A report released in January by a US steel industry group attempts to build the case that China's subsidies to its steel industry are in violation of its WTO commitments.

China's steel production and consumption has expanded rapidly in recent years; in 2005 China become a net steel importer, a development directly correlated with generous energy subsidies that benefit the steel industry, according to the report.

"One can almost perfectly predict China's steel exports from its energy subsidies," writes the author of the study, Usha Haley, a professor of international business at the University of New Haven.

Prof. Haley estimates that in 2007 energy subsidies to Chinese steel amounted to US$ 15.7 billion; a 3800% increase since 2000. These include subsidies to thermal coal, coking coal, electricity and natural gas.

China's subsidy regime contributes to an increasingly fragmented steel industry, at a time when the rest of the world is concentrating production. "Every Chinese province and region wants its own steel mill, and local governments provide lavish benefits to their steel industries," says the report.

The report accuses the Chinese steel industry as being "a creation of the Chinese government", and in breach of its WTO obligations. The Chinese government has not listed subsidies to steel in its most recent subsidy notifications to WTO Members.

The report, Shedding Light on Energy Subsidies in China: An Analysis of China's Steel Industry from 2000-2007, is available for download at: 
http://www.americanmanufacturing.org/wordpress/wp-content/uploads/2008/01/energy-subsidies-in-china-jan-8-08.pdf