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Report finds Chinese steel heavily subsidized

Chinese workers weld steel at the Behlen Manufacturing plant on the outskirts of Beijing. A new report finds that Chinese steelmakers receive huge government subsidies.

China makes half the world’s steel with the help of heavy government subsidies and other unfair advantages, a new report found.

Five trade associations, including the American Iron and Steel Institute and the Steel Manufacturers Association, studied the various types of subsidies the 25 largest steelmakers in China get since they provide good-paying jobs. Ansteel Group for instance received $385 million yuan ($57.8 million) in subsidies, including cash grants and capital infusions.

Shougang Group got more than $1.5 billion yuan ($225.4 million) in subsidies such as tax benefits and preferential loans, at a time when Chinese capacity utilitization was as low as 65.8 percent, the report found.

The Chinese government has supported the country’s steel industry primarily through cash grants, equity infusions, government-mandated mergers and acquisitions, preferential loans and directed credit, land use subsidies, subsidies for utilities, raw material price controls, tax policies and benefits, currency policies, and lax enforcement of environmental regulation, according to the report.

“The Chinese government maintains a majority share in the top-producing Chinese steel producers. Domestic steel producers are not competing with private enterprises but with sovereign governments that do not need to use free-market principles to operate,” the report stated.

Steelmakers such as U.S. Steel have decried such subsidies, which they don’t get, as distorting the market and fueling global overcapacity, which drives down prices.

The United Steelworkers union blames imports for more than 19,000 layoffs of steelworkers and iron ore miners over the last few years.

The trade organizations behind the report are hoping to keep China from being granted market economy status in the World Trade Organization in December, which potentially would remove dozens of tariffs the United States already has imposed on Chinese steel.

The report found in 2014 China made 822 million tons of steel, or about half of the steel made in the world. The Chinese economy and demand for steel there has slowed, so Chinese steelmakers have been dumping excess steel abroad, creating a global import crisis that’s resulted in layoffs and mill closures.

“It is unreasonable to believe that U.S. steel pipe and tube producers can compete in the global trade arena when a foreign government is subsidizing its steel industry,” said Roger Schagrin, Executive Director of the Committee on Pipe and Tube Imports. “It is time that our U.S. government and our global allies work together on a definitive policy that will end this chronic overcapacity which has resulted in plant closures, worker reductions and injury to communities across the United States.”

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Business reporter

Joseph S. Pete is a Lisagor Award-winning business reporter who covers steel, industry, unions, the ports, retail, banking and more. The Indiana University grad has been with The Times since 2013 and blogs about craft beer, culture and the military.