Statement of reasons—Preliminary determinations: Steel Strapping (SS 2025 IN)

China

Government control analysis

[42] This section will present the CBSA’s analysis of the extent the Government of China exerts control over the flat-rolled steel sector in China, by examining the following:

• Government of China’s control over the flat-rolled steel sector
• Government of China’s steel plans, directives and other policy documents
• Government of China’s ownership and control of steel manufacturers
• Government of China’s provision of subsidies to steel manufacturers
• Government of China’s intervention in the cost of production of steel

Government of China’s control over the flat-rolled steel sector

[43] Most recently, the CBSA has determined that Section 20 conditions exist in the flat-rolled steel sector in China:

• carbon and alloy steel plate in 2010^{Footnote 16}
• flat hot-rolled carbon and alloy steel sheet and strips in 2015^{Footnote 17}
• cold-rolled steel in 2018^{Footnote 18}
• corrosion-resistant steel sheet in 2019^{Footnote 19} and
• corrosion-resistant steel sheet in 2023^{Footnote 20}

[44] The CBSA has previously found that a government can indirectly control the prices of the sector being investigated by controlling the prices of the primary inputs.^{Footnote 21} Given that cold-rolled steel is the primary input material in the production of steel strapping, the recent Section 20 finding on cold-rolled steel in China is highly relevant to the steel strapping case.

[45] The substantial amount of information on the record for these previous findings and new information collected through the CBSA’s own research support the preliminary determination of Section 20 conditions existing in the flat-rolled steel sector in China.

Steel plans, directives, and other policy documents

[46] The steel industry is regarded as a key industry by the Government of China. As such, the steel industry, including the flat-rolled steel sector, in China is subject to a variety of plans, directives and other policy documents issued by all levels of the Government of China, including the following:

• In August 2024, the Government of China issued “Notice of the General Office of the Ministry of Industry and Information Technology on Suspending Steel Production Capacity Replacement Work” requiring the suspension of new steel capacity replacement plans starting August 23, 2024^{Footnote 22}
• In August 2023, the Government of China released the “Work Plan for Stabilizing Growth in the Steel Industry” to guide and support the enhancement of supply and demand of steel in China^{Footnote 23}
• In March 2022, the Government of China released the “Roadmap for high-quality development of iron and steel industry” to guide the development of the iron and steel industry and aiming to rationalize the structure of the industry, ensuring global competitiveness, and technical advancement^{Footnote 24}
• In February 2022, the Government of China released guidelines for its steel industry to consolidate through mergers and acquisitions (M&As) in order to “create world-class steel giants and accelerate the sector’s high-quality development.” In addition, financial institutions are urged to provide “comprehensive financial services to iron and steel enterprises pursuing M&As, structural adjustments, transformations and upgrading.”^{Footnote 25}
• In May 2021, Chinese Premier Li Keqiang addressed the State Council at its executive meeting on the topic of rising steel prices, stating that “we must… deal with the excessively rapid increase in commodity prices and its collateral effects” and that such efforts were needed to “keep the economy running smoothly.” To discourage collusion on higher steel prices, local governments in Shanghai and Tangshan had ordered steel mills to fix their prices “at reasonable levels” or they would face severe punishments^{Footnote 26}
• In March 2021, the Government of China released the “14th Five Year Plan: Part III” which is a directive identifying the transformation of traditional industries and improvements as part of the plan to increase manufacturing core competitiveness, including in the steel sector^{Footnote 27}

[47] The China Iron and Steel Association (CISA), a key industry association in China that works closely with the Government of China, has explicitly described itself as “guided by the Party’s lines” and that it “participates in making the industrial development planning, and relevant policies, laws and regulations”.^{Footnote 28} In October 2024, CISA urged steel mills “to be disciplined in restraining production” after the Government of China stimulus led to increased steel prices.^{Footnote 29}

[48] Based on evidence available on the record, as it relates specifically to the Chinese steel industry, Chinese steelmakers are highly encouraged to follow government directives or they may face negative consequences from local and state governments.

[49] As shown by the above policies, the Government of China intervenes in the steel industry, including the flat-rolled steel sector, by increasing mergers and acquisitions to create larger and more efficient steel companies to guide the growth of the industry. The Government of China also exerts control on steel capacity and supply, which may impact the price of steel in China.

