Jason Ford
News editor
European steel producers are staging a march to protest about what they see as unfair trading practices by their Chinese competitors
In a relatively short space of time the EU’s economy has become linked with China’s to such an extent that the People’s Republic is now the Union’s second largest trading partner.
As such, the two economic blocks are reportedly trading over €1bn a day with figures from 2013 indicating €428bn in bilateral trade.
In a speech given in January this year, Cecilia Malmström, the European Commission’s commissioner for trade said: “Over three million jobs here in Europe depend on sales in China. And that’s an underestimate of the total value of the relationship, given the number of European companies who depend on imports from China to make their businesses competitive.”
The issue of Chinese imports unites company bosses, unions and workers from the European steel industry who are gathering today in Brussels to call for reforms in the face of steel being exported at prices below the cost of production, a practice more commonly referred to as dumping.
In the UK alone, the practice of dumping was cited by Tata Steel UK as a chief reason behind job losses at sites in Wales, Northants, and Co. Durham in January 2016.
“We are not asking for special treatment,” said Karl Koehler, Tata Steel’s European CEO. “Instead, we are asking for the European Commission to stand up for fair trade and to give European steelmakers a chance to compete on a level-playing field.”
Today’s march is being organised – with the support of Eurofer, the European steel association – under the umbrella of AEGIS Europe, an alliance of 30 European industrial sectors including steel, aluminium, ceramics, glass, solar panels and bicycle manufacturing, among others.
China’s ability to dump its steel in Europe will be greatly enhanced if it gains market economy status (MES) in December this year. According to US think tank Economic Policy Institute, granting MES to China would increase manufactured imports from it by 25–50 per cent, putting 1.7–3.5 million EU jobs at risk.
EU policy makers are being urged to rethink MES status to China unless it becomes a true market economy rather than operating a state capitalist system.
Under EU guidelines, China currently only fulfils one of five criteria under which is can call itself a market economy (the removal of barter trade) and that in 15 years of World Trade Organisation membership, China has not succeeded in allowing prices to be determined by market forces.
European steelmakers are also calling for the European Commission to ensure its post-2020 proposals to change the Emissions Trading System (EU ETS) do not lead to unfair costs, which are not borne by global competitors. According to a recent study, the proposed EU ETS reform may cost the steel industry alone about €34bn. They will also call on commissioners to scrap the so-called ‘the lesser duty rule’ whereby the EU seeks to achieve the lowest possible tariff on imports.
A European Industrial manifesto for fair trade – stop China dumping: stop China MES! Can be found at the following address: https://www.eiseverywhere.com/ehome/stopdumping-stopchinames/manifesto/?&
Free trade is great thing and we should defend it at all costs. Unfortunately, trade with China is very rarely free and the European steel industry is suffering as a result.
The issue reminds me of a conversation that I had many years ago with a senior manager in automotive industry who was waxing lyrical about partnerships. When he was backed into a corner he finally agreed that your view of the partnership depended on whether you were the ‘screwer’ or the ‘screwee’.
For me the issue of steel and the industry itself is multifaceted , firstly we’re at the bottom of a commodity cycle, which means steel is at its cheapest !
Secondly China’s industrial capacity , worlds largest steel producer and will remain so for the forseeable future , China’s own housing sector is cooling so domestic usage is slowing down , China is aware of its role in a global sense and is apparently dealing with over production, now the question is does Europe become punitive and risk tit for tat with China and effect other businesses as well, or does it develop a long term vision of the steel industry and the so called 10 % of q e , that’s going to be spent on infrastructure, good luck with that, is twinned with european steel firms, again after a recent visit to a local steel mill, they were already mporting Chinese steel 80 – 90 %,
Thats the reality of the status quo !
For me its a new race in how steel makers become more energy efficient in their energy usage , usually the most intensive users of energy eg, a steel plant only works at 40 % efficiency, so can a secondary plant be added ? Micro grids are coming on in USA,
can energy prices be subsidised ? ( industrial users )
Can European producers instead adopt and add value in other ways, nuts and bolts, manganese, fusion metals , other materials,
Last not least the amount of toxicity and pollution that a steel plant produces is phenomenal , ask the Albanian villagers, who all suffer from cancer who live next to their steel mill !
I wonder how many people have got cancer in Sheffield ?
The govts are only clamping down on coal plants , scrubbers etc.
I recall some years ago now a customer of mine placing work, that I would normally have been entrusted with, to the far east for pricing reasons and then finding the materials used to manufacture the parts was of a sub standard specification resulting if numerous mechanical failures and so I got the contract back. What, in the light of this ‘new’ situation, are the safeguards in place to ensure that steel to correct specifications are supplied?
The simple answer is “NONE”. The Chinese producers will put any quality stamp on steel products as requested by the buyer, irrespective of the actual quality of the steel. The whole concept of quality as we understand it is of little interest to them.
(I have witnessed this first hand working in the Far East in the steel industry for many years.)
Mike B-as long as price is paramount (and purchasing agents/buyers are the greatest culprits because they apply the same approach to the purchase of pencils, loo-paper and stationary as high-spec steels…these outrages and related nonsensical conduct will continue. I have lost count of the number of textile expert witness cases I have constibuted to: where a fault can be traced to some smart-a**ed’ purchasing agent saving a few pence in buying yarn and causing £100,000’s worth of damage and costs in ic and garments. As long as the clerks have power they will exercise it. Hey Ho!
This has occurred with the rise of the non-technical “professional” purchasing manager. They are a menace to society, and are not needed.
The British Steel industry was largely closed by European companies protecting their industries and using the UK’s relatively weak employee protection to reduce capacity: carbon steel more or less disappeared years ago, it is the added value steels that are now being destroyed.
