The European Union said Thursday it would investigate whether China, Moldova and Turkey are illegally selling steel wire rod at below-cost prices that damage European manufacturers.
The EU can slap trade charges on imports for up to five years if it finds they are being dumped on the European market in violation of global trade rules. Any hint of sanctions would come in February at the earliest, after officials can make recommendations and EU governments decide whether to take action.
Steel is the latest product to strain Europe's trading relations with China, after surging clothing imports broke through quota limits in 2005 and cheap shoes saw Europe impose tariffs in 2006.
Chinese steel sales to Europe almost doubled last year, pushing down European prices and triggering complaints from the European Confederation of Iron and Steel Industries, or Eurofer. The EU's executive Commission said a March 25 complaint from Eurofer gave evidence of surging imports from Moldova and Turkey as well.
The new trade investigation will focus on wire rods used in construction that were imported from April 1, 2007, until March 31.
"It is alleged that the volumes and the prices of the imported product have ... had a negative impact on the market share held and the level of prices charged by the (European) industry," the Commission said in the EU's Official Journal.
The investigation will compare European steelmaking costs with those in Turkey to help determine if that country's exports undermine market prices.
But the EU does not recognize China or Moldova as market economies, since state subsidies such as low rents or cheap power may affect production costs. So it will instead compare European figures with those of another fast-growing developing economy, in this case Brazil, unless Chinese and Moldavian steelmakers can prove their governments do not subsidize them.
The EU already has launched three other investigations, looking at imports of steel wire from China, stainless steel cold-rolled flat products from China, South Korea and Taiwan and Chinese hot-dipped metallic coated iron or steel flat-rolled products.
Gordon Moffat, Eurofer's director general, warned that European steelmakers were also monitoring imports for other types of steel.
China supplies about a third of the EU's steel imports, far more than suppliers in Turkey, India, South Korea and Switzerland. Europe is China's largest trading partner, and it is importing more steel as an economic boom last year led to more building construction and machine and car manufacturing.
EU officials warned of a protectionist backlash if China does not open up more to European exports. They have asked Beijing to change a system that keeps the yuan undervalued, giving Chinese exporters an unfair price advantage and adding to the country's surpluses.
However, Europe's slowing growth and Chinese export controls have caused imports to fall by a fifth from November through March, compared with the same period a year ago, EU statistics show.
As a result Europe's two biggest steelmakers, ArcelorMittal and ThyssenKrupp AG, said they expected strong demand and higher steel prices this year.
Eurofer's member companies together employ 372,000 people and turn out 200 million tons (220 U.S. tons) of steel a year making a combined annual turnover of 138.5 billion (US4 billion).
Source: The International Herald Tribune
