Feb. 1 (Bloomberg) -- The European Union broadened the threat of tariffs on steel from China to protect EU producers including ThyssenKrupp AG from cheaper imports, opening a probe that also targets Taiwan and South Korea.

The inquiry is into whether Chinese, Taiwanese and Korean exporters sell stainless steel in the EU below cost, a practice known as dumping. It covers 2.1 billion euros ($3.1 billion) of imports of cold-rolled flat products, used in everything from cars and tanks to boilers and kitchen equipment, and is on top of an EU investigation of steel from China used in construction.

``The threat of EU trade protection is a very important framework for the European steel industry,'' said Hermann Reith, an analyst at BHF-Bank in Frankfurt. ``It will help limit Chinese steel exports.''

Steel may become the next flash point in EU-China trade relations amid European allegations the Chinese currency is undervalued and a trade deficit with the Asian country that is expanding by $20 million an hour. China, whose yuan has declined about 9 percent against the euro in the past two years, is the world's biggest steel-producing nation, accounting for a third of global output.

The 27-nation EU is already trying to stem imports of Chinese goods ranging from textiles and chemicals to ironing boards and bicycles through anti-dumping duties. The aim is to prevent Chinese exporters from undercutting higher-cost European manufacturers.

Assessing Impact

The new investigation will determine whether stainless steel ``is being dumped and whether this dumping has caused injury,'' the European Commission, the EU's regulatory arm in Brussels, said in the Official Journal.

The commission has nine months to decide whether to impose provisional anti-dumping duties for half a year and EU governments have 15 months to choose whether to apply ``definitive'' levies for five years.

``A team of lawyers will come to our company to assess the possible impact'' of the new EU dumping inquiry, said Wan Yi, board secretary of Wuhan Iron & Steel Co., China's third-biggest steel producer. ``We will see whether we need to defend the action.''

In December, the commission opened a probe into whether Chinese exporters including Baoshan Iron & Steel Co. and Wuhan Iron & Steel dump flat-rolled steel in the EU. That inquiry covers 1.2 billion euros of EU imports of hot-dipped metallic- coated steel, which the construction industry uses.

Earnings, Jobs

The two cases stem from complaints by European steel lobby group Eurofer, which represents producers including Germany's ThyssenKrupp and Luxembourg-based ArcelorMittal. The complaint over stainless steel, filed Dec. 21, alleges ``substantial adverse effects'' on profitability and employment in the EU steel industry, said the commission.

``It is alleged that the volumes and the prices of the imported product concerned have, among other consequences, had a negative impact on the market share held and the level of prices charged'' by EU steel producers, the commission said.

Trade and industry officials in Taiwan and Korea questioned the strength of the dumping allegations.

``It's unclear if they have enough evidence for a case,'' said Wu Hsin-hua, a spokesman for Taiwan's Bureau of Foreign Trade in Taipei. ``A lot of companies file to their governments dumping charges against rivals.''

Market Share

EU imports of stainless steel cold-rolled flat products from China, Taiwan and Korea totaled 400,000 metric tons last year, giving the three nations' producers a combined 10 percent to 15 percent of the bloc's market for the product, according to Eurofer. That's about double their joint EU market share in 2006 and four times higher than in 2005, the group said.

In 2007, EU imports of cold-rolled flat products totaled about 160,000 tons from China, 130,000 tons from Taiwan and 110,000 tons from Korea, according to Eurofer.

``A major threat may come from China from the EU's point of view,'' said Kim Sung Woo, general manager of the international cooperation team at the Korea Iron & Steel Association in Seoul. ``It's unfair for them to expand the investigation into other countries including Korea.''

Korea's major steel producers declined to comment on the EU case. Ko Min Jin, a spokeswoman for Pohang-based Posco, Asia's third-biggest steelmaker, said the company would only comment ``after we see any result of the probe.'' Hyundai Steel Co. spokesman Chang Young Sik said he didn't have anything to say on the matter ``for now.''

`Flood' of Imports

Eurofer hailed the opening of the new probe. The Brussels- based group said the EU had a ``massive flood'' of imports of stainless steel cold-rolled flat products last year primarily because of excess capacity in China.

The nine-member Bloomberg Europe Steel Index rose 5.8 percent today, led by ArcelorMittal, ThyssenKrupp and Finland's Outokumpu Oyj, another stainless-steel manufacturer. Outokumpu's 9.9 percent gain was the biggest on the index.

The EU may open a third steel dumping inquiry involving China within weeks. Eurofer has also filed a complaint seeking EU anti-dumping duties on wire rod from China and Turkey. The uses of wire rod include construction and tires.