The EU launched an investigation yesterday into whether China is illegally selling steel at prices so low that they are hurting European steelmakers such as ArcelorMittal and ThyssenKrupp AG.
Steel producers complained in October, asking for a 40 percent surcharge on soaring imports of two types of steel and claiming that China's output was "out of control."
The European Commission will now investigate imports of hot-dipped metallic coated iron or steel flat-rolled products between Dec. 1 last year and Nov. 30.
Under global trade rules, the EU has the right to impose extra charges on imports if it gathers evidence that China is illegally selling below cost. The soonest there would be any hint of trade sanctions would be next year.
The European Confederation of Iron and Steel Industries, or EUROFER, "has provided evidence that imports of the product concerned from the People's Republic of China have increased overall in absolute terms and in terms of market share," the EU executive said in an official notice.
"It is alleged that the volumes and the prices of the imported product concerned have ... had a negative impact on the market share held, the quantities sold and the level of prices charged," it said.
EUROFER said in October that imports have increased from virtually nothing prior to 2004 to 12 million tonnes last year -- and European companies risked making cutbacks that would shed European jobs if this went on.
Its showed that hot-dipped metallic coated sheet and strip steel from China and stainless steel cold-rolled flat products from Taiwan, South Korea and China for building and engineering products are being dumped at prices 25 percent to 30 percent below the EU average.
The EU does not recognize China as a market economy because it suspects government subsidies may make usual business costs such as rent much cheaper than in other parts of the world. This puts the onus on Chinese steelmakers to prove that they operate in normal market conditions.
EU statistics bear out EUROFER's complaints: Steel imports from China during January to September grew 137 percent year-on-year, to 8.9 million tonnes.
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