A new Duke University report examines how China’s excess steel production is flooding worldwide markets and putting companies and workers at risk, including those here in the U.S.
China’s expansion of its heavily subsidized and government-run steel sector since 2000 has grown capacity in the global steel sector to over 2,300 million metric tons, while only 1,500 metric tons are needed to meet global demand, Duke researcher Lukas Brun wrote in the study, which was undertaken in conjunction with the Alliance for American Manufacturing (AAM).
“The result is a global steel sector with record low profits and an influx of cheap steel in the global trading system affecting companies, workers, and the global trading regime,” Brun wrote.
As CPBJ reported earlier this year, Luxembourg-based ArcelorMittal was still the world’s biggest steelmaker by volume, but company officials admitted that the global steel conglomerate had been wounded by Chinese exports.
The company’s Steelton plant, a former Bethlehem Steel Corp. facility which has been the site of steel manufacturing since 1867, is one of only three plants in North and South America that manufactures rail for railroads.
The sale of three of ArcelorMittal’s long carbon assets in the United States – Harriman, Tenn., LaPlace, La., and Vinton, Texas – was announced in March, spokeswoman Mary Beth Holdford said.
“We were not able to reach an agreement on Steelton that was satisfactory for all parties. Steelton will remain within the ArcelorMittal portfolio,” Holdford said. “We will continue to operate it, support our employees and improve its profitability, just as we do with our other assets.”
A complex problem
Brun’s report suggests that China admits it has a problem and has repeatedly pledged to cut its steel production, “yet due to either an unwillingness or inability to honor its commitments, it struggles to address overcapacity in its steel sector.”
Since 2007, when overcapacity in the Chinese steel sector became apparent in the country’s own planning documents, China has added 552 metric tons of new capacity, Brun wrote — equivalent to seven times total U.S. steel production in 2015.
The result has been to put tens of thousands of U.S. jobs at risk, AAM says, calling on stronger enforcement of existing trade laws.
Brun cautions that the answers are complex, and his report looks to explore them without “appeals to protectionism and xenophobia.” He also points out that existing policies are more reactive than proactive.
He also notes that any solutions must acknowledge the differences between market and non-market economies, and advises against treating China like a true market economy for the time being.
“Until the reforms promised by China show tangible results in addressing oversupply in steelmaking facilities, its trading partners should pursue traditional trade remedies when specific instances of harm can be substantiated, fully pursue the rights of domestic producers, and postpone the decision to grant market economy status for purposes of the World Trade Organization,” he wrote.