Chinese steel industry warns of hit from trade wars

The head of China’s powerful Iron and Steel Association says the Chinese economy faces ‘downward economic pressure’.

Barges loaded with steel rods and wire moored at a depot in China. Picture: Bloomberg

The head of China’s powerful Iron and Steel Association, Liu Zhejiang, has warned that the Chinese economy faces “downward economic pressure” from the global trade wars.

But he urged the world’s mining companies, including BHP, Rio Tinto and Fortescue Metals, to work together with Chinese steel mills to ensure a steady market for iron ore.

At a speech to the China International Steel and Raw Materials conference, attended by representatives of Australia’s largest iron ore miners, Mr Liu said the steel industry needed to be prepared for the fact that next year would be a tougher year.

“There will be downward economic pressure next year,” he said.

“Next year (the industrial outlook for China) will not be as optimistic as this year.

“We have to be prepared for it with the trade war started. Next year will not be as optimistic a year as this year.”

Mr Liu’s comments come as China has been reeling from this week’s announcements by US President Donald Trump of new tariffs on some $US200 billion ($275bn) worth of imports from China, with threats to impose duties on China’s entire range of exports to the US.

Beijing has responded with duties of up to 10 per cent on another $US60bn worth of US exports but it is now having to face the prospect of having to cope with a long and bitter trade war from an aggressive US president with no end in sight.

Also speaking at the conference, Australia’s Ambassador to China Jan Adams said that Australia and China “stood together in opposing protectionism and supporting the World Trade Organisation”.

“No one wins from a trade war,” she said.

She said both Australia and China were strongly committed to defend the multilateral trading system, and to their “mutually beneficial” trading relationship “for the long haul”.

The world’s largest producer of steel, China is also the world’s largest importer of iron ore, buying more than $US60bn a year from offshore suppliers and accounting for 80 per cent of the world demand for iron ore.

Australia is the single largest supplier, providing more than 62 per cent of the market.

Mr Liu said the impact of the trade war on the Chinese economy would not really become evident until next year.

But he said he felt the demand for iron ore next year would continue to be stable.

“I don’t think it is possible that the market will plummet,” he said.

Mr Liu said 2018 had been one of the most stable years for the Chinese steel industry for the past decade, following a major restructuring that has seen low-quality, polluting steel producers closed down and moves by the government to insist on stricter environmental standards.

He said demand and supply in the steel industry in China were now “basically balanced”, following the cut in production of recent years, with small increases in supply and demand evident this year.

Mr Liu urged Chinese steel mills and world iron ore suppliers to continue to work together to create a steady market.

“The world economic order is faced with new challenges with troubles invented deliberately,” he said.

“No matter how the global situation will change and who is trying to control it, we mining companies and steel mills — we two directly interdependent stake holders who cannot live without each other, should keep a clear mind,” he said.

“We should continue to do our work well together and not be interfered (with) by the troubles and the noises of the world.”

Mr Liu said China would find a way to weather the impact of the trade war.

He said China had experience in coping with crises as was evident from its recovery from the impact of the global economic crisis in 2008.