Chicago — Five of the leading American steel trade associations have released a report documenting that the steel industry in China is heavily subsidized by its government, and the rapid growth in the industry there has been fueled by government subsidies and other market-distorting policies. The report was released by the American Iron and Steel Institute (AISI), the Steel Manufacturers Association (SMA), the Committee on Pipe and Tube Imports (CPTI), the Specialty Steel Industry of North America (SSINA) and the American Institute of Steel Construction (AISC).
The report analyzed each of the 25 largest steel companies in China and detailed the amount and types of government subsidies each company received in recent years. The analysis also found that these subsidies and policies have led to tremendous overcapacity and created a highly fragmented domestic steel sector in China made up of many inefficient, and heavily polluting, companies.
The report states: "The Chinese government has supported the country's steel industry primarily through cash grants, equity infusions, government-mandated mergers and acquisitions, preferential loans and directed credit, land use subsidies, subsidies for utilities, raw material price controls, tax policies and benefits, currency policies, and lax enforcement of environmental regulation. The Chinese government maintains a majority share in the top-producing (by 2014 tonnage) Chinese steel producers. Domestic steel producers are not competing with private enterprises but with sovereign governments that do not need to use free-market principles to operate."
According to the report, China produced over 822 million tons of steel in 2014, which accounted for half of the world's steel production. However, the Chinese steel industry is facing weakening demand for steel both globally and domestically. But despite these trends and increasingly challenging market conditions for China's steel producers, steel capacity is expected to continue expanding in the short term as new production under construction comes online.
In releasing the report, the associations said that the investigation serves as additional corroboration that China should not be granted market economy status in December. The group also emphasized that the results of this study will be used to further advance the global dialogue among nations on the elimination of excess steel capacity throughout the world.
"WTO Members expected China — consistent with its commitments during accession negotiations — to transition to a full market economy; however, the evidence and experience is that many significant aspects of the Chinese economy remain under significant government control or influence," the groups concluded.
Download the full report at http://www.steel.org/~/media/Files/AISI/Reports/Steel-Industry-Coaliton-Full-Final-Report-06302016.pdf?la=en.