Asean steel associations seek review of free trade agreement with China

Steel industry associations from six Southeast Asian countries have jointly called for a review of a free trade agreement with China, in light of rising Chinese steel exports to the region.

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Since the 2010 free trade deal between China and the Assn of Southeast Asian Nations (Asean), there has been a surge in Chinese exports to the region, Chow Chong Long, president of the regional bloc’s iron and steel council, said.

The steel trade has gone in a “one-way direction and in a significant way”, Chow told Steel First.

The call for a review was submitted to Asean’s secretariat in Jakarta earlier this month, backed by national steel lobby groups in Malaysia, Indonesia, Philippines, Thailand, Singapore and Vietnam.

They want Asean to take up the case directly with China.

Steel exports from China to Southeast Asia have risen steadily in recent years, rising from about 10% of the total to 18% in 2011, before reaching 23% in the first half of 2012.

Import penetration in some markets has forced local steelmakers to cut production, since mills in Southeast Asia tend to be competing for the same market in basic commercial grades.

As a priority, steelmakers in Southeast Asia want the Chinese government to address loopholes in the export tax regime.

Chinese mills minimised the impact of higher export taxes imposed in July 2010 by adding boron to their steel so they instead qualified for tax rebates as alloy steels. This also means that the products often get further tax relief by avoiding higher import duties at the destination country.

“We do not mind fair trade, it is unfair trade that we are against,” Chow said.

Senior industry sources in Southeast Asia had told Steel First that they have become increasingly frustrated by a lack of movement on this issue from the Chinese government and the China Iron & Steel Assn (Cisa).

The call for a review of the Asean-China free trade deal adds to attempts in various member countries of Asean, including Thailand, Malaysia and Indonesia, to impose restrictions or anti-dumping duties on Chinese imports.

Japan has traditionally been the largest exporter to Asean in terms of its share, taking up more than 20% of the region’s import market, but mostly focusing on higher-grade steels.

When the final figures are tabulated for 2012, “I wouldn’t be surprised if China has overtaken Japan”, Chow said.