World's Largest Steelmaker Urges Europe To Declare Trade War On China

Tyler Durden's picture

Currency wars are so pre-"QE eternity." At least that is the opinion of Indian multi-billionaire Lakshmi Mittal, and owner of the world's biggest steelmaker, who urged Europe to embrace protectionism and erect trade barriers to "protect" its manufacturers (benefiting one ArcelorMittal among others), while at the same time bashing austerity, saying "the futures of EU manufacturing depended on politicians in Brussels helping industry face what he said was unfair competition from China." In other words, it's time for Europe to escalate into full blown trade warfare with China. It is unclear if Mr. Mittal had any thoughts on how China would, in turn, escalate to this progression in trade warfare: whether with tariffs, subsidies, or outright dumping. What does appear quite clear is that the owner of ArcelorMittal, who on Friday posted a net loss of $345 million (down from a $92 million profit a year earlier) on Q1 sales plunging by 13%, whose stock is just off its 52 week lows, and who said he may close plants in Eastern Europe if the "economy continues to slump", may have some ulterior motives in asking that Europe fight his war for him.

From the FT:

Mr Mittal suggested that Europe should embrace protectionist measures to stop Chinese products flooding the market with cheap goods.


The London-based entrepreneur said Brussels should consider applying higher tariffs on imports of Chinese-produced steel, similar to the ones to be imposed on solar panels made in China. He argued that Chinese producers of steel were over producing, lowering the price of the metal globally.


“There should be increased tariffs for imports, or there should be a surcharge on the steel coming to Europe from countries where environmental standards are very low,” he said.


His call came as EU policy makers adopt an increasingly muscular approach to what they see as unfair competition from Chinese producers across a range of sectors.

Also not surprising was his lashing out at the latest bogeyman for Europe's economic doldrums: austerity, which has become the old world's equivalent of Bush, whereby everything that is wrong, is blamed on Germany's unwillingness to pursue "debt-reduction" policies through the layering of more debt, or in other words, to give the ECB carte blanche to follow in the Fed's footsteps and engage in outright monetization (a topic extensively discussed previously, and one where Europe will be at an impasse at least until Merkel's September reelection campaign is successful, or not).

“If Europe continues only with the austerity programme without spending money on growth for infrastructure, things will never improve,” Mr Mittal told the Financial Times. “We can clearly see that austerity is not helping economies to come out of recession.”


He added: “They [policy makers] have to save European manufacturing, whatever you may call it, what I want is actions to save the domestic manufacturing, including steel.”

At least now thanks to Lakshmi, Europe has a new bogeyman: evil, efficient Chinese steel plants which should be stigmatized due to "very low environmental standards."

Just as not surprising, was the lack of macro economic "advice" geared at the US - after all there Mittal's operations are still quite profitable:

ArcelorMittal executives say  the operating environment in the Americas is much healthier than in Europe. Louis Schorsch, who heads a large part of the American business, said that steel consumption in the United States was approaching levels last seen before the financial crisis. Demand from the auto industry, probably the company’s most important customer in the United States,  is ‘‘a good story’’ and housing is ‘‘a little better,’’ he said, while demand for drill pipe and other energy-related products is ‘‘a little bit off.’’

But in Europe it is a different story entirely:

 Mr. Mittal said Friday that while the results were ‘‘still not satisfactory, at least I am starting to see the benefits of the actions we have taken’’ to reduce capacity.


Given the slump in demand in Europe, ‘‘we felt that this is not a cyclical but a structural change,’’ he said. ‘‘We needed to take action.’’


The closing  of operations in Europe, especially at Liège,  Belgium, and Florange,  France, has led to tension with governments and unions.


The French government last year threatened to nationalize the Florange site, but Mr. Mittal largely held firm on his plans to permanently close blast furnaces there. The company did say Friday that  it had begun a new production line at Florange for modern, lightweight automotive steel with the trademark Usibor.

