The G7 nations are to take steps to tackle a global glut in steel that many blame on overcapacity at Chinese producers of the material used in construction and cars, according to a draft text obtained by Reuters.
If adopted at the G7 summit in Japan later this month, it would likely add to pressure on China, which accounts for about half of global steel output, to take steps after production hit a record high earlier this year.
Steel mills from Australia to the UK are under threat of closure because of the glut.
Photo: Reuters
“We recognize the negative impact of global excess capacity across industrial sectors, especially steel, on our economies, trade and workers,” the draft text said. “We are committed to moving quickly in taking steps to address this issue by enhancing market function, including through coordinated actions that identify and seek to eliminate such subsidies and support, and by encouraging adjustment.”
G7 leaders are to meet on May 26 and May 27 in Ise-Shima near Nagoya, a major car production and steel manufacturing center.
China produced 69.42 million tonnes of crude steel last month, up 0.5 percent on the year, the statistics bureau said yesterday, with mills defying a sector slowdown in order to take advantage of higher profit margins.
Last month’s volume is slightly lower than the record 70.65 million tonnes of crude steel produced in March. Output over the first four months of the year has now hit 261.42 million tonnes, down 2.3 percent on the same period last year, the Chinese National Bureau of Statistics said.
Last month, China and other major steel producers failed to agree on measures to tackle the overcapacity crisis, prompting the US, the EU and others to call for urgent action.
China plans to shed as much as 150 million tonnes of domestic crude steel capacity in the next five years in a bid to help tackle the capacity overhangs that have saddled domestic firms with losses and debts.
France and Germany urged fellow EU members on Friday to tighten trade defenses to protect the bloc’s companies against floods of cheap imports, including steel products from China.
Cheap Chinese steel exports have been cited as one reason for Tata Steel Ltd’s decision to sell its British steel operations. Australian steel and mining company Arrium has gone into administration, while in Germany steelworkers have taken to the streets because of the threat of job cuts.
Chinese officials have said that they are already taking sufficient steps to curb capacity, while state news said blaming China for the international steel crisis is an excuse for protectionism that would be counter-productive.
Some European nations are opposed to the wording of the G7 draft text because of fears about retaliation from China, a source said.
China is not the only concern, with Japan threatening to take action against India at the WTO after it set minimum prices for imported steel. Japan and South Korea have also been criticized for exporting steel products cheaper than those sold domestically.
“In particular, we are concerned about subsidies and other support by governments and government-supported institutions that distort the market and contribute to global excess capacity, including such supports granted to overseas expansion of the capacity,” the G7 text said.
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