How will the China-EU Investment Agreement affect the stainless steel industry?

On December 30, 2020, the leaders of China and the EU jointly announced the completion of the EU-China Comprehensive Agreement on Investment, which is a framework agreement designed to replace the existing bilateral investment treaties between China and EU member states and build unity China-EU bilateral investment system.

This negotiation has gone through 35 rounds of negotiations and lasted for more than 7 years. The negotiation was once stalled and accelerated in the past one and a half years. The negotiation was finally completed at the end of 2020, which is also after the Regional Comprehensive Economic Partnership Agreement (RCEP). , China has completed another major opening-up measure, which is another significant victory of multilateralism in the course of years of anti-globalization.

So, will the completion of the “China-EU Investment Agreement” negotiations have an impact on the stainless steel industry?

1. If the China-EU Investment Agreement is reached, will the EU still have tariff barriers to China?

In recent years, due to the EU’s continued anti-dumping of stainless steel exports from mainland China, the EU currently imposes a tax rate of more than 20% on stainless steel from mainland China. Then, if the China-EU Investment Agreement is reached, will the EU still have tariff barriers against China?

The first thing to be clear is that the China-EU Investment Agreement does not involve tariff issues. Secondly, it is assumed that the “China-Europe Investment Agreement” has certain benefits for stainless steel exports, mainly related to stainless steel products, such as household appliances. However, after the preliminary negotiations are completed, the agreement needs to be further transformed into legal provisions, which can only come into force after approval by the European Parliament. The process is expected to start in the second half of 2021.

2. From the perspective of European open areas, what impact does the “China-EU Investment Agreement” have on Chinese stainless steel companies going global?

According to relevant information, the China-EU Investment Agreement will lock in the existing Chinese investment market access rights in Europe, while ensuring the opening of sensitive areas such as energy, agriculture, fishery, audio-visual, and public services in Europe. In addition, according to the “General Agreement on Trade in Services” (GATS), the EU will open up the service industry to a large extent.

From China’s standpoint, the European open field provides Chinese investors with greater opportunities to enter the EU energy wholesale and retail market, renewable energy market and other fields, and promote the development of China’s new energy, automobile and other related industries. For Chinese investors, the agreement also means that there are more potential investment opportunities in the EU, including China’s competitive construction industry, telecommunications industry, etc., which may stimulate domestic demand for stainless steel.

However, from the perspective of stainless steel companies, the possibility of domestic stainless steel plants going out and establishing plants in the EU is slim. Due to the relatively large accumulation of scrap steel in Europe, Chinese stainless steel mills may enjoy some advantages in the cost of stainless steel smelting when they go out and invest in construction. However, all stainless steel mills in Europe currently use electric furnaces for production. If you go to Europe to build a plant, the overall cost is too high. Secondly, from a demand perspective, European stainless steel production has been declining year by year. In addition, due to the impact of the new crown epidemic, the European economy has fallen into a downturn, and the demand side has remained weak. Therefore, the possibility of domestic stainless steel plants going to Europe to build factories generally does not exist.

3. From the perspective of China’s open fields, what impact does the “China-EU Investment Agreement” have on domestic stainless steel companies?

During the negotiations, the areas that China promised to further open include manufacturing, automobiles, financial services, healthcare, communications/cloud services, computer services, international shipping, air transportation, business services, environmental services, etc. At present, about half of EU’s direct investment in China is concentrated in the manufacturing sector, such as transportation and telecommunications equipment, chemicals, health equipment, and so on. In the automotive sector, China agreed to gradually cancel the requirements for joint ventures and promised market access for new energy vehicles. In addition, China agreed to abolish joint venture requirements for certain industries in the financial services and healthcare sectors.

From the standpoint of the European Union, the European Union has new opportunities in China’s automotive, consumer products, biomedicine, financial services, and medical and health sectors, but more likely it is the output in the technical field, which has a basic impact on the production of the stainless steel industry. No.

In summary, in general, the “China-Europe Investment Agreement” does not have any positive impact on stainless steel and stainless steel companies themselves, but it may be positive for the export of stainless steel products.


Post time: Jan-12-2021