Bottom line: Mittal's advice to France - don't target me, but instead make things much worse by re-escalating trade tensions and taking up the global currency wars at least one level. As for the long-term consequences of China getting actively involved in trade warfare, well - the stock market really only cares 1-2 quarters out. What happens in 2014, 2015 and so on, that's someone else's concern.

ArcelorMittal, which is based in Luxembourg, still looks as if it has a long way to go before it returns to the high profitability it enjoyed before the onset of the global financial crisis. The company reported net income of $10.4 billion in 2007.


‘‘There is a glut of steel supply globally,’’ said Jeff Largey, an analyst at Macquarie in London. ‘‘That is going to prevent a company like ArcelorMittal from making the type of profits it did in its heyday.’’

One wonders if Mittal will also demand protectionism to be enacted against Chinese miners next:

Even in mining, where Mr. Mittal is focusing most of his investment these days, the results were not stellar. Operating income of $286 million was down 19 percent compared with the previous year, although it was up 54 percent compared with the last quarter of 2012.

But ignore all that, and just blame China, which was a great friend and ally when it was helping the Indian's materials empire achieve record profits, but which may be sacrificed at the altar of hollow punditry and macroeconomic myopia once things start turning sour for the bottom line.

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kliguy38's picture

Bring it on BITCHEZ

Almost Solvent's picture

I propose a worldwide ban on Eurotrash with severe sanctions for dumping.



Buckaroo Banzai's picture

But Europe is awash in Eurofags! What do you propose to do with all of them???

markmotive's picture

It's a trade war for some. A battle for survival for China. The higher the Yuan goes, the closer China gets to the economic ledge.

According to Jim Chanos, China has gotten worse:


W T F II's picture

MUCH worse, if Australia is any indication...and Australia is a BIG indication of Chin's REAL condition...

Kirk2NCC1701's picture

They didn't accommodate them until Hollywood said it was Ok, and US politicians insisted on it.

economics9698's picture

Smoot-Hawley II.

Yea why not 25% unemployment?

Kayman's picture

The 25% unemployment is in those countries that had their jobs outsourced to China. It is here now in front of your eyes !

fourchan's picture

and i thought we would start a trade war first. oh well wrong again.

knukles's picture

Here we go!
Right down the olde path of glory for state and people!
Trade wars, the next step in the global depression I shit you not.

Ignatius's picture

You're likely right.  But a comparative advantage (technology/climate/resources) is not equivalent to an absolute advantage (slave wages).  Shipping our mfg to low wage country is NOT 'free trade'... it's suicide.

Pure Evil's picture

But, then how would the Wal-Martians be able to afford cheap Chinese manufactured products.

booboo's picture

Yard sales, there is 100 years of built up inventory sitting in peoples homes, they just need to drag it to the curb and throw up a sign.

Doña K's picture

The proverbial, "your stuff is shit but my shit is stuff" in play here as broadcasted by non other than George Carlin.

Buckaroo Banzai's picture

He's definitely right. It is absolutely inevitable that international trade will completely seize up. International trade was crippled in 1914 when Real Bills clearinghouses were effectively shut down, forcing all trade financing and settlement into the banking system. It hasn't been the same since, and the endgame is upon us.

Charles Wilson's picture

Knukles, you have swerved into the Truth.

Don't forget, however, that we still have all that Icky Foreign Debt to repudiate before we open the FEMA Camps.

A good Trade War would be perfect for a Retaliatory Default.

Let them Chinee types brutalize a few million Induns and the Namish People.  'N who needs Europe anyway.

China needs water more than it needs gold.

It would be such an easy, limited far away war.

Sure. WE could do it...



Son of Loki's picture
Airbus to China: We support you, please buy our jets


BRUSSELS (Reuters) - China's decision to ease a boycott of some $11 billion (7.16 billion pounds) in Airbus (Paris: NL0000235190 - news) jet orders followed a high-level appeal from the planemaker urging Beijing to recognise its support over a trade row with Europe, a letter seen by Reuters shows.


