China denounces U.S. trade ruling on steel pipes

By Steven Mufson
Washington Post Staff Writer
Friday, January 1, 2010

BEIJING -- China condemned on Thursday a U.S. agency ruling that clears the way for tariffs on imports of steel pipe from China and asserted that the global economic slowdown was the real reason for lower demand for U.S.-made steel pipe.

China's Ministry of Commerce said that China was "strongly dissatisfied" with the U.S. International Trade Commission's Wednesday ruling that Chinese subsidized imports had harmed or threaten to harm U.S. steel pipe manufacturers.

The ITC ruling involved one of the largest U.S.-China trade cases ever. It focused on the quadrupling of U.S. imports of steel pipe from China between 2006 and 2008 from $681 million to $2.8 billion. U.S. companies alleged that their Chinese rivals received discounts on raw materials and loans from government-owned firms.

The Commerce Ministry said that the ITC ruling was "wrong" and "ignored the fundamental reason" for the drop in demand for U.S.-made pipe. The ministry also blamed the collapse in oil prices in early 2009 for hurting U.S. manufacturers; steel pipe is largely used in the oil and gas industry.

"The export of oil well pipes from China won't damage or threaten the U.S. industry," the ministry said on its Web site.

Chinese companies said the tariffs would hurt business, but also noted that exports had already fallen in 2009. A report by the Shanghai Customs Office said that from January to November 2009, the export of oil well pipes in the Shanghai area plunged 85.5 percent compared with the year before.

But U.S. companies said that Chinese firms were still gaining market share in the first nine months of 2009 and that they had contributed to a drop in U.S jobs from 5,800 workers in 2008 to 3,400 workers.

WSP Holding Limited, a seamless pipe producer based in Wuxi, said that even though Chinese demand for steel pipe had dropped in 2009, it was down less than exports, which still account for 27 percent of total sales.

Han Fei, a salesman from Shengli Oilfield Highland Petroleum Equipment responsible for the South American and North American markets, said that the financial crisis had led to cancellations of orders during 2009. Before then, half of Shengli's output was sold to the United States.

Han said the company now has more than 10,000 tons of steel pipes stockpiled after customers opted to pay the penalty for breaking sales agreements in 2009. Some shipments were en route to the United States when customers backed out, and some workers were laid off.

Nonetheless, some firms said that the tariffs would still matter. Li Lianchang, head of the export intelligence department of Tianjin Pipe Group, called the tariffs "frost on the top of snow," an expression that means one disaster follows another. The snow, he said, is the economic crisis and the frost is the tariff.

Tianjin Pipe Group, the world's largest maker of steel pipe, would remain competitive in the United Sates with a 10 to 16 percent anti-subsidy tariff, said Li. But, he added, if the total amount is more than 20 percent, "it's totally impossible for us to export to the U.S."

Exports to the United States accounted for just 5 percent of the output of Tianjin Pipe Group, a state-owned enterprise.

The United States and Europe have been pressing China to let its currency appreciate so that its exports wouldn't have an unfair advantage. But President Hu Jintao recently brushed aside such a plan. And on Thursday the State Administration of Foreign Exchange, a unit of the central bank, said in a report that it "should decide on the method, content and timing of yuan exchange rate reform according to our own needs and development."

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