Question

Opening Case: Is China Dumping Its Excess Steel Production? QUESTION 1: Provide an overview of the current situation in the global steel market. As a steel producer from the United States, how do you feel about the dynamics described in the case? If you were a steelworker in the United States, what would be at the front of your mind? QUESTION 2: Why would Chinese steel companies be willing to sell their product at a loss? Though it has created a negative response from the U.S. Commerce Department, discuss the possible reasons that this strategy might be pursued.

Answer 1

ANS 1) The global steel market were facing a devastating phase because of the low priced exports of steel products from china. The United Kingdom has been particularly hard hit by Chinese imports. Chinese imports were taking up 45 percent of the UK steel market for steel rebar, up from nothing in 2010. Overall, steel imports from china doubled between 2014 and 2015. The UK lost some 4000 steel making jobs in the second half of 2015 as the Chinese grabbed market share. Elsewhere in Europe, the Luxembourg based steel giant Arcelor Mittal lost $8 billion loss in 2015 because of the exports of Chinese steel products.

As a steel producer from United States, i feel that the exports from china has really affected our sales as the Chinese products are available at low prices, people prefer to use those low priced products and thus the sales of our steel products has fallen drastically.

If i were a steel worker in United States, the first thing i would have in my mind is that i am going to lose my job as there were huge imports of low priced steel products from Chinese market, our company's sales would have gone down and as a result the company would layoff several employees.

ANS 2) Because of the huge boom in construction and infrastructure spending there was a high demand for steel products but when the economy slowed down in China, the government shifted its priorities away from massive infrastructure investments and toward boosting consumer spending. By the end of 2015, Chinese steelmakers were estimated to be producing 300 million more tons of steel a year than required for domestic consumption. Thus with prices for steel slumping, China's 101 steel firms lost over $12 billion in 2015, roughly twice what they made in profits during 2014. Because of these things the Chinese steel companies were forced to sell their steel products at a loss.

Even though it has created a negative response from the U.S commerce department, the possible reasons that this strategy might be pursued are given below-

• They wanted to sell the products because these were unwanted products in China.
• There was excess production.
• The steel companies were facing huge losses.