[50] Based on the substantial amount of information on the record of previous findings related to steel products, including the flat-rolled steel sector, and evidence discussed above, the CBSA finds that the Government of China actively releases plans, directives, policies, and guidelines for its domestic steel producers to follow in order to control its steel industry, including steel strapping producers.

[51] The CBSA finds that the Government of China’s control over steel capacity and supply may result in distorted selling prices of these goods. The steel plans and directives in place provide further support for the conclusion that the government may substantially determine prices in China’s flat-rolled steel sector.

Government of China’s ownership and control of steel manufacturers

[52] Many of the largest steel manufacturers in China are state-owned enterprises (SOEs).

[53] As shown in the table above, six of the top ten steel producers in China are state-owned. China Baowu Group, AnSteel Group, and Shougang Group are owned by China’s State-owned Assets Supervision and Administration Commission (SASAC), HBIS Group is wholly owned by the Hebei provincial government, Hunan Steel Group is jointly organized by Hunan province’s three major iron and steel enterprises, and Shandong Steel Group is a state-owned enterprise owned jointly by the Shandong provincial government and China Baowu Group.^{Footnote 32}

[54] In addition, other prominent Chinese steel manufacturers have indirect ties to the government or are subject to substantial government intervention. Many of these steel producers have been found to be state-owned or state-controlled^{Footnote 33} and are located adjacent to most of China’s steel strapping producers. For example, Tangsteel, a subsidiary of HBIS Group, is located within 75 km of two steel strapping producers near Tangshan, China.^{Footnote 34} This creates an environment where cold-rolled steel produced by state-owned and state-controlled steel producers is easily accessible to steel strapping producers in China.

[55] The CBSA notes that China’s focus on the acquisition of steel manufacturers in recent years have led to even more steel production falling under Government of China ownership as it pursues its goal of consolidating over 60 percent of China’s steel capacity in the hands of three to five large, globally competitive enterprises by 2025.^{Footnote 35}

[56] Without responses to the government Section 20 RFI, the CBSA was not able to determine the extent of the state-ownership and control in the steel strapping industry as this information is not publicly available. Notwithstanding this, the significant presence of state-owned and state-controlled enterprises in the steel and flat-rolled steel sector suggests that the sale of steel products may be based on non-market factors, such as meeting the Government of China’s policy objectives to lower domestic steel prices in China,^{Footnote 36} As a result, the domestic selling prices of steel strapping in China may not be substantially the same as they would be if they were determined in a competitive market. The significant presence of SOEs in the steel industry supports the preliminary determination of Section 20 conditions existing into the flat-rolled steel sector in China.

Government of China’s provision of subsidies to steel strapping manufacturers

[57] The recent subsidy notification, submitted by the Government of China, was criticized by the World Trade Organization Secretariat as lacking transparency.^{Footnote 37} Nevertheless, the available evidence indicates that steel strapping manufacturers have received or are eligible to receive benefits and support from the Government of China.

[58] The complainant provided information on the subsidization of the Chinese steel industry and argued that this subsidization influences the price of steel products, including steel strapping.^{Footnote 38} The CBSA’s analysis revealed that the alleged subsidy programs constitute potential financial contributions by the Government of China that may have conferred benefits to producers and exporters of steel strapping.

[59] Subsidization of steel production effectively enables the Government of China to influence the price of downstream products such as steel strapping, as producers can purchase input materials at less than fair market value and lower their cost of production. In short, these subsidies may distort the domestic selling price of steel strapping in China. The widespread presence of subsidies in the steel industry, including steel strapping, supports the preliminary determination of Section 20 conditions existing into the flat-rolled steel sector in China.

Government of China’s intervention in the cost of production of steel

[60] The Government of China has taken several measures that may control costs with respect to raw materials for steelmaking. By intervening in upstream raw material inputs, the Government of China can substantially determine the prices of downstream products.

[61] Based on evidence available on the record, and as described below, the Government of China maintains controls on raw materials for flat-rolled steel products, including steel scrap, iron ore, and cold-rolled steel.

