How to Deal with Chinese Steel Aluminum Enterprises

Update:30-03-2018
Summary:

Following the United States' taxation on global imports […]

Following the United States' taxation on global imports of steel and aluminum products, the European Union, Japan, and other countries have successively resorted to trade remedy measures or investigations on related products. Global trade disputes are continuing to ferment.

On March 29, the spokesman of the Ministry of Commerce stated that the bad practices of the United States are like opening Pandora's box, which threatens to trigger a chain reaction and will spread protectionist "viruses" globally.

Under the cloud of trade wars, many domestic companies and citizens have voiced their opposition. China's steel and aluminum companies are also actively exploring countermeasures and development measures.

The China Nonferrous Metals Industry Association’s vice president Zhang Wenjun stated at the “2018 Thirteenth Copper and Aluminium Summit” jointly organized by the Shanghai Nonferrous Metals Industry Association and Shanghai Nonferrous Metals Co., Ltd. “China is not willing to fight trade wars but is not afraid to trade. The overall consideration of the domestic industrial development and the overseas production capacity layout and the formation of domestic industrial policies and international trade policies that are compatible with them are important for training a professional team to deal with international trade friction. At the same time, China needs to unswervingly expand domestically. Consumers and international markets are actively exploring the markets of neighboring countries, including the markets of South Asia and Southeast Asia. They are potential large markets for China."

Local opposition is high

Although Nucor, U.S. Steel, AK Steel, ArcelorMittal USA, the four steel companies, recently expressed their gratitude to the Trump Steel and Aluminum tariff policy, they believe that this will support steel. The company's development and employment, but the United States downstream steel consumption industry expressed dissatisfaction.

Lawrence Summers, former U.S. Treasury Secretary and economist, said that Trump’s steel tariff policy will harm the economic interests of the United States, especially the interests of American workers. "Tariffs may cause far more damage to domestic workers in the United States than benefits, because workers in the steel consumption industry are 40 times more likely than the steel production industry."

On March 26th, Lamar Alexander, a member of the Tennessee Federal Senate, publicly criticized Trump's collection of steel tariffs "it is Washington's bad policy ever" because it has deeply affected Tennessee, the prevailing automobile industry in the United States. Tennessee is a large producer of the automotive industry. There are 929 suppliers and 3 large-scale production plants in 87 of the 95 counties in the state. Now that US steel tariffs have increased by 25%, domestic producers will raise the price of raw materials, and the cost of manufacturing cars will increase.

The increase in taxes was also met with fierce opposition from the US energy industry. Jack Gerard, chairman of the American Petroleum Industry Association, said that the equipment used in the oil and gas industry uses a lot of steel and aluminum. “Excluding national security as an excuse” imposes tariffs on steel and aluminum, “which will undoubtedly increase production costs. Consumer commitment.

The U.S. Oil Industry Association stated that if a 25% increase in the cost of pipelines is involved in a typical project, the entire construction cost may increase by $76 million and the cost of large-scale projects may increase by at least $300 million. Moreover, U.S. workers and businesses are major beneficiaries of existing pipeline projects.

In addition to the dissatisfaction with the domestic downstream industry's tariff policy, Vladislav Soloviev, the world’s leading aluminum producer, said that “Russian Americas was established in Delaware in 1999 to supply low-carbon aluminum products to the U.S. market to meet U.S. demand. Consumer demand continues to grow We are exporting to low-carbon aluminum products that are urgently needed by US downstream manufacturers in the US aluminum industry and have insufficient domestic production in the US We believe that US consumers should have as many diversified purchasing options as possible to purchase at a reasonable price. We have a low carbon footprint and good quality products. Therefore, we believe that Russia should obtain a tariff exemption to protect American consumers from price increases and help US manufacturing companies remain competitive."

On March 27, the website of the China Iron and Steel Association announced that the European Union announced that it initiated investigations into safeguard measures for imported steel products. This is a practice that the United States has complicated when it provokes incidents. The EU decision will intensify the international steel market. Uneasy and unstable. Since 2016, the appearance of China's steel capacity-removing effect has led to the gradual recovery of the global steel market. However, the current measures taken by the United States and Europe will cause confusion in the international trade order.

