February 1, 2008 -- BRUSSELS, Belgium (AP) - The European Union started a new probe Friday into whether China, South Korea and Taiwan are illegally selling steel below-cost and hurting European steelmakers. The investigation adds to one the EU launched in December into Chinese steel imports.

Steel producers such as ArcelorMittal SA and ThyssenKrupp AG complain that stainless steel cold-rolled flat products used for building and engineering products are flooding the European market.

Surging imports of steel -- up by 3,300 percent over the last five years -- have pushed prices down by a quarter, according to the European Confederation of Iron and Steel Industries, or Eurofer.

They have asked for a 40 percent surcharge on these imports, alleging Chinese output is "out of control."

The European Commission will now investigate cold-rolled flat stainless steel imports from the three Asian nations to Europe during 2007. It is already looking into imports of hot-dipped metallic coated iron or steel flat-rolled products from China.

Under global trade rules, the EU has the right to impose extra charges on imports if it gathers evidence that these countries are illegally selling below cost.

Europe does not recognize Chinese companies as operating in normal market conditions because the economy is still largely state-controlled and the government subsidizes rent and energy bills. It will check steel making costs in Mexico instead to compare them to European rivals.

The soonest there would be any hint of trade sanctions from the new probe would be November, when officials can make a recommendation for temporary antidumping duties and EU governments can decide to take action.

European trade statistics bear out steelmakers' complaints. EU steel imports from China and South Korea during the first 11 months of last year almost doubled from the same period in 2006.

China provided around a third of the EU's steel imports, far ahead of any other supplier. The EU economy grew strongly over the period, calling for more steel to make cars and construct buildings.

Eurofer's members include the world's largest steel maker, ArcelorMittal, which complained in August of cheap Chinese imports threatening the European market by holding down prices. The group also represents Britain's Corus Group PLC and German steel makers ThyssenKrupp AG and Salzgitter AG.

All of Eurofer's member companies employ 372,000 people in Europe, turning out 200 million metric tons of steel a year and making a combined turnover of â?¬138.5 billion (US$206 billion).

Europe is now China's largest trading partner and it is importing more and more -- the trade gap widened by a quarter in the first 10 months of 2007.

EU officials have warned of a protectionist backlash if China does not do more to open up to European exports. They have asked Beijing to change a system that keeps its currency cheap, giving Chinese exporters an unfair price advantage and adding to the country's surpluses.

Source: Associated Press Newswires