NEW YORK Joint ventures such as Valin ArcelorMittal Automotive Steel Co. Ltd. (Vama) could lead to fewer trade cases being filed in the historically contentious iron and steel sectors, according to some steel trade executives.
However, thats assuming that the venture represents a trend that takes hold at worlds largest steelmaker Luxembourg-based ArcelorMittal SA, as well as more regionally focused U.S. companies, they said.
China has kept restrictive rules on investment in its steel industry, but a new status quo might be in the works, Gary Horlick, legal counsel for the Falls Church, Va.-based American Institute for International Steel (AIIS), said June 16 during a roundtable at the Steel Success Strategies XXIX conference in New York sponsored by AMM and World Steel Dynamics Inc.
"As that changes, you could well see a change in U.S. trade remedy activity against China," he said. "If U.S. steel companies were allowed to own majority shares in Chinese steel companies, they might act differently than now, when so far they havent been allowed to (own majority shares)."
Vama, which started operations in Hunan provinces Loudi city June 15, is 51-percent owned by Chinas Hunan Valin Steel Co. Ltd. and 49 percent by ArcelorMittal. The 5.2-billion-yuan ($834.9-million) venture aims to capture 10 percent of Chinas automotive steel market (amm.com, June 16).
Many trade petitions in the United States originate from the steel industry in part because it iswith the exception of ArcelorMittalless international than other industries, such as the chemical sector, Horlick said. "There is an obvious constraint on bringing dumping cases against the rest of the world if you own production facilities there," he said.
Products made from iron and steel account for roughly 44 percent of all anti-dumping and countervailing duty orders, AIIS executive director Richard Chriss said. "And the other products arent even close."
Miscellaneous manufactured goodssuch as furniture, magnets and hand toolsmake up 18 percent of anti-dumping and countervailing duty orders, with chemical and pharmaceuticals coming in third at 15 percent, Chriss said. However, "you really dont have the same level of political sensitivity (with those products) that you have associated with steel and metals," he added.
Contributing to tensions around steel is "massive overcapacity" worldwide, much of it state financed, and a North American market whose higher prices make it an attractive destination for imports, according to Jeffrey Himmel, president and chief executive officer of White Plains, N.Y.-based Artco Group International Inc.
"The logical answer is to reduce some of the overcapacity," he said. "But its easier said than done."
But Horlick questioned the extent to which overcapacity might be a problem over the long term. "Discussions of overcapacity all the way back 11 to 12 years ago did not envision China consuming 22 million cars a year and India as a potential market of the same size," he said.
Another factor that might help reduce trade tensions is overall economic improvement, according to AIIS chairman John D. Foster, who is also president of Burlingame, Calif.-based Kurt Orban Partners LLC. "We as a trading industry want to see as strong and as robust a domestic industry as we can," he said. "A rising tide lifts all ships."