China Steel refuses to stop exporting

Despite the persistent shortage of steel nationwide, state-run China Steel Corp (中鋼), the nation's largest steelmaker, said yesterday that it would continue exports of steel, ignoring requests by industries to halt them.

"We understand the difficulties for certain industries, but to halt the exports may generate trade disputes with other countries," said Chen Yu-sung (陳玉松), assistant vice president of the commercial division of China Steel.

However, in response to questions from lawmakers yesterday in the legislature's Economics and Energy Committee, Chen said the company could cut "exports from 30 percent to 24 percent" of output.

The cost of raw materials for making steel have risen sharply since the second half of last year as the global economy recovered, forcing steelmakers to raise prices.

Strong demand from China has particularly put pressure on prices of steel products, which have surged by between 33 percent and 40 percent from a year ago, according to statistics from the Taiwan Steel and Iron Industries Association (台灣區鋼鐵公會).

Industries that use steel, such as the construction, ship building and auto sectors, said they could not afford the higher prices, causing many projects to be halted. A coalition of steel-using industries plans to hold a protest next Monday calling on the government to suspend steel exports like the South Korea government does.

South Korea decided last week to impose export restrictions on scrap iron and steel bars to ease the effect of price hikes.

The problem is also affecting US steel industries, which may soon ask the Bush administration to limit scrap steel exports, Reuters reported yesterday, citing Robert Stevens, president of the Emergency Steel Scrap Coalition.

"According to law, the US government may prohibit or curtail the export of scrap, if conditions warrant. It is clear all the criteria are met in this case," Stevens said in a statement.

Daniel Liu (劉大年), deputy director of the Chunghua Institution for Economic Research's (中經院) WTO Center, said the suspension of steel exports could prompt retaliation from other WTO members.

"Besides, this measure will only resolve the problem in the short term. I think we should respect the market mechanism on this issue in the long run," Liu said, suggesting that the government could provide low-interest loans for the companies suffering from higher steel prices.

Wu Sheng-feng (吳聖峰), chief executive of the Taiwan Steel and Iron Industries Association, said the supply of steel was not as tight as reported, but companies refused to pay more.

As the prices of raw materials such as steel scrap have risen 220 percent over the past two years, companies should adjust their production according to the new costs, Wu said.

Minister of Economic Affairs Lin Yi-fu (林義夫), who also attended the legislative session yesterday, promised to coordinate steelmakers to increase production and reduce exports, as well as investigating any stockpiling that could be artificially forcing up prices.

Legislators also criticized the ministry for failing to stabilize the prices of other construction materials, mainly sand and gravel.

The shortage of sand and gravel since the end of last year has driven up prices, halting building construction projects.

Lin responded that the ministry had lifted the ban on gravel imports from China and had reopened several rivers for quarrying.