November 1, 2012
To the Editors:
I am writing to comment on your story of October 30, 2012, entitled “Chinese traders intend to
keep focus in Latin America.” The article quoted a number of Chinese sources claiming that
China has acted as a responsible source of exports to Latin America. The article did not note that,
in 2011, China alone accounted for nearly one-third of all extra-regional imports of steel into
Latin America, despite the obvious costs of moving steel from China to Latin America, and
despite the availability of plentiful quantities of higher-quality steel from the NAFTA countries.
The excessive level of Chinese steel exports to Latin America is a direct consequence of the
breakneck expansion of Chinese steelmaking capacity. In 2011, China’s steel production equaled
nearly 684 million tons – 45 percent of total world production. The article quotes one Chinese
trader as stating that China exports “only” 10 percent of its production. This 10 percent of
production would equal 68 million tons of exports – more than enough to wreck many markets
around the world. The relentless expansion of Chinese steel production has had negative effects
throughout the world economy, driving up raw material prices while driving down steel prices,
harming even the most competitive producers, including the U.S. steel industry. China continues
to add steelmaking capacity despite slowing domestic demand and global excess capacity that is
now estimated to exceed 500 million tons.
The explosion of Chinese production reflects a deliberate decision by the Chinese government to
subsidize the industry, despite China’s lack of any comparative advantage in steel production.
Chinese steel producers have higher raw material, energy, and transportation costs than their
competitors in the United States, among others. This lack of competitiveness is reflected in the
billions of dollars in losses suffered by the Chinese steel industry, which is the world’s most
unprofitable. Yet the Chinese government has continued to pour billions of dollars worth of
subsidies into the industry. Any discussion of China’s export activities without a discussion of
these basic facts is incomplete.
Sincerely,
Thomas Danjczek
President, Steel Manufacturers Association
13515719.1