seen in hot-rolled and cold-rolled sheet exports, hot-dipped galvanized sheets and strip exports. The total steel shipment declined by approximately 10.7% in comparison to the last year.

There are quite a lot steel companies including US Steel Corp., Gerdau, AKK Steel and ArcelorMittal. These companies may really face various risks in steel industry. They already have tariffs concerning many industrial goods such as fasteners or steel wires because they want to withstand Chinese steel giants but the companies call these tariffs insufficient. US steel producers began to layoffs at their mills. This year many workers have been laid off or warned about this. The number may reach 3,500 in Texas, Indiana, Alabama and Illinois. Several companies even proposed an anti-dumping duty on Chinese steel, which they think, must reach from 18% to 33%.

U.S. Steel is an example of companies suffering from Chinese overcapacity.  It had high cost structure, that's why it was roughly affected by Chinese import. This company, one of the biggest US steel manufacturers, was founded in 1901. Some years before the company wrote about possible impact of Chinese excess steel production. Its assumptions appeared to be true. The massive closure of mills means the steel-manufacturing assets reduction. By far, U.S. Steel performs the worst results among the US steel companies in steel production in the past month. Another steel producer, Canadian Essar Steel Algoma, has worse situation, it asked for bankruptcy protection.

Steel industry workers talk about the national strategic importance of steelmaking in the US and they claim it must be supported and renovated. They want emergency actions to back the steel industry and prevent the layoffs. After such events the government begins to understand that the country needs an active, strong and reliable industry. People believe that the most important steps for the government to implement are to block China from importing cheap steel on the US market and to force businesses to use home-made steel and other products.

Source: https://trade-metal.com/news-the-us-steel-export-declines-because-of-chinese-im-5.html

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