[62] In 2021, amid concerns over tax evasion, the Government of China eliminated the VAT rebate for export that was available to exporters of certain steel goods including cold-rolled steel. At the same time, the Government of China eliminated import duties on scrap and billet, allowing for an even greater supply of cheaper scrap steel in China.^{Footnote 39} These measures contributed to an increased steel supply in the Chinese domestic market causing downward pressure on domestic prices.^{Footnote 40}

[63] Further, the Government of China places price ceilings on the cost of electricity that is sold from coal-fired power generators. This has a significant impact, as coal accounts for 60 percent of China’s total energy generation and supply and the steel industry is one of the largest industrial consumers.^{Footnote 41}

[64] The evidence available on the record suggests the Chinese domestic price of steel strapping is influenced by the Government of China as the government also influences the price of cold-rolled steel, the primary input of steel strapping. Benchmark comparisons of cold-rolled steel prices in China against global markets indicate that the Chinese domestic prices for cold-rolled steel was, on average, 55% lower than the cold-rolled steel prices in the US^{Footnote 42} and 38% lower than the average global prices of cold-rolled steel.^{Footnote 43}

[65] The CBSA finds that as a result of these measures, the Government of China’s intervention in the cost of production of steel creates an environment where domestic prices of steel may be artificially low, benefitting the producers of steel strapping. As a result, the domestic selling prices of steel strapping in China may not be substantially the same as they would be if they were determined in a competitive market.

Summary of Government control analysis

[66] The CBSA has previously found that the Government of China’s measures, policies, and vested interest in the steel industry, through government ownership and controls, substantially determine the prices of steel and flat-rolled steel in the domestic industry and that these prices are substantially different than if they were determined in a competitive market.

[67] Specifically, the CBSA has previously issued opinions in respect of four steel products in the flat-rolled steel sector, namely, steel plates, hot-rolled steel sheets, cold-rolled steel sheets, and corrosion-resistant steel sheets.

[68] The Government of China exerts control on the steel industry in general but also on the flat-rolled steel sector specifically through various plans, directives and other policy documents that impact steel strapping producers. In making corporate decisions, Chinese steel strapping producers are highly encouraged to adhere to the Government of China’s macro-economic policies including measures related to steel production capacity. As a result, corporate decisions based on market dynamics of supply and demand compete with the Government of China’s directives and mandates.

[69] The Government of China has significant ownership and control of Chinese steel manufacturers, including cold-rolled steel manufacturers. As discussed in the preceding sections, the collective effects of the Government of China’s measures, policies, and directives applies downward pressures to the domestic prices of steel. To remain competitive, private steel manufacturers are pressured to lower their prices to compete with the state-owned and state-controlled enterprises.

[70] Furthermore, the subsidization of the steel industry in general, and the flat-rolled steel sector in particular, suggests the Government of China’s intent to exert control to maintain domestic prices at a certain level. These subsidies allow steel manufacturers to sell their products at prices below fair market value to producers of steel strapping, who in turn, are able to sell their products at distorted prices. This may contribute to Section 20 conditions in the flat-rolled steel sector.

[71] Through various actions and measures, the Government of China also influences the prices of the inputs of steel strapping, including steel scrap, iron ore, and cold-rolled steel, as well as energy inputs.

[72] Overall, the cumulative impact of the Government of China’s policies and actions indicate that the Government of China indirectly influences prices in the flat-rolled steel sector in China.

Price analysis

[73] Chinese domestic prices of steel strapping are not publicly available. For the purposes of the preliminary determination, four exporters, including two from China, provided domestic sales databases.

[74] As mentioned in the preceding section, the CBSA has determined that the Government of China also influences the prices of the inputs of steel strapping. including cold-rolled steel. As such, the CBSA conducted a pricing analysis of cold-rolled steel, comparing domestic prices in China to markets around the world using publicly available data and pricing information provided by steel strapping producers in South Korea and Vietnam that provided substantially complete responses to the dumping RFI. ^{Footnote 44} The CBSA’s analysis showed that Chinese cold-rolled steel prices were not substantially the same as those determined in competitive markets, namely, the U.S., South Korea, and Vietnam.

[75] In addition, the CBSA compared Chinese domestic steel strapping prices with that of other subject countries, using data from exporters that provided substantially complete responses to the CBSA’s dumping RFI. As the CBSA did not receive substantially complete responses from any exporters in Türkiye, the CBSA’s analysis focused on comparing steel strapping prices in China, South Korea, and Vietnam. The comparison showed that Chinese domestic prices of steel strapping were substantially different than those determined in competitive markets, namely, South Korea and Vietnam.

