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World 'must stop steel overproduction'

Nik Martin (AP, Reuters)
April 20, 2016

The US, EU, Canada, Japan, Mexico, South Korea, Switzerland and Turkey have called for urgent changes in the industry. They urged countries not to subsidize or sustain loss-making steel plants.

Chinese steel plant
Image: picture-alliance/dpa/S. Wei

In a move that's likely to anger European steelworkers' unions, the eight countries said that market driven industry restructuring was imperative and that national governments shouldn't prop up failing plants or encourage additional capacity.

The call was made in a joint statement released by the US Department of Commerce a day after major steel-producing countries failed to agree on measures to tackle an industry crisis.

Urgent talks were held in Brussels on Monday, with ministers and trade officials from more than 30 countries attending. But delegates could only agree that overcapacity had to be dealt with in a swift and structural way.

Many countries blame China for the crisis, accusing the country of "dumping" steel on the global market. Washington warned Beijing that it needed to cut overcapacity or face possible trade action from other countries.

China steel factory
China's steel production hit a record high in MarchImage: picture-alliance/Que hure/Imaginechina

Chinese officials argued that they were already taking sufficient steps to restructure the steel sector, and several analysts warned that significant overcapacity would remain. That would likely mean further plant closures elsewhere in the world and thousands of job losses, they added.

Further action promised

In a separate statement, U.S. officials said they would continue to lobby for action on steel with trade partners.

"It is our shared goal that other economies, including China, will come to recognize the value of these actions and will join our collective effort to address the causes of the current excess capacity problem," Secretary of Commerce Penny Pritzker and U.S. Trade Representative Michael Froman said in a separate statement.

On Monday, Cecelia Malmstrom, the EU's trade commissioner, insisted governments should not grant subsidies that keep unviable plants running and should subject state-controlled firms to the same rules as the private sector.

Previously, the EU has indicated that Brussels could soften the rules on state aid to the steel sector.

Steelworkers protest in Duisburg
German steelworkers are angry about Chinese importsImage: Reuters/W. Rattay

Tensions have risen between other steel producers, with Indian minimum prices attracting criticism, while Japan and South Korea have come under fire for exporting steel products cheaper than they sell them at home.

China's steel production hit a record high last month as rising prices and profits encouraged mills that had been shut or suspended to resume production.

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

Last month, the world's 11th largest steel producer, Tata Steel, announced it was putting its UK assets up for sale, with the risk of 15,000 job losses.

Last week, 40,000 German steel workers protested against dumping from China.

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