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. Last Updated: 07/27/2016

China Opens Probe Into Steel Imports

The Chinese Ministry of Commerce said Monday that it had launched a probe into imports from Novolipetsk Steel, investigating possible dumping of transformer steel.

Novolipetsk Steel, or NLMK, which produces one-fifth of the world's output of the metal, insisted that it had not broken any regulations and said the probe would not affect its exports to China.

"NLMK doesn't practice price dumping as a method of promoting its products," NLMK spokesman Anton Bazulev said in an e-mailed answer to questions. "We will cooperate with the Chinese Ministry of Commerce to protect our interests." Transformer steel is used to produce equipment for electricity transmission stations.

"The investigation doesn't require a suspension or change in deliveries of Russian transformer steel," Bazulev said. "Any changes will only be made after the results of the investigation are announced, which usually takes a few months."

Calls to the Chinese Ministry of Commerce went unanswered on Monday. The Chinese Embassy in Moscow did not respond to faxed questions.

The investigation will not significantly affect NLMK, UralSib metal analyst Dmitry Smolin said. The steelmaker has cut its production of transformer steel by 75 percent to 22 tons in the first quarter as demand for it shrank, Smolin explained.

NLMK produced 344 tons of transformer steel last year, a quarter of which was exported to China, UralSib data showed.

"Producing transformer steel is a complicated technological process, which brings a high level of profitability to those who produce the metal," Smolin said. A ton of transformer steel now stands at about $3,000 a ton, according to UralSib. "China simply wants to defend its domestic steel producers," he said.

The burgeoning trade dispute could have its origin in a different hemisphere, however.

"The investigation launched against Russian and U.S. transformer steel producers could be a reaction of the Chinese authorities to the recent anti-dumping probes initiated against cheap imports from China in the United States," said George Buzhenitsa, a metals analyst at UniCredit Securities.

On May 22, a U.S. trade panel approved a government probe that could lead to the United States levying anti-dumping and countervailing duties on imports of Chinese stainless-steel oil pipes. The probe was initiated by seven U.S. steelmakers, including Russian-owned Evraz Rocky Mountain Steel Mills and TMK IPSCO.

China's Ministry of Commerce planned to launch an anti-dumping investigation earlier this month into deliveries of hot-rolled steel produced by Novolipetsk Steel, Magnitogorsk Steel and Severstal, Steel Business Briefing, an industry journal, said in May. Russian steelmakers export 20 percent to 30 percent of the hot-rolled steel that they currently produce to China, UralSib data showed.