EXPORT BARRIERS AND GLOBAL TRADE IN RAW MATERIALS: THE STEEL INDUSTRY EXPERIENCE

1
EXPORT BARRIERS AND GLOBAL TRADE IN RAW
MATERIALS THE STEEL INDUSTRY EXPERIENCE

• Alan Price

2
Raw Materials

• The global steel industry depends on key raw
  materials
• 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

3
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

4
China

• China restricts exports of
• Coke
• Steel scrap
• Molybdenum
• Fluorspar
• Magnesium carbonate
• Silicon carbide
• Tin
• China is among the worlds leading producers of
• Coke
• Fluorspar
• Magnesium carbonate
• Molybdenum
• Silicon carbide
• Tin

5
Russia

• Russia restricts exports of
• 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 worlds largest producer of nickel

6
Ukraine

• Ukraine restricts exports of
• 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

7
India

• India restricts exports of
• Iron ore
• Ferrous scrap

8
Indonesia

• Indonesia restricts exports of
• Steel scrap
• Copper ores and concentrates
• Lead ores and concentrates
• Tin ores and concentrates
• Indonesia is the worlds second-largest producer
  of tin

9
Other Countries

• A number of countries impose restrictions on
  exports of steel scrap
• Argentina
• Azerbaijan
• Egypt
• Iran
• Kazakhstan
• Saudi Arabia
• Thailand
• United Arab Emirates

10
Forms of Export Restrictions

• Export bans
• Quotas
• Export taxes
• No VAT export rebates
• Licensing requirements

11
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

12
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

13
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

14
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

15
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

16
Spread Between Domestic and International Prices
17
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

18
Volatility in Raw Material Prices
19
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
• 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

20
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