U.S. steel producers rap China on fairness

U.S. steel producers rap China on fairness. U.S. steel producers fired another volley in their long-running dispute with the Chinese government, saying its massive ownership of that country's steel industry distorts the free market and violates China's commitment to the World Trade Organization. In a report, the American Iron and Steel Institute and the Steel Manufacturers Association said eight of China's 10 largest steel producers are 100 percent government-owned. The iron grip means the Chinese government decides which steel producers will merge, what products each will make and which will be supported in overseas expansion, said Alan H. Price, one of the authors of the study. "These are state-owned enterprises that have grown with state support and are acting in pursuance of a national policy," said Mr. Price, an attorney with Wiley Rein in Washington, D.C. He said that when China joined the WTO, it promised state-owned companies would make decisions based on commercial considerations rather than government policy. U.S. steelmakers said that promise had been broken. "Chinese steel producers are operating in an environment where basic market forces do not apply and where commercial decisions are mandated by the government," AISI president and CEO Thomas Gibson said in a statement. AISI's members account for about 75 percent of U.S. steel production and include Pittsburgh-based U.S. Steel. The report states that China has accounted for all of the growth in steel production since 2009 and now represents more than 45 percent of global steel production. Industry consultant Tony Taccone said that despite China's enormous growth and appetite for steel, there was little reason for its steel industry to be as large as it is. Many steel plants in other countries are more efficient than Chinese mills and are closer to sources of the raw materials that China lacks, said Mr. Taccone, a principal at First River Consulting in Pittsburgh. "There's a logic to why China ought to be developing differently," he said. Mr. Taccone said history had shown that government control of industry typically leads to policies emphasizing employment and production rather than efficient use of capital. He also noted that China prevents overseas producers from investing in China, while Chinese steelmakers eagerly pursue expansion abroad. "The [U.S.] industry is right to be frustrated because the system as it exists is patently unfair," Mr. Taccone said. Metals analyst Charles Bradford said 95 percent of China's steel production goes toward internal consumption to meet demands from its growing industry and infrastructure requirements. While some of the U.S. industry's complaints about Chinese government subsidies are legitimate, U.S. producers also benefit from government incentives, said Mr. Bradford, a partner with Affiliated Research Group. U.S. steel producers and the United Steelworkers union are also angered by what they say is China's policy of keeping its currency artificially low in order to subsidize the country's export industries. Critics say the policy has cost millions of American workers their jobs. The industry and union are among those supporting legislation that would punish China for manipulating its currency. The proposal, co-sponsored by Rep. Tim Murphy, R-Upper St. Clair, was approved by the House of Representatives but has not been acted on by the Senate. By Len Boselovic, Pittsburgh Post-Gazette