Following warnings by European steelmakers that dumping was likely to increase, the European Commission has launched an inquiry into Chinese subsidies for steel sold to the EU.

Chinese producers benefit from government subsidies such as preferential lending rates and low energy charges claims the submission from the European Steel Association which also forms the basis of the inquiry.

The association said that Chinese companies were able to export steel to the EU at prices that damage European steel producers due to the subsidies. As soon as China diverts steel to the EU from the US and other countries that have clamped down on dumping, the imports would again rise, the commission said adding that it had been provided credible evidence of this.

“The commission decided to act early, motivated by the threat that continuation of imports under current conditions might cause economic damage to the EU industry,” the commission said.

Recently Tata Steel announced its decision to pull out of the UK, directly threatening about 15,000 jobs and many more that rely on the sector and the inquiry is the first move announced by the commission since then. A new “threat of injury” mechanism that does not require proof of injury before proceedings start formed the framework fr the inquiry launched by the commission.

Pompted by a slowdown in the Chinese economy, Chinese dumping of cheap steel have been identified to be partly responsible for the crisis in the industry. Imports of hot-rolled products of iron, non-alloy or other alloy steel from China would be covered by the investigation by the commission’s anti-subsidy investigation cell.

Sajid Javid, the business secretary, has stepped up efforts to support the steel industry after he was accused of complacency early in the steel crisis and since then the UK government is trying to find a buyer for Tata Steel.

“This is welcome news for British steel, particularly Port Talbot which produces nearly a million tonnes of this type of steel every year. It’s exactly the action we have been pushing hard for in Europe and this type of investigation, the first of its kind, means anti-dumping tariffs can be imposed much earlier,” Javid said.

The commission has imposed some measures to deal with the practice of dumping and is already investigating dumping of Chinese steel in the EU. Cheap Chinese imports have sent the price of steel plunging and put UK producers at risk. Britain’s steel industry has accused the commission of acting too slowly to cut off these imports.

Citing that tougher EU trade rules against dumping could have increased prices for British shoppers, Javid have opposed such proposals even as the UK government has called for tougher action from the commission.

“This is a welcome and much needed investigation into Chinese government subsidies which will run in parallel with the investigation into dumping of steel into the EU. The commission and member states must commit to using all the measures available to tackle this problem in the short term,” Gareth Stace, director of UK Steel, the British industry lobby, said.

“The commission should take this opportunity to revamp the way it operates and speed up its investigation to ensure that it tackles the problem in the shortest possible time,” Stace added.

(Adapted from The Guardian)