UK steel industry calls for protectionist measures against China-led oversupply | steel industry

Britain's steel industry has urged the government to consider further protectionist trade measures to prepare for a flood of imported steel amid a global supply glut led by China.

The global industry has 543 million tonnes of surplus steel, lobby group UK Steel said in an analysis published on Monday. This is 70 times more than the UK uses each year. The UK will face a cliff edge in 2026 when current protections run out, it said.

China's steel industry is experiencing a deep recession amid a years-long crisis in China's real estate industry that has dragged down domestic steel demand. Last August, the CEO of China Baowu Steel, the world's largest steelmaker, said the industry was facing a severe crisis that could be worse than the 2008 financial crisis or the 2015 slump in demand that saw thousands of British steel jobs cut. He said he was spending winter. Oversupply in China is driving down prices globally.

UK Steels director-general Gareth Stace said the UK must balance national interests with international obligations and act to protect its industry or face the prospect that the UK's recent investments in the steel industry will be worthless.

Britain currently has so-called steel safeguards in place to restrict the diversion of cheap steel into the UK. It was imported in 2018 to prevent the diversion of Chinese steel after U.S. President Donald Trump imposed tariffs on American imports. However, this protection expires in 2026 and may not be extended under World Trade Organization (WTO) rules. But the industry wants Britain to consider protecting its steel industry.

Russell Codling, UK Marketing and Business Development Director at Tata Steel, said: “The scale of oversupply from China to the global market is overwhelming every corner. The trade protection mechanisms currently in place are not sufficient to deal with this situation.

Lower prices benefit steel users, including construction projects and critical infrastructure. However, the steel industry tends to have political influence, and domestic steel production capacity is also considered an important indicator of industrial power and geopolitical power.

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The UK government, now Conservative and now Labor, has pledged 500m to convert blast furnaces at the Tata Steels plant in Port Talbot, south Wales, to clean electric furnaces. Indian-owned Tata closed its last blast furnace last week, costing 1,900 jobs, but the government insists the investment will help sustain Britain's steel industry. Chinese-owned British Steel is also trying to negotiate state support to convert to electric furnaces.

Deciding whether to impose protectionist measures could be tricky for a Labor government. Other countries, especially the United States, have essentially ignored the WTO, and pressure is mounting within the EU to expand what the rules allow.

UK Steel argued that the UK would face further trade diversions if it did not take action. The UK proposed that it should consider imposing tariffs on steel imports above a certain level. A carbon border adjustment that puts a price on carbon emissions from dirty furnaces could also help British industry, he said.

The growth of global excess capacity, driven and maintained by non-market forces, is one of the biggest challenges for the global steel industry of our time, Stace said. There is a possibility of redrawing the map of the global steel industry because there is no longer fair competition.

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