5 questions: EU steel crisis and China

Chinese steel production is being blamed for turmoil in the industry in Europe and elsewhere, while domestically it is also suffering. Here are five questions and answers on the issue.

1. How has China impacted the global steel market?

China is by far the world's biggest producer of steel, accounting for about half of global production.

As the country has urbanised in recent decades it became the world's biggest source of demand for steel, helping to send prices soaring.

Now that its economy is slowing, demand has fallen and Chinese producers have been left with the ability to produce hundreds of millions of tonnes more each year than they need domestically.

As a result, world export prices have plummeted from an all time high of $1,113 per metric tonne in July 2008 to just $321 last month, according to the website steelbenchmarker.com.

2. Is China dumping steel on global markets?

The EU has launched a dumping probe into Chinese steel, and European politicians have used the word to describe China's exports.

It is hard to confirm the charges, partly because dumping can refer both to a country exporting a commodity at a price less than is charged in its domestic market or a price less than the cost of production.

Dumping investigations are complex and often protracted. It can be difficult to work out production costs, and Europe measures them in different ways depending on whether it considers a country a "market economy".

The EU has granted Russia the status, but so far denied it to China.

Critics say dumping charges can be an excuse to evade world trading regulations that ban countries from unilaterally imposing import tariffs.

China's low labour costs mean it can sell profitably at prices well below EU firms.

Chinese officials contend that overcapacity in its steel sector is a result of cyclical change in the economy, and that they are striving to shrink the sector.

3. What are EU and Chinese authorities doing?

The EU in February imposed tariffs ranging from 9.2 percent to 13 percent on imports of steel bar used in construction from China.

But industry groups are calling for a much steeper tariff, along the lines of the 266 percent duties on Chinese steel recently imposed by the US.

China said last Friday it would impose import deposits, a form of anti-dumping duty, of up to 46 percent on flat-rolled electrical steel products from the European Union. But China's steel imports from the EU are negligible.

Beijing has also vowed to eliminate 100 million to 150 million tonnes of capacity -- out of a total of 1.2 billion tonnes -- by 2020. It said the reforms would cost 500,000 jobs.

4. Where does China’s steel go?

According to the World Steel Association, the majority of China's exported steel is sold in Asia -- about 51 million tonnes out of some 80 million tonnes exported in 2014.

Just under 20 million tonnes were exported to Latin America and the Middle East.

The same year, China exported just over six million tonnes to the European Union, about the same amount it sent to Africa.

5. Where does Europe’s steel come from?

EU countries get most of their steel imports from other countries in the bloc, accounting for some 101 million tonnes out of 134 million tonnes imported in 2014, according to the World Steel Association.

About 18 million tonnes that year came from former Soviet Union countries, and European states outside the EU.