April 5, 2024

Steel Market Summary - Australia

Australia Receives Embarrassing Anti-Dumping Ruling

A panel at the World Trade Organization (WTO) has found that duties imposed by Australia in a steel products dispute with China were flawed. Canberra has accepted the ruling. The problem here is not so much the size or nature of the error: rather, it is that our Anti-Dumping Commission´s system was shown to be fallible. China had launched the complaint in June 2021 over anti-dumping and anti-subsidy measures on railway wheels, wind towers and stainless-steel sinks. In all three categories, the WTO said Australia’s investigating authority, the Anti-Dumping Commission (ADC), had acted inconsistently with some articles of its own rules. Issuing a mea culpa statement in March, the Australian Trade Minister, Don Farrell, agreed the panel had found some technical issues with how the duties were calculated. “Australia will engage with China and take steps to implement the panel’s findings,” Mr Farrell said. However, in a push-back against the ruling, Mr Farrell also said: “The report does not diminish the integrity of Australia’s trade remedies system. Our system is evidence-based and non-discriminatory and will continue to respond effectively to unfair trade practices.” Perhaps so. But an inescapable reality is


the heightened air of suspicion over how the ADC is operating and whether its protection powers are being appropriately requested and implemented. The history is that Canberra had imposed duties totalling 10.9% on Chinese wind towers, 17.4% on railway wheels and up to 60.2% on stainless steel sinks. China has called the WTO’s ruling objective, fair and unambiguous, and has urged Australia to rectify what it called “violations” by removing the disputed tariffs.

It´s worth remembering the terminology used in such cases. The ADC´s website says “dumping” generally occurs when a company exports a product into Australia at a price that is lower than the price charged in the country of manufacture. “Subsidisation” is a financial benefit an exporter receives from a government. This subsidy may allow the exporter to sell its goods into Australia at a lower price. The ADC says an anti-dumping “measure” is an additional duty on dumped imports that have injured Australian industry. A “countervailing” measure is an additional duty on subsidised imports that have injured Australian industry. The ADC says material injury to an Australian industry can include loss of sales, profits, market share and/or productivity; also, negative impacts to prices, cash flow, inventories and employment. The injury must be greater than what normally occurs in the normal ebb and flow of business. To decide if the imports have caused material injury, the ADC examines the volume and price of the imports and their effect on Australian producers of like goods. Speaking of importing and exporting, our companion website AustralianSteel.com has just published a special product feature focussing on importers. Click here to see the information.

The recent price decline in iron ore seems to have stopped. As our graph shows, the key steelmaking component presently sits at USD 101 per metric tonne (m/t). Australia is the world’s largest exporter of iron ore, having shipped out about 930 million m/t last year which would be worth about $93 billion at today´s rates. Just over 80% of our iron ore exports head to China, which buys about 70% of the total global seaborne volumes and produces almost 60% of the world’s steel. Thus, Australia is central to and profits greatly from a relationship of a dominant producer and a dominant buyer in the iron ore market. However, if analysts who attended the recent Global Iron Ore and Steel Outlook Conference in Perth are to be believed, there are dark clouds on the horizon. They said the nature of China’s demand and the process of making steel are likely to change soon. According to the World Steel Association, China’s annual steel output has remained steady for the past five years at about one billion m/t but is forecast to gradually decline in the next few years as China’s infrastructure and housing construction ease. Also, China will increasingly use more scrap steel and less iron ore in electric arc furnaces to produce greener steel products.

While Australia’s iron ore miners may be able to offset the loss of some of China’s demand by selling to newer steel producers in south-east Asia, it’s likely the overall market for iron ore will decline. It’s also likely to change in composition, with higher grades of iron ore preferred as a feedstock along with scrap in electric arc furnaces. Higher grades of iron ore can also more easily be upgraded into direct reduction iron (DRI) which can be turned into steel without using coal as a fuel. Clearly, decarbonisation and the greening of the steel industry are going to come at a cost.

Finally, the Australian Steel Association is hosting a luncheon event worth attending in Melbourne on Tuesday, April 9. The event – Forging A Sustainable Future: ESG Insights & Carbon Reduction in the Steel Industry – will hear from top experts from KPMG and the Commonwealth Bank in a panel session focussing on the evolving landscape along the decarbonisation journey within the Australian and global steel industries. Here are the details: ESG Insights & Carbon Reduction in the Global Steel Industry 2024 | Australian Steel Association