[76] Based on the price analyses of cold-rolled steel and steep strapping in China and around the world, Chinese prices appear to be substantially different than they would be in a competitive market.

Preliminary results of the section 20 inquiry of China

[77] Based on the CBSA's analysis, the scope of the Government of China’s macroeconomic policies and initiatives provides a compelling factual basis to suggest potential influence over the Chinese flat-rolled steel sector. In addition, the domestic prices of steel strapping in China appear to be substantially different from what would be expected in a competitive market.

[78] For the purposes of the preliminary determination of dumping, the CBSA has formed the opinion that domestic prices in the flat-rolled steel sector in China are substantially determined by the Government of China and that domestic prices are not substantially the same as they would be in a competitive market.

[79] During the final phase of the dumping investigation, the CBSA will continue the Section-20 inquiry and collect and analyze relevant information.

Vietnam

[80] At the initiation of the investigations, the CBSA had sufficient evidence, supplied by the complainant and from its own research, to support the initiation of a Section 20 inquiry to examine the extent of the Government of Vietnam’s involvement in pricing in the flat-rolled steel sector, which includes steel strapping. The information indicated that the cumulative impact of the Government of Vietnam’s policies and actions provided a reasonable indication that the Government of Vietnam may indirectly influence prices in the flat-rolled steel sector in Vietnam. Consequently, the CBSA sent Section 20 RFIs to the Government of Vietnam and all known producers and exporters of steel strapping in Vietnam to obtain information on the extent to which the Government of Vietnam is involved in the determination of domestic prices in the flat-rolled steel industry sector.

[81] The CBSA received and reviewed the response to the Section 20 RFI submitted by one Vietnamese exporter, Sam Hwan Vina Co., Ltd.,^{Footnote 45} the response to the Section 20 RFI and one SRFI submitted by the Government of Vietnam,^{Footnote 46} and the flat-rolled steel pricing data submitted by the Vietnam Steel Association.^{Footnote 47}

[82] As described above, the CBSA considers steel strapping to be a part of the flat-rolled steel sector. As such, for the purposes of the Section 20 inquiry, the flat-rolled steel sector in Vietnam is the sector under review.

Analysis of applicability of Section 20

[83] In examining whether domestic prices may be substantially determined by the Government of Vietnam, the following were the main factors that the CBSA considered for the initiation of the Section 20 inquiry:

• The Government of Vietnam’s steel plans, directives and other policy documents
• The Government of Vietnam’s ownership and control in the steel industry
• The CBSA previously found Section 20 conditions to exist in the flat-rolled steel sector in Cold-Rolled Steel (CRS 2018 IN)^{Footnote 48}; steel strapping is primarily produced using cold-rolled steel
• Government control of major steel strapping purchasers and
• Subsidization of the steel industry

[84] During the preliminary phase of the investigations, evidence reviewed by the CBSA concerning the Government of Vietnam’s relevant legislation and administrative instruments, as well as state ownership of flat-rolled steel producers, did not support the assertion that the Government of Vietnam substantially determines domestic prices in the flat-rolled steel sector in Vietnam. Further, the results of the pricing analyses conducted by the CBSA during the preliminary phase of the investigations did not indicate that the prices of hot-rolled steel, cold-rolled steel or steel strapping were not substantially the same as they would be if they were determined in a competitive market. Specifically, these price comparisons consistently demonstrated that Vietnamese flat-rolled steel prices are in-line with world benchmarks.

Preliminary results of the section 20 inquiry of Vietnam

[85] The CBSA did not form the opinion that the Government of Vietnam’s has substantially determined prices in the flat-rolled steel sector in Vietnam or that those prices were not substantially the same as those determined in a competitive market. Therefore, the CBSA has not formed the opinion that the conditions of Section 20 prevailed in the flat-rolled steel sector in Vietnam during the POI.

[86] During the final stage of the dumping investigation, the CBSA will continue the Section 20 inquiry and further verify and analyze relevant information. The CBSA may form an opinion that the conditions of Section 20 of SIMA exist in the flat-rolled steel sector, which includes steel strapping, as part of the final phase of the investigation, or conclude that the determination of normal values may be made using domestic selling prices and costs in Vietnam.