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European steelmakers have appealed to trade officials to tackle a surge in Chinese steel exports that has driven European prices below the cost of production.
A new, comprehensive system of tariffs is needed to address the market-distorting effects of global overcapacity and protect domestic manufacturers battered by weak demand and high energy costs, producers and Europe’s main trade body told the Financial Times.
China, the world’s largest producer of steel, is expected to export more than 100mn tonnes of the metal this year, more than any year since 2016. The surge has already raised trade tensions and prompted several countries to introduce tariffs on imports.
Direct Chinese exports to Europe are small since the introduction of safeguards on certain steel products in 2018, but the industry has said it is suffering the knock-on effects of higher imports from elsewhere.
The volume of exports from China was “huge”, said Genuino Christino, chief financial officer at ArcelorMittal, Europe’s biggest producer. He said the industry was “back to the crisis that was led by the high exports from China in 2015 and 2016”.
The flood of “subsidised, below-cost Chinese steel exports” was threatening the sustainability of Europe’s steel industry and its low-carbon transformation, said German steelmaker Salzgitter.
Russell Codling, director of marketing and business development in the UK for India’s Tata Steel, said current market conditions were a “huge issue” for the industry, especially with “demand on the floor”.
“The [European] commission needs to take bold measures such as a tariffication scheme to tackle the root causes of the problem, which are huge excess capacities in China and other countries,” said Salzgitter.
Regulators should introduce a more “global, tariff-like measure” to help European producers, which were suffering the knock-on effects of Chinese sales to other markets, said Axel Eggert, director-general of Eurofer, the trade body.
Europe’s existing safeguards had lost their effectiveness and were unable to absorb the volume of imports, he added.
“Chinese export prices today are below production costs,” said Eggert.
Several countries have already taken action to address market problems, including Canada. In July, the US announced a 25 per cent duty on any steel coming from Mexico that had not been melted and poured in North America. India said last week it was in talks to tackle rising steel imports.
Imports of flat steel products to the EU rose 30 per cent in the first four months of 2024, according to Thyssenkrupp Steel, Germany’s largest producer. That trend, along with poor demand and high energy costs, was “putting significant pressure” on the European industry, the company said.
It was also jeopardising investment in the sector’s green transition, it added.
The EU market is “pretty weak”, said Bastian Synagowitz, global head of steel research at Deutsche Bank, adding that “imports are still rising”.
Arcelor’s Christino said the situation in Europe was “particularly challenging” given the combination of weak demand, high energy costs and the rise in imports. He pointed out that the continent used to be a net exporter of steel.
“Now we are a net importer,” he said.
With Europe’s existing safeguards due to expire in two years, Christino said it was even more important that the EU “gets right” its proposed carbon border adjustment mechanism, which will tax products based on their carbon content. The levy should be expanded to cover a wider range of products, the company said.
Matthew Watkins, principal steel analyst at CRU Group, said an additional challenge for Europe’s steelmakers was a rise in imports of Chinese steel-containing goods, notably electric vehicles, which “then compete with European manufacturing industry — in other words, with the domestic European demand source for steel”.
The EU already has more than 40 investigations into dumped or subsidised Chinese goods exports of all types. In metals, there are punitive duties on organic coated steel products, aluminium foil and radiators, iron and steel pipes and tubes and fasteners, such as screws.
The commission is investigating complaints about Chinese exports of tin plate, steel track shoes and pipe fittings. A probe is under way into hot rolled flat steel from Egypt, India, Japan and Vietnam.
However, one commission trade official said there was no appetite for a fight with China on steel, while Brussels was trying to get member states to approve tariffs on Chinese electric vehicles. That process has already prompted trade retaliation from Beijing.
The commission declined to comment.