The Brotherhood of Steel: The EU and Britain are closing themselves off from China
Britain is seeking to create a "western alliance" with the European Union to curb China's dominance in the global steel market. This approach is also supported by the United States. The steel industry is, in principle, one of the most duty-regulated in the world, but the current standoff could take the situation to a new level. About why steel is becoming the cause of a new conflict between the world's largest economies is in the Izvestia article.
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Back in the 2000s, China became a global leader in the steel industry. Since then, he has only been building up his superiority. Analysts predict that Chinese steel exports will range from 115 to 120 million tons in 2025. By comparison, this is more than the annual steel production in any other country in the world except India. The engine of this expansion was a fundamental internal imbalance: steel consumption inside China peaked back in 2020, after which the collapse of the giant real estate market deprived producers of the main source of demand.
Faced with colossal overcapacity, Chinese steelmakers were forced to seek sales abroad. Along the way, they have demonstrated considerable adaptability. China is actively redirecting its export flows: the emerging markets of the Middle East, Central Asia and North Africa are becoming new growth points. In the first seven months of the year, shipments to Saudi Arabia increased by 24%, to Malaysia by 14%, and to Thailand by 13%. At the same time, China's exports to its main trading partners, Vietnam and South Korea, which have also introduced anti—dumping measures, decreased by 20% and 10% respectively in the first seven months, the state—backed China Iron and Steel Association (CISA) reported in late August.
To circumvent the high duties on finished products, Chinese companies have dramatically increased exports of semi-finished products such as steel billets. Its supplies have tripled, and fittings — by 77%. At the same time, exports of more complex rolled products, such as hot-rolled coils, fell by 23%. This tactic, however, comes at a price: although volumes are breaking records, the value of exports in dollar terms has even declined.
The logic of manufacturers is "It's better to sell as much as possible now." But this fear of being late only adds fuel to the fire, provoking a protectionist reaction. Most of the countries of the world that produce significant amounts of steel, including Russia, have some kind of support measures for their own producers, including duties.
Alliance of the West
Western economies are in a difficult situation. No one really believes that the duties imposed by the United States can cope with the Chinese onslaught alone. The initiative comes from the United Kingdom, which found itself in a vulnerable position after Brexit: half of its steel exports go to the EU, and new 50 percent duties from Brussels threaten it with serious losses.
Senior EU officials say the bloc has "no other choice" but to protect its industry, warning that Europe is "in deep trouble because of this overcapacity problem." Nevertheless, the European Union has left the door open for negotiations with London.
The British propose a way out — the creation of a "Western steel alliance" together with the European Union and, possibly, the United States. The idea, which has been circulating for "quite a long time," now looks "more attractive," according to Brussels. The goals of the alliance may be to unify tariff policy against Chinese steel, provide preferences for steel trade within the alliance itself, which will create a protected market space, and joint pressure on China to solve the problem of excess capacity.
The United States has also joined the game, with Trade Representative Jamison Greer calling for closer coordination, saying "current international trade rules are inadequate."
Some outlines of the future alliance are already partially visible: the EU and the UK have agreed to unify their future carbon taxes on imports, which creates an additional non-tariff barrier for "dirty" steel (of course, mainly of Chinese origin).
The collapse of the system
What is happening is a logical stage in the ongoing fragmentation of the world: spheres of influence are emerging not only in politics, but also in the economy. They often match, although not always. At the moment, we are seeing how the global steel market is splitting. The West forms a "closed club" with high barriers. China, in turn, is increasingly conquering the markets of the Global South, where trade restrictions are still weaker. This leads to the creation of parallel, less integrated market ecosystems.
The escalation of trade wars in the industry is ongoing, and the process began long before the second presidential term of Donald Trump. In 2024, about 54 trade barriers were created against Chinese steel, more than in the entire period from 2019 to 2023. Mexico has already submitted a plan to increase tariffs. Moreover, China's record exports this year guarantee a new wave of restrictions next year.
It is worth noting that even within the PRC, the growth of exports of semi-finished products is of concern to the authorities. Beijing wants the industry to create products with higher added value, and is considering raising export taxes to limit the export of low-quality metal. According to Baosteel CEO Baojun Liu, the company "has to export," but it is becoming increasingly difficult to do so.
The West's attempts to block the growing expansion of Chinese steelmakers are not just a trade skirmish, which has periodically occurred over the past 20 years. This is a symptom of a deeper process of deglobalization and regionalization of the economy. The creation of the "Western alliance" is a defensive reaction to the objective economic superiority of Chinese industry, with lower labor costs, less stringent regulations (including environmental ones), more thoughtful supply chains, and the superiority of "economies of scale." In response, China will be forced to enter even deeper into the markets of developing countries, strengthening its economic and political ties with them.
If the Western project is implemented, which, however, there are doubts, given the growing contradictions between the Western powers themselves, the consequences will be impressive. The world has every chance of becoming a set of competing and loosely interconnected "steel spheres of influence", where trade flows will be determined not so much by market efficiency as by political expediency and the strength of protectionist barriers.
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