China's steel overcapacity to weigh on trade relations

Jan 19, 2010 | 12:50 PM | Brian Levich

The global economic crisis has exacerbated growing tensions between Western and Chinese trade relations, and within the global steel industry itself.

The sense of global financial stabilization also has proven short lived, despite central banks across the world pouring in vast quantities of fiscal and monetary support, according to analyst Brian Levich. Simply throwing money at the problem in the form of stimulus packages might not solve some of the fundamental imbalances behind these difficulties. This includes excess leverage that helped to create the global economic crisis in the first place.

China refuses to allow its currency to be fully convertible against the U.S. dollar, allowing it to positively manipulate its exports and with it the export economies of southeast Asia.

Given the perception that China is "blindly expanding" steel, aluminum, cement and plastic production capacity, avoiding economic confrontation, or even a trade war, between China and the West will be the next large strategic challenge. There is already strong political pressure for protectionist action against "cheap" Chinese exports.

U.S. and European authorities routinely undertake anti-dumping actions against importing nations during periods of economic downturn. The United States recently took protectionist measures against Chinese tire exports, and the European Confederation of Iron and Steel Industries (Eurofer) has lobbied for anti-dumping duties on China-origin stainless steel to supplement existing measures against Chinese exports of oil country tubular goods (OCTG) and other metal commodities.....





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