Chinese trade practices have generated abundant irritants in US China business relation. Charges range from currency manipulation, export subsidies, assistance to state owned enterprises, to restriction on export of raw materials for the benefit of indigenous producers.
Manufacturing sector in US is losing its leadership in productivity and low capacity utilisation arising out of poor demand leading to maximum loss of jobs. Although US ranks 6th in direct steel exports from China, nearly 20% of merchandise imports to US comes from China which ranks first in indirect export of steel to US in the form of machinery and equipment.
Diversification of exports to a wide range of countries also forms a part of a deliberate strategy of China.
In the first nine months of the current fiscal, trade data reveal that China has exported a total quantity of 37.2 million tonne out of which 22 % has gone to South Korea, 5% to India, 2% to Japan, 3% to Taiwan and another 2% to Russia.
As long, flat constitute 45% each and tubes and pipes another 7% of the total production basket, it is natural that China has the option of choosing among the countries with diverse steel requirements for exports. Chinese steel import stands at around 12 million tonne during the period, which primarily arrives from Japan (47%), South Korea (26%) and Taiwan (13%).
The traditional interdependence in steel trade of China with South Korea, Taiwan, Vietnam and Japan would continue to be strengthened in the years to come in view of drying up of demand in Europe and US. Also the spate of anti-dumping and countervailing duty cases initiated and imposed by US has prompted China to divert export to African countries, Middle East and South Asian countries. However, more utilisation of Singapore and Hong Kong route has increased the third country mode of exports and that constitutes another charge of US against Chinese steel exports.
Chinese imports of iron Ore have reached more than 508 million tonne during January-September 11 with 42% from Australia, 21% from Brazil and 12% from India. China is scouting for high grade iron ore lumps and its demand for seaborne iron ore may be less than the previous year.
The current ruling price of Indian exports of fines (63.5% fe) CFR China at $ 133 per tonne is showing a declining trend. China has made exports of coke negligible, to make it available for domestic end users.
The chances of China agreeing to lift restrictions on export of 9 major raw materials as advised by WTO are remote. It is also seeking the status of market economy from EU in lieu of helping them out of the sovereign debt crisis. Thus Chinese trade policy is realpolitik with rhetoric playing no role.
The author is DG, Institute of Steel Growth and Development. The views expressed are personal