Europe did not complain while they were encouraging the UK politicians to massacre its steel industry.
I do not agree that China is dumping steel at below cost. While Europe and the rest of the world literally slept,China aggressively moved and installed modern manufacturing practices including use of robotics to lower its manufacturing costs. I make boilers and was startled to see their manufacturing facilities as innovative and advanced and use of latest machinery and techniques not used in West. I am changing to new way and instead of crying European bosses should modernise.
I can assure you that China is dumping steel below the costs of production. China imports coking coals and iron ores at prices that are higher than those available to producers in say Brazil, Australia, and Japan. About 80% of the cost of making steel via the BF/BOS is the costs of these raw materials. The labour content is irrelevant.
So there is no mystery concerning the costs of production of steel in China. Anyone who has done the sums understands this. For example, China buys ores and coals from Brazil, transports them to China, converts them to steel, and ships the steel back to Brazil at prices below those in Brazil. This is obviously dumping, and Brazil has rightly applied import tariffs to protect their own industry. Many other countries have done the same, including the USA. It is only those countries who only look at prices that are allowing the import of steel from China duty free.
I used to believe (because my leaders and superiors?! told me so) that ‘we are all in this together’ and that the purpose of a State, nation, economy, social grouping…was that its members did indeed believe they had some sort of link: perhaps enhanced by a shared set of values. Someone please tell me which ‘set’ of such those who make a living from ‘importing’ adhere. It is as though the retailers (and wholesalers) wish others within the ‘state’ to be their customers, but are sufficiently callous that they are prepared to “buy-in” the results of other’s overseas labour: and remove their fellow citizens from having the cash in their pockets to be their customers. The economics of the mad house. So nothing new there! But what else can one expect from a circumstance created by a grocer’s daughter.
We must be clear..the consumer is KING……and I do not appreciate the fact that Governments play the game according to the tune of the industry that has been bloated and sleeping with no vision of the future. The East was not sleeping and had a vision: Catch up to Europe with better quality,delivery ,after sales …et all.. In Pakistan, Chinese below USD 1 shoes ( lasting 2 years ) enabled people who had no shoes to have shoes, have new clothes when they had three level hand me downs in the past and if there was no China and the East, the Western monster industries would have simply bankrupted us poor people . Hurray to the vision of the East.
“We must be clear..the consumer is KING”. Perhaps when buying chocolates and peppermint creams, but not when buying sophisticated products like steel.
The quote should more accurately be: “the consumer is ignorant”, in many cases.
Totally agree, the consumer only sees the sale price and not what is happening behind the scenes, and doesn’t want to see behind the scenes as they don’t care as long as they get their commodity cheaply.
The rather complex issues surrounding the problems of the British steel industry are obviously not properly understood. There are 2 basic methods used to “make” steel;
-from iron ore, using the blast furnace and oxygen steel making
-from scrap, by melting in electric arc furnaces. (this is not really making steel, but is recycling steel scrap)
These 2 processes are very different in their energy needs and cost structures, and should not, can not, be lumped together, as is common.
The scrap melters are the ones affected by the price of electricity. The producers using the blast furnace route, like Tata, are not, at least not in the same way. Their energy largely comes from the coal used in the associated coke making process, and is affected by the price of coal. Indeed, the blast furnace steel making route is energy self-sufficient, providing by-product gases for the processes and power generation.
The problems with the British industry is that the quality is inferior to that of other countries, and the UK bulk steel producers are trying to compete on price at the clog iron end of the market instead of moving up-market at the high priced end. To try to compete with the producers in China, India, and Russia on price alone is absurd, and can not be done.
Since early 2000, steel prices have been at record highs, about 5 times what they are now. But instead of investing in the building of high quality finishing end facilities, they have taken the money and run. No significant investment has been made since the 1980’s, and the purchase of cheaper raw materials like iron ore and coal has not been done. It was a mistake to close down the UK coal industry that could provide coking coal at significantly lower prices than imported coals.
“they have taken the money and run” -yes, run to pay dividends to shareholders(*) in a vain attempt to keep the ‘share-price “up”!? -(*) those who are often (and incorrectly) are described as investors! If one thinks of the ‘stock-exchange’ as a horse-race in which only the jockeys move -and they only from side to side (think about it!)- almost the entire reality as opposed to the hype of ‘financial market(s) falls into place.
Or taken the money out of the country to where they are based or to some tax haven.
These are just some of the issues surrounding foreign ownership of British companies.
“When he was backed into a corner he finally agreed that your view of the partnership depended on whether you were the ‘screwer’ or the ‘screwee’.”
In 1971, the absurd, “screw-em” terms ‘imposed’ on RR by Lockheed (RB211 for the Tristar) was the reason for the bankruptcy of both!
“Placing impossible terms on a supplier is an invitation to them to let you down”: and they will & did!
Free trade (as several others point out -no such thing?) is (a)great thing and we should defend it at all costs. (with what, from whom? and what if the ‘costs’ are the almost complete neutering of manufacture in UK plc. Let me repeat a previous comment: “the only groups who believe that ‘market-forces, competition, capitalism and democracy’ are valuable ways to keep us all on our toes…are those who believe that what they offer is so important, must be retained in its full purity, are those who have insulated themselves totally from such!” Think about it! There they are the ‘shams’ -who create no wealth and have to make up some silly ‘rules’ so that the rest of us have to pay for them?
China is well on the way to becoming the dominant world power of the 21st Century. At the moment only India seems to have taken this on board and are trying to compete.
The USA is in for a shock when it looks away from its bug-bear, Russia, (a hang-over from the cold-war) and finds that China has now got far more influence that Russia does!