China’s Excessive Steel Production Triggers International Trade Tensions and Raises Strategic Worries
China’s steel production oversupply has become a significant issue, leading to international trade tensions and raising strategic concerns among other nations. Despite decreasing domestic demand, the Chinese Communist Party (CCP) has continued to increase steel production, resulting in a surge of cheap steel exports that have sparked a global backlash.
Last year, China’s net crude steel exports reached a staggering 856.81 million metric tons, a year-on-year increase of 64.2 percent. Steel exports also reached their highest level since 2016, totaling 902.64 million tons, a rise of 36.2 percent compared to the previous year. As a result, countries such as Brazil, Vietnam, India, the UK, the Philippines, and Turkey have initiated anti-dumping investigations against China.
The repercussions of China’s excessive steel production are evident across the globe. Chile, which has a free trade agreement with China, recently announced temporary tariffs ranging from 25 to 34 percent on imported steel from China. This decision came after Chile’s largest steel manufacturer, Huachipato, had to suspend production due to the inability to compete with Chinese steel products that were 40 percent cheaper.
The issue has also caught the attention of President Joe Biden, who called for an increase in tariffs on Chinese steel and aluminum from 7.5 percent to 25 percent. Biden accused Chinese steel manufacturers of not competing but cheating. Mexico has already taken action by imposing tariffs of nearly 80 percent on certain steel products from China.
While China faces international backlash, its domestic steel demand continues to shrink. The collapse of China’s real estate sector has led to a sharp decline in steel demand. Additionally, financial constraints in local governments have halted many infrastructure projects. China’s real estate construction typically accounts for about 25 percent of global steel demand in a typical year, according to Frederic Neumann, chief Asia economist at HSBC.
A report released by the China Metallurgical Industry Planning and Research Institute predicts a 3.3 percent year-on-year decrease in China’s steel demand in 2023, with a further decline of 1.7 percent expected this year. The ferrous metals processing industry, representing China’s steel industry, reported the highest loss among all industrial sectors in the first two months of this year, amounting to 14.61 billion yuan (US$2 billion).
China’s excessive steel production is not merely an economic issue but also a strategic consideration for the CCP. The regime aims to gain manufacturing dominance over Europe, the United States, and Japan. However, with shrinking domestic demand and increased tariffs worldwide, this strategy may prove counterproductive.
The CCP has employed aggressive tactics to expand its steel industry and achieve a monopolistic position globally. It has merged multiple steel producers into one giant conglomerate, Baowu Steel Group, which has become the world’s largest steel manufacturer. The CCP spared no effort in pursuing its goals, despite the impact on local government officials and private enterprises.
An analysis by the World Steel Association reveals that among the top 50 major steel producers globally, 27 are Chinese steel companies. Furthermore, six out of the top 10 steel producers in the world are Chinese steel companies. These statistics highlight China’s growing dominance in the global steel industry.
Despite the global backlash and shrinking domestic demand, the CCP continues to increase its steel production capacity as part of its broader global strategy. Experts believe that the CCP has long had global ambitions and sees steel production as crucial for industrial support during times of armed conflict. By developing its manufacturing industry and increasing steel production, China hopes to surpass the industrial support capabilities of the United States, Japan, and Europe in the event of war.
The strategic implications of China’s excessive steel production extend beyond economics. It has become a cause for concern among other nations, who perceive China’s actions as a threat to global trade and security. As tensions rise and international trade tensions escalate, it remains to be seen how China will respond and whether it will adjust its steel production policies to alleviate the concerns of its trading partners.
In conclusion, China’s excessive steel production has triggered international trade tensions and raised strategic worries among other nations. The surge in cheap steel exports has led to anti-dumping investigations and the imposition of tariffs by various countries. Meanwhile, domestic demand in China continues to shrink due to the collapse of the real estate sector and halted infrastructure projects. The CCP’s aggressive tactics to expand its steel industry and achieve a monopolistic position globally have further fueled concerns. As China’s global ambitions and steel production capacity increase, the implications for global trade and security remain uncertain.
