EXPORT BARRIERS AND GLOBAL TRADE
IN RAW MATERIALS: THE STEEL
INDUSTRY EXPERIENCE
Alan Price
Raw Materials
• The global steel industry depends on key raw materials
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Iron ore
Steel scrap
Coke
Coal
Ferroalloys
Natural gas
• These raw materials are internationally traded
– Over 40% of world iron ore production is traded internationally
• Few countries are self-sufficient in all of these raw
materials
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A Worrisome Trend
• World demand for raw materials for making steel
is likely to continue to increase
– Increased steel production in China, India, and Brazil
– Economic recovery
• But a growing number of countries are imposing
restrictions on exports of raw materials
– The following slides identify some of the restrictions
that various countries have imposed on exports of
raw materials used to make steel
• Rules regarding export restrictions change
frequently, making supply even more
problematic
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China
• China restricts exports of
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Coke
Steel scrap
Molybdenum
Fluorspar
Magnesium carbonate
Silicon carbide
Tin
• China is among the world’s leading producers of
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Coke
Fluorspar
Magnesium carbonate
Molybdenum
Silicon carbide
Tin
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Russia
• Russia restricts exports of
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Ferrous scrap
Aluminum ore and concentrates
Molybdenum ore and concentrates
Tin waste and scrap
Tungsten waste and scrap
Antimony waste and scrap
Nickel waste and scrap
Nickel products
Coking coal
• Russia is the world’s largest producer of nickel
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Ukraine
• Ukraine restricts exports of
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Ferrous scrap
Ferro-chromium-nickel
Unrefined copper
Copper waste and scrap
Nickel waste and scrap
Aluminum waste and scrap
Lead waste and scrap
Zinc waste and scrap
Tin waste and scrap
Tungsten waste and scrap
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India
• India restricts exports of
– Iron ore
– Ferrous scrap
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Indonesia
• Indonesia restricts exports of
– Steel scrap
– Copper ores and concentrates
– Lead ores and concentrates
– Tin ores and concentrates
• Indonesia is the world’s second-largest
producer of tin
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Other Countries
• A number of countries impose restrictions on
exports of steel scrap
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Argentina
Azerbaijan
Egypt
Iran
Kazakhstan
Saudi Arabia
Thailand
United Arab Emirates
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Forms of Export Restrictions
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Export bans
Quotas
Export taxes
No VAT export rebates
Licensing requirements
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Conservation of Natural Resources
• Conservation of natural resources is often given as a
reason for export restrictions
• The GATT allows trade-restricting measures to conserve
limited natural resources “if such measures are made
effective in conjunction with restrictions on domestic
production or consumption”
– But without limits on mining, production, or domestic
consumption, export restrictions do not actually conserve
resources
• WTO members must show that measures to conserve
resources are not a “disguised restriction” on
international trade
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Environmental Protection
• China has claimed that export restrictions
on coke and other energy-intensive inputs
protect the environment by reducing
greenhouse gas and other emissions
• Because there are no limits on production
for domestic consumption, there is no
evidence that export restrictions in fact
reduce energy use and pollution
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Orderly Markets
• Some countries claim that licensing of exporters
is needed to ensure an orderly market
• There is no evidence that absence of licensing
procedures in other countries disrupts the
market
– To the contrary, licensing procedures can be used as
a disguised restriction on international trade
– Licensing procedures can also be used to favor
domestic over foreign traders
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Revenues
• Some countries have claimed that export
taxes provide needed revenue
• The amount of revenue raised from export
taxes is quite small compared to other
sources of government funds
• A tax on production of an input would raise
more revenue without discriminating
against foreign purchasers
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Effects of Export Restrictions
• Wide spreads between domestic and
export prices
– This gives an advantage to consuming
industries in the exporting country
• Higher international prices
• Volatile international prices
• Disproportionate impact on developing
countries
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Spread Between Domestic and
International Prices
Chinese Coke Domestic and Export Prices
$1,100.00
$1,000.00
$900.00
$800.00
$/Metric Ton
$700.00
$600.00
Export Prices
$500.00
Domestic Prices
$400.00
$300.00
$200.00
$100.00
$Jan- Feb- Mar- Apr- May- Jun- Jul- Aug- Sep- Oct- Nov- Dec- Jan- Feb- Mar- Apr- May- Jun- Jul- Aug- Sep- Oct- Nov- Dec07 07 07 07 07 07 07 07 07 07 07 07 08 08 08 08 08 08 08 08 08 08 08 08
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Export Restrictions and Coke Prices
• Changes in coke prices are not associated with
changes in either steel production or steel prices
• Changes do reflect imposition of export
restrictions by China
Chinese Coke Prices and World Coke Demand
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Reduction of export quota,
January 2004
Imposition of export tax,
November 2006
2000 = 1
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2
1
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Jan 00
Jan 01
Jan 02
Jan 03
Jan 04
Jan 05
Jan 06
Jan 07
Jan 08
Jan 09
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2006 = 1
Volatility in Raw Material Prices
Raw Material Prices
4.5
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3.5
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2.5
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Coke Imports
Iron Ore Imports
Hot-Rolled Sheet
1.5
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0.5
0
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Impact on Developing Countries
• Restrictions on raw material exports impact developing
countries disproportionately
– 50% of iron ore that is imported is imported by developing
countries
• The steel industries in many developing countries are
heavily dependent on imports of iron ore
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Argentina: 100% of consumption
Libya: 100% of consumption
Philippines: 100% of consumption
Serbia: 100% of consumption
Trinidad & Tobago: 100% of consumption
Indonesia: 99% of consumption
Egypt: 68% of consumption
Turkey: 61% of consumption
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Conclusion
• Restrictions on exports of raw materials for
steel making
– Give domestic producers in the exporting
country an unfair competitive advantage
– Increase worldwide costs of production
– Do not match up to the justifications given
– Place a heavy burden on the steel industry in
developing countries that do not have
substantial iron ore reserves or steel scrap
supplies
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