Global Steel Trade; Structural Problems and Future Solutions

CHAPTER 6
New Players in the
Global Steel Market
Introduction
In light of the instability caused by Russia’s emergence as a major exporter in recent years, U.S. steel
workers and producers have expressed concern about new players that may begin to compete
internationally. Three of these players, China, India, and Ukraine, have raised the most concerns as
potential threats to the global steel market’s stability, particularly given the continued aid of their respective
governments.
Although China is the world’s largest crude steel producer, its export potential may not be as great as
overall production might suggest, due to its relatively small number of efficient producers. However, the
Chinese government is undertaking a concerted effort to upgrade key producers. Government planned
and supported investment projects will improve production techniques and product quality. And a
government-directed consolidation of the industry will concentrate steel production around a small
number of large industrial conglomerates. The Chinese government intendes for these producers to enjoy
the full benefits of economies of scale and diversified business operations. If the domestic market cannot
absorb their production, they could become more significant exporters, and continued government
support raises concerns about the potential for unfair trade. With China’s accession to the World Trade
Organization (WTO), the United States will have available several key new mechanisms for addressing
trade concerns, including a special safeguards mechanism for import surges and increased disciplines for
subsidies.
Ukraine has significant potential for exporting large volumes of steel in the near term. While Ukraine was
not a major player in the 1998 steel crisis, prior to and since 1998 Ukraine has exported large volumes of
steel to the United States. Most of Ukraine’s steel production facilities remain government-owned, and the
government continues to focus on steel exports as a way of revitalizing the formerly state-controlled
economy. The government’s involvement in the steel sector increases the potential for unfair trade in
international steel markets.
India could also become a substantial exporter. Over the past few years, domestic demand in India has
greatly decreased, increasing the need for Indian steel producers to export their products. In addition,
government subsidization has created a steel sector that has a large amount of overcapacity. Given the
government’s involvement in the steel sector, the possibility of unfairly traded steel entering the global
market rises as India increases its exports.
Chapter 6: New Players in the Global Market—China 139