China produces about half the world's steel, sparking concerns in many markets, including the US.

A court ruling on Chinese steel exports to New Zealand threatens to remain a sore point for diplomats, a building industry lobby group warns.

A High Court ruling last week criticised advice provided by the Ministry of Business, Innovation and Employment (MBIE) to the previous government over whether anti-dumping tariffs should be applied on galvanised steel coil imports.

The court ruling said MBIE had wrongly discounted findings of overseas investigations into Chinese subsidisation of its steel industry.

The Building Industry Federation said the High Court's decision to order MBIE to reopen its investigation could reignite a significant irritant in the Beijing-Wellington trade relationship.

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"When allegations arose two years ago of subsidised Chinese steel entering New Zealand, suggestions were made in China that any imposition of penalty duties on the imports could threaten the flow of New Zealand dairy products to the Chinese market," chief executive Bruce Kohn said.

MBIE opened its investigation after NZ Steel complained that local steelmakers were not competing on a level playing field.

According to NZ Steel, the resulting report also applied the wrong law in deciding that any benefits Chinese producers received from banks or other Chinese entities did not qualify as subsidies.

MBIE estimated that Chinese steel might be subsidised up to 0.02 per cent, whereas earlier American and Australian investigations have claimed subsidies of 39 per cent and 22 per cent respectively.

Seven Chinese firms were asked to respond to MBIE's inquiries as to whether their coil exports were subsidised but only one replied.

The Chinese Government said claims that it subsidised its steel makers had no merit and contained no evidence.

In last week's ruling, the High Court quashed the former commerce minister's decision to not to impose anti-dumping duties on imported steel coil.

But it said that decision did not mean MBIE's original report had come to a wrong conclusion, just that it was flawed.

Kohn said the current Government needed to make its position on the issue clear "so that New Zealand manufacturers had some certainty on the level of competition they could expect.