UPDATE: Chinese subsidies on steel imports not hitting NZ Steel margins: MBIE
(Updates with Dean's decision, more detail)
By Paul McBeth
July 7 (BusinessDesk) - Chinese subsidies on galvanised steel coil imports won't attract the wrath of the government after Commerce Minister Jacqui Dean accepted a report that they're too small to have injured the domestic industry, dominated by Australian-owned New Zealand Steel, which cried foul about the rival Chinese supply last year.
The Ministry of Business, Innovation and Employment's final report released today found Chinese imports were undercutting NZ Steel prices, but couldn't be blamed on government support for Chinese manufacturers, which was minimal at most. Rising Chinese steel coil imports have moderated over the past two years and MBIE noted there hadn't been "a significant increase in the volume of imports of the subject goods in either absolute terms or relative to production or consumption in the domestic market."
NZ Steel, owned by ASX-listed BlueScope, filed a complaint with MBIE last year and mobilised a political campaign accusing Chinese government subsidies of causing material injury to the domestic industry.
In May, Dean wasn't convinced there were grounds for provisional measures to be imposed on Chinese imports and today accepted a recommendation that she "make a final determination that the subject goods are subsidised only to de minimis levels and are not by reason thereof causing material injury to the industry".
"MBIE's overall conclusion, based on the subsidy levels established, is that while there is evidence of injury to the domestic industry attributable to the price effects of imports from China, material injury to an industry is not being caused by the subsidisation of imports from China," the report said.
The finding was foreshadowed in a June essential facts and conclusions report, which received feedback from NZ Steel and the China Chamber of International Commerce.
The Chinese lobby group noted its "continuing concerns with respect to MBIE's findings relating to injury and causation" and called the ministry's findings on Chinese imports undercutting the domestic producer as "deficient".
NZ Steel "strongly disagreed" with MBIE's findings on subsidies, saying the ministry "conducted a 'misplaced search for incontrovertible direct and specific evidence of subsidisation,' has 'wrongly overlooked the compelling indirect and circumstantial evidence before it,' and has 'disregarded or unjustifiably discounted relevant and reliable evidence before it, and placed disproportionate weight on other less relevant and reliable evidence'."
The MBIE report shows NZ Steel's average selling price shrank 25 percent between September 2011 and June 2016 as the local company tried to match cheaper Chinese imports, which the company said was its strategy of trying to keep market share. While it lost market share between 2012 and 2014, it has since regained that ground, the report shows.
The company's earnings also showed steady and significant decline, which MBIE said "correlates significantly with and can be attributed to price undercutting, price depression and price suppression," but not linked to Chinese subsidies.
New Zealand importers who took part in the investigation were largely against imposing duties on Chinese steel imports, which would force them to lift their own prices and potentially push up the cost of construction.
MBIE started its investigation with little fanfare in December, simply noting it in the government's gazette without a public statement. Chinese steel imports have been a bone of contention around the world as US and European producers claimed their own industries were being undercut by the dumping of subsidised steel in their markets. When New Zealand was dragged into the matter last year there were claims Kiwi firms could face a backlash if the government pursued an anti-dumping probe.
The ministry found it difficult to secure responses from Chinese manufacturers, with just one of seven responding to its questionnaire, while Chinese government officials said they could only provide general answers "due to the lack of cooperation with the investigation by such producers". Several intermediary exporters provided information, and MBIE also used on US, European and Australian investigations and World Trade Organisation documents.