China may ax steel-dumping tariffs

China, the world's largest steel consumer, may scrap anti-dumping tariffs on cold-rolled steel as part of efforts to lower raw material prices, which have pushed the country's inflation to a seven-year high.

Baoshan Iron & Steel Co (寶山鋼鐵), China's largest steelmaker by market value, and other Chinese steel producers have been asked by the government to justify their claim that rivals in Russia, South Korea and Taiwan are selling cold-rolled steel in China at below market prices.

"There is a strong intention to suppress raw material price increases," said Geoffrey Cheng, a Hong Kong-based analyst with Daiwa Institute of Research Ltd. "If they're talking about measures aimed at lowering prices, you can assume they're probably going to follow through with them."

Chinese Premier Wen Jiabao (溫家寶) said last week that April economic data, which showed inflation rising to 3.8 percent from 3.0 percent in March, would be assessed to determine whether further action was needed to curb the rise.

Changes in the domestic and international steel markets since China imposed anti-dumping tariffs on Russia, South Korea, Taiwan, Ukraine and Kazakhstan on Jan. 14 prompted the commerce ministry to call on domestic producers to prove the tariffs are still necessary, it said in an announcement on its Web site.

Local steelmakers have 10 days to confirm whether they will attend a June 1 hearing at which the government will decide whether to keep the tariffs in place, the announcement said.

The tariffs are retroactive to September last year and lasts for five years.

China Steel Corp (中鋼), Taiwan's largest steelmaker, is subject to levies of 24 percent, according to a schedule posted on the ministry's Web site.

South Korea's Hyundai Hysco, the steelmaking unit of South Korea's top carmaker, is subject to 12-percent tariffs.

"China Steel exports about 10 percent of output directly to China, though much more is sold downstream to steelmakers that also re-export to China," said Chung Lo-min (鍾樂民), vice president of finance at China Steel. "We welcome China's decision to drop its anti-dumping tariff if that's true."

Chung said that China's efforts to cool its economy and halt capacity expansion was the right move and bode well for long-term development.

"Production expansion in many of China's manufacturing sectors such as steel has reached a state of madness, driving up prices of raw materials and creating demand that will not sustain," he said.