TORONTO (CP) -- The government body that regulates trade in Canada has ruled that a duty needs to be slapped on some Chinese steel imports.
The Canadian International Trade Tribunal found the Canadian steel industry has been harmed by the subsidization and dumping of some Chinese steel products used in the oil industry, and an anti-dumping duty will be collected as a result.
The duty will be as high as 166.9 percent, depending on the company that produced the product, according to the Canada Border Services Agency.
The decision could have negative implications for the domestic oil and gas industry, raising the cost of materials at a time when oil and gas companies are already dealing with higher labor costs on many expansion projects.
Before the recession hit, the oilsands were experiencing an enormous boom with crude prices above US$140 a barrel. Producers scrambled to find enough workers to run their operations and steel and construction materials became too costly.
This all changed when the recession hit and oil prices fell below $40 a barrel, but as demand rises again post-recession, so will costs. According to a recent forecast by the Conference Board of Canada, capital costs for the oil industry are set to rise 13.2 percent per year between 2011 and 2014.
However, this doesn't matter to the Canadian steel industry, which has been hurt by a slump in demand caused by the worldwide recession, reducing demand from the auto, appliance, construction and capital goods industries.
"We're pleased with the decision. What they found today was a ruling on past injury, and that's what we were waiting for," said Randy Sockovie, director of sales and marketing at Lakeside Steel Inc.
Welland, Ont.-based Lakeside Steel Inc. initiated the anti-dumping complaint, along with Tenaris and Evraz, two international steel producers with operations in Canada. Evraz is the former Ipsco Steel with major operations in Regina
Sockovie said subsidization and dumping meant Chinese exports of some steel products to Canada were running anywhere from 10 percent to 40 percent cheaper than similar Canadian-produced goods.
Similar trade measures in the U.S. provoked a strong rebuke from China late last year.
Washington said it would place levies as high as 99 percent on some steel pipes imported from China, causing China to retaliate with an anti-dumping probe into the American auto industry.
Dumping occurs when one country exports a significant number of goods to another country at prices much lower than in the domestic market.
China produces some 600 million tons of steel a year, or approximately half of the world's total output, and is increasing manufacturing capacity to keep up with massive infrastructure projects. Despite this, the country continues to import large quantities of the metal used in everything from construction to vehicles to appliances to keep up with its rapid industrialization.
However, with demand for steel escalating due to massive government stimulus spending around the world, China's power as a steel exporter is rapidly growing.
The trade tribunal will release the detailed reasons for its decision on April 7. Tuesday's ruling applies to casing and tubing used in oil and gas wells and other parts of the energy industry.