EU against China: Overcapacity in heavy industries is wreaking “far-reaching” damage

The Asian giant’s steel industry manufactures more than the next four largest producers combined – Japan, India, the US, and Russia – the European Union Chamber of Commerce in China said in a report, warning that more than 60 per cent of China’s aluminium industry had negative cash flow.


Beijing (AsiaNews/Agencies) – China’s overcapacity in heavy industries is wreaking “far-reaching” damage on the global economy, with steel production “completely untethered” from market demand, the European Union Chamber of Commerce in China said on Monday.

The Asian giant’s steel industry manufactures more than the next four largest producers combined – Japan, India, the US, and Russia – the chamber said in a report, warning that more than 60 per cent of China’s aluminium industry had negative cash flow.

And in only two years, its cement production equalled the amount produced in the United States during the entire 20th century.

“China has not followed through on the attempts it has made over the last decade to address overcapacity,” chamber president Joerg Wuttke said.

The issue has led to trade tensions between the world’s second-largest economy and developed countries that accuse it of dumping in their markets.

The EU launched inquiries this month into imports of Chinese steel, with trade commissioner Cecilia Malmstroem warning: “We cannot allow unfair competition from artificially cheap imports to threaten our industry.”

This month, the Luxembourg-based world leader in steelmaking, ArcelorMittal, blamed China for a colossal US billion loss in 2015, at a time when thousands of jobs are being cut across the industry.

On February 15 thousands of European steelmakers descended on the EU capital Brussels demanding that officials do more to stop the flood of cheap imports from China.

However, many Chinese steel firms are also losing money, and Beijing has announced plans to cut production by as much as 150 million tonnes over the next five years.

Beijing hopes to soak up overcapacity by selling its excess production to markets in Central Asia and the Middle East as part of President Xi Jinping’s “One Belt. One Road” plan, which has been touted as a revival of ancient Silk Road trade routes.

However, those markets were not big enough to absorb China’s overcapacity, Wuttke said.

It “is a complete mismatch, it will not put even a minor dent in the overcapacities in China”, he said.