MBIE rejects NZ Steel's latest complaint on Chinese imports

The Ministry of Business, Innovation and Employment took longer and wrote a bigger report but still rejected New Zealand Steel's latest complaint that Chinese imports have an unfair government subsidy.

The ministry was asked to investigate by BlueScope Steel-owned NZ Steel, which claims imported goods are being dumped on the local market, and that China is unfairly subsidising those firms. MBIE has to look at whether goods are dumped separately from whether they're subsidised.

Both studies were meant to be completed in October. While it wrapped up the dumping component on time, a High Court ruling complicated things for MBIE. That judgment found shortcomings in a separate subsidy review into imported Chinese galvanised steel coil and ordered the ministry to revisit that work.

MBIE's latest report took that judgment to heart, acknowledging NZ Steel's successful judicial review in the March 2019 report, and saying those issues had been addressed in its latest recommendation to the minister.

A contentious issue for NZ Steel was MBIE's testing of whether Chinese steel companies were meaningfully controlled by the Chinese government. The ministry said this investigation differed from earlier ones in that three of the four sample Chinese manufacturers cooperated and it was able to verify the information provided.

With that extra help, MBIE came to the same conclusion it did on two similar accusations that Chinese imported steel products were unfairly subsidised: Chinese government support was so small as to be meaningless.

"MBIE's conclusion is that on the basis of the primary information provided direct by interested parties and substantiated by verification or from other evidence available to MBIE, and for the programmes concerned, there was no financial contribution by a government or any public body," the report said.

"In addition, in relation to claims of preferential loans, MBIE has established that the cooperating sample manufacturers did not receive loans at preferential rates, while in relation to providers of hot-rolled coil (HRC), the prices paid by the sample manufacturers were broadly similar whether the supplier was an SIE (state-invested enterprise) or not, and were also similar to world export prices."

The 263-page document is the longest of the three subsidy reports produced by the ministry during the past two years, and included greater detail on how it uses information in its investigations.

Commerce Minister Kris Faafoi signed off the investigation's termination on March 28, with the notice published in the government's Gazette on April 1. That coincided with Prime Minister Jacinda Ardern's first state visit in Beijing, where she met with President Xi Jinping and Premier Li Keqiang in a fleeting trip.

The mere fact that an investigation was being considered in mid-2016 stoked speculative reports that New Zealand exporters faced retaliation if anti-dumping provisions were imposed on Chinese steel imports.

China's steel exports have been a bone of contention around the world. US and European producers accused the Asian nation of undercutting their local industries through subsidies and overproduction.

NZ Steel, a wholly-owned subsidiary of Australia's BlueScope, is the country's largest steelmaker. It considers that steel made in China is subsidised by the government there and that imports of it cause material damage to the domestic industry.

The local steelmaker has sought relief over three different steel products, complaining of unfair subsidies or product being dumped in New Zealand to undercut domestic production. Each time it's been told any subsidies are too small to make a difference to the company's margins, and that dumping that's occurred has also been too small to undermine the local industry.

NZ Steel's first complaint about claimed subsidies on galvanised steel coil imports is back with MBIE after the successful judicial review, and is running behind schedule.

MBIE was targeting a February release for an essential facts and conclusions report, which typically forms the basis for a final decision. On March 6, MBIE told BusinessDesk it hoped to have the report out in "a few weeks". That initial time-frame would have meant a final report could have been made in April.