China says Cheap Steel is Food for Hungry Industry

Beijing has countered that the steel capacity issue is a global problem and that it is seeking to work together with other international partners to resolve it, with officials noting in Brussels this week the production cuts already being made to the sector.

“China has already done more than enough. What more do you want us to do?” said Chinese Commerce Ministry spokesperson Shen Danyang to reporters, according to comments reported by Reuters.

The Chinese official noted that much of the problem actually relates more to a lack of demand from countries that usually are major steel consumers, which in turn gives the impression of over-supply.

“Steel is the food of industry, the food of economic development. At present, the major problem is that countries that need food have a poor appetite so it looks like there’s too much food,” the ministry spokesperson said.

Furthermore, an op-ed published the same day by the state-run Xinhua news outlet warned against “finger-pointing and protectionism,” suggesting that this would be “counter-productive.”

OECD figures confirm that global steel capacity has seen a massive uptick over that period, reaching 2.3 billion metric tonnes last year, a 126 percent increase from the year 2000. Meanwhile, demand for steel took a hard hit in the wake of the 2008 financial crisis, and once again suffered last year despite earlier seeing some signs of improvement.

According to an OECD background note prepared for the 18 April meeting, global crude steel demand in 2014 was at 1.663 million metric tonnes – over 600 million metric tonnes below the capacity that year.

“The capacity-demand gap… is expected to have widened significantly in 2015, to a level in excess of 700 [million metric tonnes],” the note says.

“It seems understandable to think of China, the world’s largest steel producer and consumer, as the source of global market woes. Upon closer inspection, however, it’s just a lame and lazy excuse for protectionism,” said the piece.

The article also claimed that much of Chinese steel production goes toward domestic consumption, and that cheap exports abroad are actually helpful for EU firms that use it for producing downstream goods. Furthermore, it said, the difficulties plaguing the world economy has made the steel situation a global problem, and that Beijing is “one of the most hard-hit.”

“The last thing the world needs is a trade war over this issue. Far more jobs will be lost than gained if protectionism prevails,” said the Xinhua article.