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U.S. Workers Are Skeptical, But China Says It Will Restrain Steel Output

Steel stacked up at a steel products market on Monday in Yichang, Hubei Province, China.

Say you are one of the roughly 15,000 American steel workers who have been laid off — or received notice of coming layoffs — in the past year.

You and your boss would cheer any reduction in China's massive steelmaking capacity. Chinese steel has been flooding global markets and hurting profits for U.S. companies.

But on Tuesday, after U.S. and Chinese officials announced plans to reduce Chinese steel production capacity, the applause from American workers and companies was, shall we say, restrained.

"I would love to believe it will lead to something, but I won't until we see evidence" that China has actually cut production, said Holly Hart, legislative director for the United Steelworkers.

And Thomas Gibson, CEO of the American Iron and Steel Institute, issued a statement saying companies in this country "welcome the new commitments by Chinese leaders to adopt measures to strictly contain steel capacity expansion, reduce net steel capacity, eliminate outdated steel capacity, and dispose of 'zombie enterprises' through restructuring, bankruptcy and liquidation."

Then he added: "But these commitments will only be meaningful if they lead to real results."

Such skepticism stems from the futility of past efforts to trim China's huge production at a time of weak global demand for steel.

U.S. Treasury Secretary Jack Lew said Tuesday at the end of talks held in Beijing that China has agreed "to actively and appropriately" shut down unneeded steel mills through "a range of efforts, including restructuring and bankruptcy."

In April, officials for major steel-producing countries met in Brussels for talks hosted by the Organization for Economic Cooperation and Development. The parties tried to reach a comprehensive multilateral agreement to cut global steel production, but China was uncooperative.

The OECD, a forum for countries to work out economic issues, says only 67.5 percent of the steel produced last year was actually being used, down from 70.9 percent in 2014. In other words, mountains of metal are piling up around the world, hurting prices and leading to steel worker layoffs in this country and elsewhere.

Now the U.S. Treasury says China will participate in the OECD Steel Committee meeting, scheduled for Sept. 8-9, to discuss creating a "global steel forum" to help tamp down excess production.

Lew was at the annual U.S.-China Strategic and Economic dialogue, a platform that allows the world's two economic giants to discuss differences. Secretary of State John Kerry and China's President Xi Jinping also attended.

At Tuesday's closing ceremony, Lew said that although the talks "cannot resolve our concerns, they do represent progress."

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