11 Jul 2017

Chinese steel subsidies found to be minimal

9:33 am on 11 July 2017

A government inquiry has found steel imports from China are not damaging the New Zealand market due to subsidies.

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Photo: 123rf.com

The Ministry of Business, Innovation and Employment (MBIE) investigation said only minimal subsidies were being placed on galvanised steel coil - in fact, no more than 0.08 percent.

However, only one of the seven Chinese coil exporters, most of which are state-owned, gave the ministry any information.

The Chinese government itself only provided general comments on the subsidy programmes being looked at.

The [http://www.mbie.govt.nz/info-services/business/trade-tariffs/trade-remedies/dumping-of-imported-goods/investigations-into-goods-dumping-or-subsidisation/pdf-document-library/essential-facts-conclusions-galvanised-steel-coil-from-china-non-conf-report.pdf inquiry (PDF, 876KB) found that the complainant, New Zealand Steel, has been damaged economically by imports from China that have undercut the domestic price by 55 percent.

"MBIE concludes that there is evidence of price undercutting by imports from China, and there is also evidence that the domestic industry has experienced price depression and price suppression," the inquiry's final report said.

"MBIE can conclude that there has been an actual decline in profits which correlates significantly with and can be attributed to price undercutting, price depression and price suppression."

However, the low price of imports had not been shown to be from Chinese government subsidies, it said.

The United States and Australia have previously ruled in separate inquires that China was dumping steel products. The US found subsidy rates of 241 percent at five Chinese companies; the Australian inquiry found much lower levels of intervention.

However, both these inquiries were into different products and faced the same problem as the New Zealand one: a lack of information from China.

New Zealand's dumping inquiry caused a political furore in mid-2016 over claims China had threatened trade retaliation if the inquiry went ahead.

New Zealand Steel's market share has gone up a bit since 2011, but its profitability has gone down.

Union unhappy with inquiry result

The inquiry's conclusions raised serious questions about the rigour of the research, said E Tū union organiser Joe Gallagher.

"MBIE admits its findings rest on 'very limited information', their words - then tells us that 'on that basis', it concludes that the Chinese subsidies are minimal," he said.

"This isn't just disappointing. It's frightening that the livelihoods of entire communities rest on this poor-quality inquiry and report."

Mr Gallagher said the report shrugged off the failures of key players to answer the questions at the heart of the complaint.

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