Steel import standards upgrade needed

NBR Article, NATHAN SMITH - 14 September 2016

Rumours of a trade war with China over a steel dumping investigation are overblown but importing standards for steel need updating, industry professionals say.

Allegations of steel dumping into New Zealand markets based on a complaint lodged by Pacific Steel prompted the Ministry of Business (MBIE) to notify China.

Following the notification, New Zealand companies operating in China say they received warnings from Chinese officials about trade tariff retaliations if any investigation commenced. MBIE says it can’t confirm whether an investigation has begun.

However, Prime Minister John Key says China’s ambassador to New Zealand has given an “absolute assurance” there would be no trade reprisals from any investigation. The government has refused to confirm whether Pacific Steel lodged the complaints, citing international trade constraints.

“Under World Trade Organisation (WTO) rules, applications relating to anti-dumping or countervailing duties are confıdential unless investigations are initiated. For this reason MBIE cannot comment on whether applications have been made for trade remedies such as anti-dumping or countervailing duties,” Commerce and Consumer Affairs Minister Paul Goldsmith says.

NZ International Business Forum director Stephen Jacobi says the China/New Zealand free trade agreement also has provisions for dealing with dumping complaints, which are lifted from the WTO rules.
“The WTO has the most detailed procedures about dumping. It also provides for the two parties concerned to be informed when any side decides to take an anti-dumping action.

“This is a technical matter and there would need to be evidence the supply has been made at a price less than the price which prevails in the domestic market, and evidence of injury to domestic producers. Proving all that is quite a difficult task. That’s why it is kept confidential until the ministry has determined if there is a prima facie case for taking action,” he says.

Steel imports from China have certainly increased over recent years. Although 2016 figures are yet to be released, worked steel, including construction steel, imported from China amounted to $298 million in 2013, $345 million in 2014 and $404 million in 2015.

Yet Challenge Steel founder Bert Govan says the suggestion that China is dumping substandard steel into the New Zealand marketplace certainly doesn’t match its experience as importers of fabricated structural steel.

“There has been a bit of noise lately about some other imported product and whether it’s even ethical to import fabricated steel in the first place. I remember similar debates when the clothing and motor industries were deregulated.”

Mr Govan says Challenge Steel has its own people on the ground at China’s Shan Steel’s fabrication factory checking at source the process, product and its adherence to the New Zealand standards. Samples then go to independent labs both in China and New Zealand for further testing and verification.

Earlier this year, the quality of some imported construction steel from China used on a number of government-led infrastructure projects was found to be inferior. Up to 1600 tonnes of steel meant for use on the $450 million Huntly bypass project was tested as too weak for four bridges.

According to Steel Construction New Zealand, inferior steel entering New Zealand reflects the outdated compliance models. Manager Alistair Fussell told the National Business Review unless there are extremely competent people managing steel quality on site, there are “certain low-cost countries” where managing quality can be a problem.

“As a rule with low-cost countries, they have both world leading and poor quality manufactures. The problem in dealing with low-cost countries is trying to understand who is good and who isn’t and how to ensure high-quality product,” says Mr Fussell.

New Zealand compliance standards are poorly set up to deal with the “new bold world of procurement” of FTAs, he says. The rules were built in an era when Australasian suppliers fed New Zealand’s demand and well before globalisation. For instance, the standards don’t dictate which party must demonstrate compliance, conduct inspections or declare compliance.

“At the moment compliance standards are not robust and internationally the best practice is moving toward independent verification of compliance. Some leading engineers are looking at independent verification of materials, even though that goes above the present standards regime, simply because their hands are tied by FTAs,” says Mr Fussell.

I’m not saying globalisation is a bad thing, there’s certainly been some advantages in bringing steel costs down. But there is now a greater need to make sure quality is managed in a different way than before to ensure we get what’s required.
— Bert Govan, Chairman & General Manager