U.S. industry association head: “Chinese producers are not responding rationally to market signals.”
It’s been pretty well documented that the global steel industry has an overcapacity problem. There is too much steel being produced – way more than the market will consume – and that’s depressing prices, and in turn causing layoffs. Most of this problem has come out of China, which is floating loss-making mills with generous government subsidies.
But steel isn’t the only industry that’s suffering from overcapacity. The U.S. aluminum sector is struggling with the same issue, as the Chinese competition, backed by Beijing, has captured more than half of the global aluminum market in only 15 years. Prices are dropping precipitously, smelters across America are closing, and workers are being turned out.
This is the kinda thing that catches Congressional attention, and it has instructed the U.S. International Trade Commission (ITC) to investigate. Its report is due next year, but it held a hearing this week to gather information. At it, the Chinese aluminum industry got raked over the coals by American industry executives and officials.
Here's a good summary quote of the mood in the room from Politico:
“Much of this expansion is being driven by misguided government policies such as artificial incentives, subsidies and provincial or local employment programs, all of which encourage the steady build-up in excess capacity and oversupply,” Heidi Brock, president of the Aluminum Association, told the trade panel.
“The simple fact is this: Chinese producers are not responding rationally to market signals, and they are not acting fairly or responsibly as members of the global economic community.”
What does China have to say about this? Well, an industry group made a “rare appearance” at the ITC hearings, where it urged dialogue and cooperation. That’s basically what the Chinese steel industry and the Chinese government have said in response to that sector’s overcapacity issues.
Meanwhile, the U.S. aluminum industry says the competition from China is getting creative in its efforts to evade the only existing U.S. aluminum tariff – one scheme claims a Chinese company has stockpiled a full 6 percent of the world’s inventory in Mexico to better hide the product’s origins, while another alleges a New Jersey company colluded to remelt (and therefore disguise) imports from that same company.
We'll be watching for news on this ITC investigation as it moves forward.