Late last week, the Government of China announced that it would be removing export taxes on many steel products, including wire, rods, bars, billets, and stainless steel plate, as of January 1, 2018. The move is part of a number of tax changes. The steel export tax has not prohibited massive volumes of Chinese steel from being shipped to other markets in the face of overwhelming overcapacity at home. But the absence of the export tax will make it even easier for Chinese steel producers to export steel products around the world. Notably, China typically adjusts export tax levels on an annual basis as a policy measure to encourage or discourage certain exports. Thus, this latest decision signals not only the Government of China’s continued active intervention in the market, but its support for even greater exports of Chinese steel, which the world can hardly absorb.

Low-priced Chinese steel has long been the target of antidumping and countervailing duty trade actions in numerous countries that have seen their domestic steel industries hammered by surging imports, including the United States, the European Union, Canada, Mexico, Australia, and several of China’s neighboring Asian countries. According to the OECD, global steel capacity reached 2.38 billion metric tons in 2016, with China alone accounting for more than half of that capacity. Another nearly 40 million metric tons of worldwide capacity additions are under way and expected to come online by 2019. An estimated 53 million metric tons of capacity expansions are also in the planning stages over the next few years. The modest improvements in global steel demand in 2017 and 2018 are insufficient to combat the overcapacity crisis. As the Chairman of the OECD Steel Committee stated in September 2017, “Forecasts by external experts suggest that steel demand could reach only 1.87 billion metric tonnes in 2035, which would be 0.49 billion metric tonnes or 20.1% below the latest steelmaking capacity level expected for 2017.”

In the past year or so, a groundswell for collective, international action in response to the glut of Chinese steel has resulted in important statements made at the G-20 (establishing a Global Forum on Steel Excess Capacity), the OECD, and the WTO, but with little more than non-binding commitments from China. Ironically, China announced that it was relieving taxes on Chinese steel exporters just days after the United States, the European Union, and Japan issued a statement on global trade crises in the wings of the WTO’s ministerial summit in Buenos Aires. The members agreed to “enhance trilateral cooperation in the WTO and other forums” to address, among other things, “severe excess capacity in key sectors exacerbated by government-financed and supported capacity expansion, {and} unfair competitive conditions caused by large market-distorting subsidies and state owned enterprises.” The mention of “excess capacity in key sectors” did not need to directly mention China or steel to reach the right audience, but will likely continue to fall on deaf ears.