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Understanding China's Impact on North American Manufacturing in the Steel Industry

This session at the American Metal Market Conference, led by Thomas A. Danjczek, focuses on the complexities of China's trade policies and their repercussions for North American manufacturing, particularly in the steel sector. Key topics include capacity growth projections, government subsidies, environmental challenges, and the implications of China's policies on global steel markets. The discussion emphasizes the advanced technological state of North American steel mills and explores the legislative context surrounding the U.S.-China trade relationship, providing a comprehensive understanding of these pressing issues.

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Understanding China's Impact on North American Manufacturing in the Steel Industry

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  1. AMERICAN METAL MARKET CONFERENCE: Solving the China Puzzle Session VI – China Trade and its Impact on North American Manufacturing Thomas A. Danjczek President Steel Manufacturers Association September 29, 2006 Rev. 9/1/06

  2. AMM – Solving the China Puzzle China Trade and its Impact on North American Manufacturing • Capacity (World, region, China by product, China’s announcements) • Subsidies (SMA statement, examples, comment re: AIIS • Environmental impact • Unknown • Conclusions

  3. Projected Worldwide Crude Steel Capacity vs. Demand (2006 – 2010) Million Metric Tons *Demand growth estimated at 6%/yr

  4. Worldwide Announced Steel Capacity AdditionsBy Region 139 120 Million Metric Tons 110 106 51 45 44

  5. China Announced Steel Capacity By Product 54 51 46 Million Metric Tons 37 5 5 4

  6. AMM – Solving the China Puzzle Notable China Capacity Announcements • Baosteel planning construction of a 20mt/yr mill • Wuhan plans 10mt/yr steelworks in southern China • Anshan ready to start 10mt/yr steel mill • Maanshan orders 5.5mt/yr hot strip mill • Hangzhou to resume previously suspended project to build 6mt/yr plate mill • POSCO in talks on 12mt/yr steel plant in China’s Fujian province

  7. AMM – Solving the China Puzzle China’s Subsidies SMA statement RE: WRF report, entitled: “The China Syndrome: How Subsidies and Government Intervention Created the World’s Largest Steel Industry”

  8. AMM – Solving the China Puzzle China’s Subsidies -Non-performing loans at state banks -Export subsidies -Import substitution subsidies -Preferential loans -Grants (land, cash, energy, raw materials -Environmental non-enforcement & weak regulation -Tax incentives & reductions -RMB manipulation -Debt to equity conversion -Barriers to foreign investment -Debt forgiveness WHO IN THE ROOM IS RECEIVING ANY OF THE ABOVE???

  9. AMM – Solving the China Puzzle China’s Subsidies Comments on AIIS report: “Integrating the Chinese Steel Industry and Trade Policy into the 21st Century” • AIIS’ attack on U.S. trade laws so that some importers can obtain illegally subsidized steel is not news for AIIS. • AIIS contradicts itself by acknowledging that tens of billions of dollars of investments by Chinese banks are directly controlled by the Chinese government. How does AIIS explain the 80% ownership of the Chinese steel industry by the Chinese government? • AIIS’ “not to worry” attitude regarding the potential for excess steel making capacity to choke world export markets is consistent with their view that China’s capacity growth is market-drive, rather than government subsidized. This is a prime example of distortion of the facts.

  10. AMM – Solving the China Puzzle Environmental Impact • U.S. EPA estimates that approximately 20% of the particulate matter in the skies above Los Angeles can be traced to China. • China’s environmental problems are severe, and getting worse. • The World Bank estimates that 16 of the world’s 20 most polluted cities are in China

  11. AMM – Solving the China Puzzle Unknown • JCCT Steel Dialogue – where goal is to promote transparency with better decisions??? • European Union antidumping investigation & targets??? • Energy cost & interest rate impacts??? • China’s restrictive policy of foreign ownership participation??? • U.S. legislation??? • Trade actions??? • When will China play by market rules???

  12. AMM – Solving the China Puzzle Conclusion • Continued North American steel industry resiliency. North American steel mills, for the most part, are technologically advanced, highly competitive, environmentally acceptable, and a key component of the North American economic infrastructure • U.S. Congress is very disappointed in the lack of China’s progress correcting currency manipulation • China has more government-financed steel making capacity than it can use • The growth of the Chinese steel industry has been at the expense of its international competitors • Concern with the displacement of steel consuming industries • China’s trade and environmental policies and laws are not enforced • North American steel industry CANNOT compete against the Chinese government • Still, reasons for meaningful optimism • It’s still a cyclical business, but enjoy today

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