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Excess supply of steel has forced many of China’s biggest producers to dump excess stock on international markets.
A flood of Chinese steel being dumped on to international metal markets is threatening to pitch the world’s two largest economies into a bitter all-out trade war.
The US fired the first shots last week when the Department of Commerce imposed duties on the imports of carbon and alloy steel wire from China after complaints of dumping made by several North American producers. According to the ruling, some Chinese exporters of steel wire to the US will face anti-dumping duties of as much as 110.25pc.
In response to such anti-dumping rulings, China’s ministry of commerce has repeatedly warned the US authorities to resist protectionist policies and abide by their country’s global commitments to maintain free trade. However, as more and more Chinese metal floods on to global markets, the scene is being set for a broader breakdown in trade relations between Washington and Beijing.
The trigger for the US Department of Commerce’s action has been a dramatic slowdown in demand for steel in China’s domestic construction industry and overcapacity amongst the country’s mills. Platts’ China Steel Sentiment Index has slumped to its lowest level since it began tracking the market in May 2013, as producers absorb slowing domestic demand and a tougher environment for exports.
The index has dropped 12.47 points month-on-month to a reading of 25.61 out of a possible 100 points in November. A figure below 50 points for the index, which surveys up to 75 Chinese steel market participants, shows a contraction in sentiment.
Excess supply has forced many of China’s biggest producers to dump excess stock on to the international market, with a potentially devastating effect for US and European mills. China already accounts for about half the world’s exports of steel. However, the US industry has been helped by lower energy costs in Europe, while in the UK producers are being squeezed from both sides.
“We are confident that weaker Chinese demand during the winter coupled with overproduction will continue to result in high Chinese steel exports, which is also likely to weigh on European prices,” warns Commerzbank (Xetra: CBK100 - news) .
Despite the slowdown in its domestic market, China is continuing to produce record quantities of steel and this year official figures suggest that output could exceed 80m tonnes. In addition, Chinese producers, which already are among the cheapest in the world due to cheap labour and power, costs are benefiting from a deep slump in the cost of raw materials such as iron and nickel ore.
European smelters are already beginning to suffer from a flood of cheap Chinese steel. According to Macquarie, Chinese stainless steel exports to Europe have surged by 115.4pc to 522,000 tonnes in the first three quarters of the year. The broker also notes that China’s share of the market for cold-rolled stainless steel sheet metal, a material used widely in the European car industry, has climbed to 35pc in the past few months, up from just 10pc last year.
In the UK, the industry’s decline since it was privatised in the 1980s has been pronounced. Recently, Tata Steel (BSE: TATASTEEL.BO - news) said it had entered into talks with Switzerland’s Klesch to sell part of its British operations, raising concerns over jobs in Scunthorpe and on Teesside. To compete with cheaper Chinese prices, the UK industry has focused more on higher- value steel products in recent years.
However, according to Wolfgang Eder, chairman of the World Steel Association, the US is much more aggressive in challenging price-dumping activities than the European Commission.
“You have only free trade in Europe,” Mr Eder, who is also the chief executive of the Australian producer Voestalpine (Xetra: 897200 - news) , told The Daily Telegraph. “Europe is really the only region that has free trade and this creates several problems for Europe as other regions try to protect their economies from competition from outside,” he said.
= Oil price slide Iran and Venezuela form alliance to pressure Opec towards $100 =
Top officials from Iran and Venezuela held high-profile meetings over the weekend that are said to be the first signs of major oil producers plotting to cut production in order to restore oil prices back to a level of $100 (£63.80) per barrel.
Iran’s oil minister Bijan Zanganeh and Venezuela’s representative to the Organisation of Petroleum Exporting Countries (Opec) have held meetings in Tehran to discuss a strategy to halt the current slide in prices, which has resulted in Brent crude falling 28pc in value since June.
“A return to past oil prices is difficult, but we have to modify the price to a level allowed by new market conditions,” said Mr Zangeneh said following the meeting.
Mr Ramirez told the Iranian oil ministry’s state-run news agency, Shana: “We believe that the prices are at a very low level and instability in the market is in no one’s interest. One hundred dollars per barrel is the desirable price for Venezuela.”
Both Iran and Venezuela are thought to be hawks within the 12-nation group of Opec producers. However, both countries will have to convince Saudi Arabia the group’s largest producer if significant reductions to its 30m barrels per day production limit are to be successful .
Opec meets in Vienna on November 27.
= Cotton =
King cotton appears to have lost its crown after the material joined the global commodities rout.
Cotton traded in New York closed last week at $58.57 (£37.36) per pound, its lowest level in almost five years and a 6pc decline on the week.
Cotton is suffering from the same problem now facing the entire commodities and raw materials supply chain: too much supply coupled with too little demand.
The US Department of Agriculture has increased its estimate for global cotton stocks as of the end of the current crop year in 2015 to a record 23.4m tons, largely due to a higher than anticipated picking estimate in North America. Growers expect prices to fall further.
| Product Model | Inside Diameter | Outside Diameter | Thickness |
| 23264BK+H3264 NTN | 300 | 400 | 56 |
| 22264BK+H3164 NTN | 300 | 400 | 56 |