SHANGHAI — China is subsidizing its organic coated steel producers, the European Commission determined this week, paving the way for companies in the region to seek higher import tariffs on Chinese products, according to the Financial Times.

This follows anti-dumping claims vs. imports of Chinese organic coated steel, used mainly in home appliances, construction materials, heating equipment and furniture.

The European Commission concluded that the Chinese government has also been providing subsidies on land, water, electricity and loans to producers of the product.

"It is not a surprise to hear the news since the (commission) was successful in proving its anti-dumping case on the import of Chinese organic coated steel," a major trader in Shanghai told AMM sister publication Steel First.

An organic coated steel producer in eastern China said the commission was trying to protect its domestic producers. The steelmaker had responded to the previous anti-dumping case but not to the complaint on subsidies, its export director said. The steelmaker might not respond at all, instead diverting its exports elsewhere, he said.

China’s organic coated steel capacity has risen, sparking an oversupply in the market. But the country’s export volume didn’t increase in 2012.

China exported 4.78 million tonnes of organic coated steel in the first 11 months of 2012, off 4.6 percent year on year, Chinese customs data show.

Its shipments of the product to the 27 countries in the European Union totaled 546,900 tonnes, down 32 percent from 808,200 tonnes in the same comparison.

The European Commission’s move is likely due to the gloomy economy in Europe, a Chinese exporter said.

Chinese companies will have to seek out new markets if the commission imposes tariffs on the product, most likely diverting shipments to Asian countries or Russia.

A version of this article was first published by AMM sister publication Steel First.