Australia cuts deal in steel row

The EU has begun the battle to protect European steel interests

Australia has reached a deal with the US government to protect its steel exports from a 30% tariff increase imposed by the US president last week.

Australian Prime Minister John Howard said he expects the bulk of Australia's steel exports to the United States to escape the new tariffs, but did not make clear if other countries would benefit from the deal.

The decision by US President George W Bush to increase anti-dumping tariffs on steel imports to last week sparked international anger.

International dispute

The European Union said it would challenge the US tariffs by taking a case to the World Trade Organisation's dispute panel, as did Japan.

Australia and New Zealand were reportedly filing a joint submission to the WTO. Mr Howard's announcement of a special deal appears to break ranks with this joint approach, analysts said.

The Australian prime minister told parliament talks had won an exemption for Australian exports of hot rolled steel, an important product for one of the country's biggest firms, BHP Billiton.

Steel slab, another major product for Billiton, was not included in the tariffs.

Billiton to benefit

"Understandings have been reached with the US administration over the weekend which will allow Australian exports of hot rolled steel products to the US West Coast to proceed," said Mr Howard.

"This decision, combined with the tariff rate quota on Australian slab steel exports, should preserve about 85% of Australia's steel exports to the United States."

Australia exports $234m of steel a year to the US and analysts feared the tariffs would have hit about half that market.

Pacific problem

Meanwhile, another Pacific steel producer reported a steep drop in profits due to the slower world economy combined with pressure from cheap imports.

China's giant Baoshan Iron and Steel, said its net income fell 14.4% to $309m.

Baoshan warned sales could be lower this year as Japanese and Korean foundries - the main targets of the US ruling - divert their production into its markets.

"The US decision has indirectly placed pressure on Chinese steelmakers such as Baoshan", said analyst Cynthia Zhang of Bank of China International in Shanghai.

Baoshan, which is China's biggest and profitable steelmaker, directly exports only 5% of its output to the US.