China is one of the biggest steel producers in the world. By 2014, their output reached 822.7 million tonnes, an exponential growth from 128.5 million tonnes of the year 2000. Such a large production was fundamental requirement behind the country’s double-digit economic growth over the past decades. However, the restructuring of China’s economy has induced its slowdown, hence decreasing demand for steel.

The natural consequence, then, is a massive surplus of steel that goes into global markets. Chinese companies need to sell to avoid more overstock, hence their prices have fell dramatically. Some even say that China is selling at a loss. In any case, it is putting much pressure on foreign steel producers that are finding it hard to compete.

According to Xinhua, China’s national news agency, accuses unjust criticism. According to the report, China is being used as a scapegoat to defend economic protectionism, covering the real problems of international steel trade. According to Li Xinchuang, deputy secretary-general of Beijing-based Iron and Steel Industry Association, fading steel industry competitiveness, rather than China, is to blame for the industry’s woes.

Countries could impose higher import tariffs to force prices up in the importing country. A measure well needed in Europe, where Chinese steel complements the falling indigenous output. However, this could trigger a trade war of tit-for-tat import tariffs on all kind of goods.

Steel is a strategic resource that nurtures the global economy. For big powers, steel production plays a major role in national defence, as it is an asset for the military industry. Hence, the question of reducing or even eliminating national steel industries is a major one.

Sources:

http://www.bbc.com/news/business-36099043

http://www.bloomberg.com/news/articles/2016-04-25/warnings-pile-up-for-china-s-steel-market-after-47-percent-surge

http://www.reuters.com/article/china-steel-idUSL3N17L2WQ

http://www.engineeringnews.co.za/article/lazy-to-blame-china-for-global-steel-woes–xinhua-commentary-2016-04-18

http://usa.chinadaily.com.cn/epaper/2015-10/22/content_22255023.htm

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