US mills are overprotected: China

China has pushed back after the US boosted anti-dumping and anti-subsidy duties on some of its steel products, saying mills in the world’s biggest economy lack competitiveness because they are overprotected.

Protectionism in the US steel sector is deeply worrying as these measures will only exacerbate friction without helping to solve the problem of shrinking global demand, the Chinese Ministry of Commerce said in a statement yesterday.

“China believes that the lack of competitiveness in the US steel industry is the result of overprotection,” it said.

The world is awash with steel as demand drops in China, which accounts for about half of global production. To offset declining consumption, overcapacity and weakening prices at home, Chinese mills have boosted exports to record levels. That has raised trade tensions worldwide, spurring a fightback from rival producers and forcing policymakers to try to address the problem.

“China urges the US to abide by the World Trade Organization’s rules and to use trade remedy measures judiciously,” the ministry said after the US ruling from the International Trade Commission (ITC).

The US has been “materially injured” by imports of the cold-rolled steel flat products from China, as well as Japan, which have been determined to be sold at less than fair value and subsidized, the commission said in a statement on Wednesday. All six of the ITC’s commissioners backed the move, it said.

China’s steel exports rose 6.4 percent to 46.28 million tonnes in the first five months of the year, according to Chinese data.

The nation’s failure to curb its steel output could prompt the EU to consider new trade sanctions against Beijing, the European Commission said on Wednesday.

In an EU document aimed at framing the bloc’s China policy over the next five years, the European Commission said Beijing’s pledge to cut up to 150 million tonnes of crude steel production by 2020 was insufficient and the country had to do more.

“The EU is seriously concerned about industrial over-capacity in a number of industrial sectors in China, notably steel production,” said the document, which was agreed to on Wednesday by top EU officials, including EU Trade Commissioner Cecilia Malmstrom and EU High Representative for Foreign Affairs and Security Policy Federica Mogherini.

“If the problem is not properly remedied, trade defense measures may proliferate, spreading beyond steel to other sectors, such as aluminium, ceramics and wood-based products,” it said, referring to punitive tariffs to limit Chinese imports.

The policy document follows a pledge by the G7 leading industrialized nations last month to take steps after global steel production hit a record high earlier this year.

The European Commission now has seven ongoing investigations into Chinese steel imports after opening a new case into alleged subsidies for hot-rolled flat steel last month.

Additional reporting by Reuters

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