How to deal with Chinese enterprises

In recent years, the steel trade has become the hardest hit area for Sino-U.S. trade friction. Before the United States investigated steel 232, dozens of anti-dumping and anti-subsidy measures have been taken against dozens of products, covering almost all major steel products, and the tax rate is almost prohibitive.

Wang Hejun, director of the Trade Relief and Investigation Bureau of the Ministry of Commerce, pointed out that most of the steel and aluminum products imported by the United States are civilian low-end products that do not harm the national security of the United States. The United States limits the international trade of steel and aluminum products on the grounds of national security. The severe damage to the multilateral trade system represented by the WTO will certainly have a major impact on the normal international trade order.

The China Iron and Steel Association hopes that the European Union will seriously assess the impact of the United States on taxation measures on imported steel, and will adopt prudent safeguard measures. It also expressed its willingness to strengthen consultations and communication with the European Steel Union and the iron and steel associations and enterprises of various countries to jointly maintain the stability of the international steel market.

At the same time, the Association called on the Chinese government to take resolute responses to stainless steel, galvanized sheet and seamless pipes imported from the United States, as well as coal, agricultural products and consumer electronics. We will prevent the increase in imported steel products and impact the Chinese market. We will firmly safeguard the stability of the Chinese market and safeguard the interests and rights of Chinese steel companies.

Fu Peng, director of the investment and macro strategy director, said at the "2018th 13th Copper-Alium Summit" that "in the United States, when it is necessary to reshape the global trade supply chain, redistribute interests, and increase the demand for the United States itself, China must seek The substitution of external demand, while increasing the proportion of domestic demand."

Mo Xinda, Director of the Light Metals Division of the China Nonferrous Metals Industry Association, said that at present, China has more than 200 countries in terms of exports to the world. From the perspective of export volume, the number of exports to the United States accounts for 16%. The United States has a large consumer market, the market has a relatively high degree of credit, a variety of product structures, and rapid self-transformation. Multiple factors have led to greater demand for foreign aluminum products. From a large perspective, before the current trade frictions, Chinese and American entrepreneurs have a good international division of labor and cooperation. However, this situation is being forced to break.

For Chinese companies, Mo Xinda believes that it is necessary to strengthen self-regulation and increase import prices first. In addition, strengthen early warning and try to contact the downstream of the United States in order to get news in advance. Adjust the investment model, and optimize the layout of the industrial chain through mergers and reorganizations when the value of the company is located in the land. We must actively respond to such measures as lobbying, hearings, and group warming, and adopt reciprocal restrictions to curb the spread of trade frictions.

Mo Xinda emphasized that "from the point of view of international distribution, if there is no US-European market, there are other supplements, such as through our investment and economic and trade cooperation with other countries, it will further stimulate consumption."

According to Wen Jun, vice president of the China Nonferrous Metals Industry Association, “China's aluminum industry development strategy should be studied. Based on strict control of electrolytic aluminum production capacity, China Aluminum Industry will continue to adjust its industrial structure and product mix to expand its effective supply. The international trade friction will continue to expand and normalize. It will be of vital importance to consider the domestic industrial development and overseas production capabilities and to formulate domestic industrial policies and international trade policies that are compatible with it. It is important to cultivate a professional team that deals with international trade friction.

The literature army also stated that it is necessary to speed up the development of overseas aluminum resources and complete the overseas bauxite and alumina production capacity layout in 5 to 10 years. The overseas equity production capacity will reach 30 to 40% respectively. At the same time, it will take precautions to strictly control the new production capacity of domestic alumina, leaving a gap in the domestic supply of alumina, and the gap size will be adapted to the overseas alumina equity production capacity. Electrolytic aluminum to meet the domestic demand-based, strict control strict control of electrolytic aluminum production capacity, timely adjustment of electrolytic aluminum import and export policies. We must also strengthen basic research on new aluminum alloy materials and new product development, actively promote supply-side structural reforms, expand effective supply, and actively develop markets in South Asia and Southeast Asia. To improve the grade of recycled aluminum products, we must continuously improve the environmental indicators of the recycled aluminum production process, and promote clean production with a combination of electrolytic aluminum and recycled aluminum.