Antidumping: Solution or just another problem?

The global steel markets seem to be witnessing a new trade case or an import duty hike almost every single day. Are these measures really the solution? Or are they adding to the problems facing the steel industry?

In the last quarter of 2014, the decrease in Chinese steel consumption took the long-standing oversupply problem in the global steel industry to a new level. The rapid increase in Chinese steel exports negatively impacted price levels throughout the world, while global steel producers, who have been forced to compete on prices, are still experiencing difficulties, leading to production cuts or even shutdowns. In this scenario, the issues of import duty hikes and antidumping cases make their appearance. However, antidumping cases and new import regulations have still not succeeded in preventing the sharp increase in Chinese exports. On the contrary, trading activity has slowed down in the petitioning countries, resulting in lay-offs. While the US is considered to be the quickest country to initiate antidumping investigations, the actual consequences of these investigations are a matter of debate in the country. It should be pointed out that, despite the current measures, US finished steel demand remains weak and high inventories of finished steel in the US have not been digested in the past month.

Let us look at Turkey’s new antidumping margins… Last year, Turkey initiated an antidumping duty investigation on hot rolled coil (HRC) imports from seven countries and the preliminary dumping margins in question were revised in January this year. Accordingly, some companies which were exempt from preliminary duties in the announcement made in August last year had 10 percent dumping margins imposed on them in the revised announcement. HRC imports from China, Japan, Slovakia and Russia were found to be dumped and so preliminary dumping margins were imposed. As seen in many countries and especially in the US, antidumping measures do not and are not likely to result in any increases in demand for domestic production materials. Contrary to expectations, antidumping measures are quite unsuccessful in their aim of keeping existing demand within the domestic market and only cause a change in the sources of import materials. For instance, when a country imposes antidumping duty on product X from country A, domestic buyers just turn to country B for the product, resulting in complete disappointment for local industry players who had been expecting an improvement in demand from their domestic market. Regarding Turkey, there are two more issues to be considered within the scope of the issue of antidumping measures. Firstly, the goods imported through the inward processing regime and, secondly, the goods imported for use in the Trans-Anatolian pipeline project (TANAP). Buyers who import HRC for use in TANAP or following processing for re-export within the scope of the inward processing regime are exempt from dumping margins. The buyers who will be affected by dumping duties have started to switch their attention to Iran which is becoming an attractive import source again. Russia is now out of the picture, while Iran is coming back into it again. Against this backdrop, antidumping measures are not likely to boost demand in Turkey for domestic production materials or to support a recovery in price levels.

Turkey’s demand for finished steel increased in 2015, but it chose to meet this demand by importing. Now, Turkey is seeking new import supply sources so as not to be vulnerable to possible price hikes by domestic producers.

There is no one to blame in this situation; on the contrary, everyone is right. Companies which import say that they will not be able to exist in the export markets if they do not reduce their costs, and they are right. On the other hand, the Turkish steel mills say that they are not able to offer lower prices due to their cost disadvantage in terms of raw materials and that they are doing their best in a difficult situation, and they are also right.

While antidumping duties are being sought as if they constitute the panacea for all problems facing the steel industry, the measures currently being taken to tackle the oversupply issue which created the need for trade measures in the first place are both insufficient and ineffective. China, the main source of the oversupply problem admits its responsibility for this problem: however, its total production cuts up to now amount to only 40 million mt. In January, the Chinese government announced that it will reduce its steel capacity by 100-150 million mt – though without giving any specific deadline. One can pose the question whether it is right to blame everything on China, as the problem of oversupply is observed in many regions; however, everyone is opposed to production cuts. Production cuts mean rising unemployment and unemployment means increased social problems. No one, in particular governments, wants to exacerbate these problems in their own countries, while at the same time everyone believes that China should definitely cut its production.

This is like expecting that every store will make a profit on a street full of stores. No matter what steps are taken, unfortunately it is not possible to foresee any actual recovery in the steel market without restoring the supply and demand balance. To restore this balance, every country, and especially China, needs to take responsibility.

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