No evidence of Chinese steel subsidies

Chinese steel is affecting the New Zealand industry, but not because of subsidies, MBIE has found. Photo: Getty

MBIE have found little evidence of subsidised Chinese steel affecting the New Zealand market, removing any temptation the Government may have had about pursuing the issue.

New Zealand will take no action regarding a complaint about Chinese steel dumping, after an investigation found any subsidies were too small to matter.

The announcement comes after New Zealand Steel lodged a confidential application for an investigation into allegations of cut-price Chinese steel imports flooding into the New Zealand market.

The issue first bubbled to the surface in July last year, when Fairfax revealed the complaint and reported threats of “retaliatory measures” from China against Kiwi exporters.

The Government initially downplayed the issue, although then-Prime Minister John Key chastised Trade Minister Todd McClay after he failed to tell him officials had spent months looking into the reports of possible reprisals.

In December last year, the Ministry of Business, Innovation and Employment (MBIE) confirmed it would look into whether cheap Chinese galvanised steel coil was being dumped here.

In its application asking for an investigation, NZ Steel said there had been a "sharp downward trend" in the price of certain steel imports from China, with subsidies as high as 39 per cent.

It argued the Government of China was both financing and directing the growth of the country’s steel industry, noting eight of the 10 largest Chinese steel groups were owned or controlled by the State.

MBIE’s final report, released on Friday, found evidence Chinese steel imports were undercutting New Zealand prices but little proof this was because of government subsidies for Chinese manufacturers.

According to an analysis of information available, the subsidy levels for manufacturers of steel exported to New Zealand was 0.08 percent.

“MBIE’s overall conclusion, based on the subsidy levels established, is that while there is evidence of injury to the domestic industry attributable to the price effects of imports from China, material injury to an industry is not being caused by the subsidisation of imports from China.”

Essentially, the report finds NZ Steel is struggling because of cheap Chinese steel, but without strong evidence those companies are being subsidised, it's fair game.

Commerce Minister Jacqui Dean has accepted the report’s recommendation to take no action said she was happy with the current situation.

The low levels of subsidisation were below the threshold set out in international rules.

Trade investigations were conducted in an open way and the recommendation reached was sound and based on all the available evidence, she said.

“Trade remedy investigations strictly follow due process based on New Zealand law and our international obligations, including under the World Trade Organisation and Free Trade Agreements.”

Other countries take a different tack

New Zealand is not the only country to look into issues involving Chinese steel.

US President Donald Trump is believed to be considering tariffs on steel imports, with Axios reporting he and a small group of officials are “hell-bent” on action - against the wishes of most of his Cabinet.

A national security review of the US steel industry was due to be completed by the end of June, but is now expected to be released in mid-July.

The review is making use of trade laws from the Cold War era, allowing the president to limit imports of materials that are believed to be critical for national defence.

Trump pledged during his election campaign to crack down on foreign steel dumping, and in a tweet this week alluded to possible action: “Really great numbers on jobs & the economy! Things are starting to kick in now, and we have just begun! Don't like steel & aluminium dumping!”

Australia has an “Anti-Dumping Commission” to investigate the dumping and subsidisation of goods imported into the country including steel.

Joe Gallagher, the E tu union’s industry co-ordinator, said it was irrefutable that Chinese steel was coming in at 20 to 25 percent cheaper, including in pre-fabricated form, and was putting the local industry under pressure.

“Basically, I think it’s f***ing stink, to be honest.”

Alongside importation, NZ Steel was also struggling with possible electricity line charge hikes and the Emissions Trading Scheme requirements.

If unchecked, it could have a huge impact on the 1,200 directly employed workers and up to 2,000 indirectly employed, as well as the community built around the Glenbrook Mill south of Auckland.

“This is not about being a protectionist, but I struggle to see how we benefit from those free trade agreements…there’s not the same stringent checks on these imports nor are there tariffs on it so how do we win? We’re starting to become the world’s warehouse.”

NZ Steel and the Chinese Embassy did not respond to requests for comment by deadline.

Lack of cooperation

The investigation was hampered by the bulk of Chinese exporters refusing to take part.

In its report, MBIE identified seven Chinese manufacturers supplying galvanised steel coil to New Zealand and sought information from all. Only one, Zong Cheng, responded.

Comment was also sought from eight export companies, but only half responded. Six out of seven importers took part, with only Steel Co Limited declining because of commercial sensitivity.

The Chinese government said it was also restricted in details it could provide because of the lack of cooperation by the producers.

But Dean said she was happy with the level of participation and the robustness of the investigation.

“It’s common to not have responses during investigations and this one was no different.

“MBIE gathered and looked at evidence from a large number of sources. Based on all the evidence gathered I’m satisfied with the report and its recommendations.”