The EU will bow to the PRC, not India.

W T F II's picture

EXACTLY what happened LAST TIME...30's....!! Funny how s#!t always'n DNA...!!

Ratscam's picture

currency, trade, real wars.
its not the DNA, its the few psyco-/sociopaths TPTB that want war in exchange for money and control. Every war is planned, so is WWIII. I hope we can avoid it.

Son of Loki's picture

I'd rather live in China then India....really.

HulkHogan's picture

I'd rather kill myself instead of living in either country.

akak's picture

The only real difference lies in whether your sidewalk-deposited turds would be curry or puppy flavored.

DaddyO's picture

Where's AnAnonymous when we need him to sort this out for us?


jon dough's picture

Stuck in the Mittal with Hu?

W T F II's picture

you should have 100+ UPs for that one...

ps. i thought Jon Dough offed himself..??

DaddyO's picture

All the comics here on ZH need a foil, right?


RafterManFMJ's picture


The infantry is hiring! (Or soon will be)

surf0766's picture

25% unemployment in those countries which choose a socialist path.

DoChenRollingBearing's picture

Yes, Lakshmi doesn't care about 25% unemployment.  He's just talking his book.  Timken will just say the same thing when the USA goes back into recession.

duo's picture

Europe just needs a fracking boom.  It will create demand for steel pipe, and a place to stash carcinogenic chemical by-products underground, um, below the water table.

Urban Redneck's picture

In the spring of 2009, the market cap of US Steel fell below the cost of constructing a SINGLE new steel plant, much less any cash and inventory it carried (in addition to all the steel plants) on its balance sheet.  

Lakshmi might not do so well if there's blood in the streets he has to fight to retain control of his company from someone hunting for strategic assets on the cheap. 

RafterManFMJ's picture

They can have my 409 coil when they pry it from my cold, gloved hand...

samcontrol's picture

what does that have anything to do with steel.
you are like a little boy.

Dr. Engali's picture

Currency wars , trade wars, followed by world wars. Won't be long before the shooting starts.

economics9698's picture

Increasing the unemployment to 25% softens them up for war.

holdbuysell's picture

Sorry, Doc. Didn't see...posted the same thing below.

Offthebeach's picture

During WWII, the stretched, diluted British Army took Iraq and Iran in months, now the US couldn't.
Conventual wars are too expensive, but China could field 20 million. Easy. But we' d have to go nuclear, which would take everyone's attention off the economy, give central bank boys something new to do, solve unemployment and clear out our urban slums for a,hundred years.

booboo's picture

Damn Doc, we burn a million tons of copper and steel laced depleted uranium a year shooting up streets in foreign lands, that ain't chopped liver.

Parisnights's picture

Trade war, currency war, cold war, proxy war-- What a bunch of sissy warriors.  Makes you pine for Attila  or genghis.

Larry Dallas's picture

Talk about biting the hand that feeds you.

Time for Mittal to hire GS for strategic alternatives...

Go Tribe's picture

Let's see if I understand this: QEInfinity plus tariffs = much higher prices for us 99 percenters, right?

holdbuysell's picture

Right on schedule.

To paraphrase Gerald Celente:

Currency war.

Buckaroo Banzai's picture

"if goods don't cross borders, armies will" --Frederic Bastiat

slotmouth's picture

Currency debasement + protectionism + xenophobia + high unemployment = golden age

Stuck on Zero's picture

The world should have figured out earlier that the Chinese were mercantilists.  To quote:

“If you will not fight for right when you can easily win without bloodshed; if you will not fight when your victory is sure and not too costly; you may come to the moment when you will have to fight with all the odds against you and only a precarious chance of survival. There may even be a worse case. You may have to fight when there is no hope of victory, because it is better to perish than to live as slaves.”


       -Winston Churchill