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EU mulls state aid to steel sector

EU industry commissioner Elzbieta Bienkowska has indicated that Brussels could soften the rules on state aid for the steel sector, after talks on tackling overcapacity and low prices in the industry failed.

Elzbieta Bienkowska told German daily newspaper "Frankfurter Allgemeine Zeitung" on Tuesday that "more flexibility" was needed in discussions of state aid for the steel industry in the 28-nation bloc. Under existing competition rules, the EU Commission has banned member states from helping companies with subsidies.

But given the difficult situation facing the steel industry, Brussels should "at least reconsider those rules," Bienkowska argued. "We can't push the industry any more," she added, suggesting that EU leaders should look for ways to alleviate the burden for European steelmakers.

European steelmakers have long been battling overcapacity and cheap prices from Chinese rivals, spurring a number of national governments to press Brussels to erect barriers against Chinese steel imports.

Overcapacity weighs

The EU industry commissioner's remarks came a day after the world's major steel-producing countries failed to agree measures aimed at tackling a global steel crisis amid controversy over the causes of overcapacity

The meeting of ministers and trade officials from over 30 countries, hosted by Belgium and the OECD on Monday, concluded only that excess capacity had to be dealt with in a swift and structural way.

Watch video 01:24

OECD takes on steel glut

Washington pointed the finger at China over the failure of the talks, saying Beijing needed to act on overcapacity or face possible trade action from other countries.

"Unless China starts to take timely and concrete actions to reduce its excess production and capacity ... the fundamental structural problems in the industry will remain," US Secretary of Commerce Penny Pritzker and Trade Representative Michael Froman said in a statement after the talks. "Affected governments, including the US, will have no alternatives other than trade action to avoid harm to their domestic industries and workers."

The OECD said global steelmaking capacity was 2.37 billion tones in 2015, but declining production meant that only 67.5 percent of that was being used, down from 70.9 percent in 2014.

Britain is particularly feeling the squeeze as its largest producer Tata Steel has announced plans to pull out of the country

, threatening 15,000 jobs. In addition, more than 40,000

German steelworkers took to the streets last week

to protest against price dumping from China.

China rejects criticism

China, the world's top steel producer, has been ramping up exports of steel in recent years, as it battles to steer its economy into services-led growth and away from traditional manufacturing, while keeping employment levels high.

China's steel exports jumped 30 percent from a year ago to 9.98 million tones in March despite a slew of anti-dumping measures globally.

However, China's assistant commerce minister, Zhang Ji, told reporters after the meeting that China had cut 90 million tones of capacity and had

plans to reduce it by a further 100 to 150 million tones

. "China does not subsidies its steel export industry. Everything we do is in strict compliance with World Trade Organization rules," he added.

Li Xinchuang, the vice secretary general of the China Iron and Steel Association, also rejected the criticism. "It is a totally pointless complaint from the US and it's biased against China," Li told the news agency Reuters. "China's steel industry is market-based and Chinese steel products have good quality, low price and good service. The complaint on government subsidies is also crap."

Angry steel manufacturers in Europe have urged the EU to join the United States in pushing China with harsh tariffs. In March, the US imposed tariffs of nearly 300 percent on so-called cold rolled steel, used to make auto parts, but the EU settled on a more cautious 20 percent for the same product.

The EU's Trade Commissioner Cecilia Malmström said after the talks that the steel crisis was now "life or death for many companies." but higher tariffs were "only a short-term bandage."

uhe/mrk (Reuters, AFP, dpa)

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