The complaint involves the illegal practice of using subsidies to artificially reduce the cost of a product in order to obtain an unfair price advantage. In extreme cases, dumping can result in driving competitors out of business and enabling monopoly pricing.
This month, the European Commission announced that it is investigating allegations that Taiwanese and Chinese producers of stainless steel are dumping their products into the European market in violation of international laws.
This investigation is believed to be only the first of what may be a series of inquests into the conduct of Chinese steel producers. Critics have noted that China is continuing to increase steel production despite the overall slowdown of their economy.This over production is cited as proof that the steel market is being manipulated by Chinese government policies.
China is the largest single steel producer in the world, so their production policies have a global impact on the steel market. Chinese and Taiwanese cold rolled stainless is the type of steel over which the most complaints have been filed.
Eurofer is the steel industry entity in Eurpose that initially filed the dumping complaint over a month ago in response to sharply rising Chinese imports. By law, the European Commission must decide whether to investigate a claim within 45 days. Now the Commission will determine whether the dumping has in fact occurred.
Should the Commission determine that the imports have been illegally dumped into the European market at unnaturally low prices, then the Commission can impose duties sufficient to correct the price distortions that were created by the dumping. Duties can then be imposed for up to five years.
Imports of sheets of cold rolled stainless steel into Europe from Taiwan and China have mushroomed ten-fold since 2002. Europe is the largest single market for Taiwan’s cold rolled stainless steel, which means that any sanctions imposed could have a devastating effect.
At least 25% of Taiwan’s exports would be affected by the imposition of special duties. General duties are already being imposed on some types of Chinese steel products, but none have ever before been applied to specific grades.
The United States is among those nations that have criticized Chinese steel policies, opening their own probe earlier this year into carbon and alloy steel wire rod imports. The U.S. claims that China is subsidizing high-tech steel products and thereby artificially manipulating the price to under-price their competitors.
Chinese steel exports have risen over 40% so far this year, amounting to more than half of the stainless steel produced worldwide. Although the anti-dumping measures taken, if any, would not be announced for many months, the mere fact than an investigation has begun may be sufficient to strengthen the financial footing of Europe’s struggling stainless steel producers.
Now that it is clear that the current policies of the Chinese and Taiwanese producers are probably unsustainable, investor confidence in other steel producers will be enhanced.