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Responsible Steel Marketing: Understanding the Challenges of Chinese Exports

This seminar conducted by Wilfried von Bulow, Chairman of the American Institute for International Steel, addresses the complexities of responsible steel marketing amidst the surge of Chinese exports. It discusses the importance of adhering to market demands and the implications of the U.S. trade laws on Chinese steel producers. The presentation explores cultural differences in market approaches, the impact of capacity excess, and how perceptions of responsibility vary among stakeholders. Key insights are provided on maintaining stability in pricing and production alongside evolving market dynamics.

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Responsible Steel Marketing: Understanding the Challenges of Chinese Exports

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  1. STEEL BUSINESS BRIEFINGSBB CHINAExport SeminarSHANGHAIApril 17 , 2007RESPONSIBLE STEEL MARKETINGByWilfried von BulowChairman The American Institute for International Steel (AIIS)Vice Chairman MAN Ferrostaal IncorporatedNew York, USA

  2. Watch the Speed Limit • As with road traffic speed limits have to be observed in the export business as well. • Rushing steel into a market provokes hostile reactions. • Until end of 2006 rising imports from China could be defended. • Defense might wear thin, should demand slow. • Chinese export rush has caused only temporary oversupply problem in the United States.

  3. Responsible or Prophetic Marketing? • In export business, responsible marketing can be interpreted as selling at pace/price that satisfies demand. • Potential problem for Chinese exporters are lead times. • Responsible export marketing is more complex when U.S. demand veers off. • U.S. steelmakers were cutting production to keep prices firm. • Given long lead times, was there anything the Chinese could have done differently?

  4. Culture Clash: Competition vs. Discipline • If Chinese steel producers were as consolidated as their U.S. counterparts, better control would be expected. • As long as China’s splintered steel industry competes vigorously at home and abroad, it will continue to clash with the U.S. industry’s more disciplined approach. • Which approach is the more responsible? • Many market observers would associate “responsible” with the disciplined, stable price policy of U.S. steelmakers. • Demand side has to be taken into consideration.

  5. Concern about Dimensions of Excess Capacity • Chinese steel export surge had other causes besides excess capacity. • China’s steel output now over twice that of the European community and more than four times that of the United States. • IISI membership includes steel manufacturers from around the world; they cannot be as direct as American steel company executives in their home country. • Steel report sponsored by several U.S. steel producers associations.

  6. The U.S. Trade – Law Defense • Once you are targeted for alleged violation of U.S. trade law, the odds are against you. • The U.S. Commerce Department (DOC) investigating complaints rarely comes up with a negative decision. • The U.S. International Trade Commission (ITC) investigating complaints is usually more neutral in its findings. • Whether Chinese steel exports to the United States were traded unfairly and caused injury will be influenced by the prevailing political mood.

  7. Market vs. Non-Market • The United States will look at China as a Non-Market Economy (NME). • As investment and operating costs in China are not set by markets, dumping margins are determined by using costs from “surrogate” countries. • Imports from NMEs are generally not subjected to subsidy investigations. • Now the U.S. steel industry and several other industries want China to be subjected to subsidy investigations as well.

  8. Conclusion: A Difference in Standards • Assessment of responsible marketing varies among steel market participants in the United States. • Steel producers more likely see it as an obligation to adjust sales volume. • Legal definition of import marketing as laid down in U.S. trade law. • U.S. producers are free to practice freight absorption when competing in distant markets. • Responsible marketing has different meanings to steel consumers, producers and government officials.

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