China’s Trade Rules and Subsidies: Down the Stainless Drain (Part 2)

There’s a fundamental question regarding who are the winners and losers in trade cases in which governments subsidize the cost of production and/or offer direct tax or pricing incentives to exporters. MetalMiner asked Elkay’s Kathleen Deighan about this very issue in a recent interview. We present excerpts below (for the full interview, please click on the MetalMiner link): 

MetalMiner: Buying organizations [often falsely] believe these trade cases to be extremely negative for them and for the ultimate consumer because prices end up increasing. What arguments do you make to explain to buying organizations that over the longer term, it’s in their better interests to have US producers bring these cases forward rather than do what Kohler did – shutting down a manufacturing facility?

Kathleen Deighan: Our “Buying Partners” have applauded us for this action … Pricing that allows for a reasonable profit helps everyone in the industry. Dumped imports pull the entire market down and, when the import pricing is below domestic producers’ costs, the very existence of domestic producers is jeopardized. Our customers understand that there needs to be fair pricing in the market in order to benefit the entire industry. While all consumers want lower prices, we do not believe that they want low prices at the cost of supporting foreign jobs over U.S. jobs.

MM: Do you track China domestic stainless pricing vs. U.S. stainless pricing? And if so, what did your findings tell you?

KD: We do pay attention to stainless steel pricing. [See an example of current price trends below.]

 Stainless steel prices

Source: MetalMiner IndX(SM) and MEPS

Information supplied with our petition suggests that the pricing of 304 cold rolled steel coils supplied by state-owned steel companies to Chinese sink producers during the period of investigation [2009-2011] was significantly lower in China…

MM: Have you seen or do you expect to see any dramatic changes in terms of sales numbers as a result of this case?

KD: We have been able to secure significant business from customers that were buying Chinese product prior to the imposition of the preliminary tariffs. The actual orders are coming in somewhat more slowly than we had expected, due to a buildup of inventory between the filing of the petitions and the imposition of tariffs, and importers willing to pay the tariffs pending the final decision. We are also well aware that there will be efforts to evade or circumvent the tariffs by transshipping product through other countries, such as Malaysia, or improperly classifying the product coming in…

Read earlier posts in the series:

Supporting the Free Market Against Chinese Manipulation

China’s Trade Rules and Subsidies: Down the Stainless Drain (Part 1)

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