UPDATE 2-China hits back at U.S. steel with dumping complaint

* China launches trade case during Geithner visit

* China probes U.S., Russian steel product used in power

* Chinese probe hits back after U.S. dumping complaint

* Two Russian firms also in U.S. complaint

(Adds comment on Russia's Novolipetsk Steel)

By Tom Miles and Alfred Cang

BEIJING/SHANGHAI, June 1 (Reuters) - China has launched an investigation into U.S. and Russian imports of some steel products, the Ministry of Commerce said on Monday, escalating a trade dispute during U.S. Treasury Secretary Timothy Geithner's first visit to Beijing since taking office.

The Chinese investigation comes 10 days after a U.S. trade panel gave its unanimous approval to a government probe that could lead to steep U.S. duties on some Chinese steel imports.

"The trade remedy measure is only to correct unfair trade affairs and the Ministry of Commerce will protect the interests of domestic enterprises via a trade remedy investigation," the Chinese ministry said in a statement.

World steel demand has collapsed this year but China has continued to pump out steel at an even higher rate than in 2008, prompting seven U.S. steel mills and the United Steelworkers union to allege China is flooding the U.S. market with a type of stainless steel pipe used in oil drilling, known as OCTG.

The complainants in that case include U.S. Steel (X.N) and two Russian-owned firms, Evraz Rocky Mountain Steel Mills HK1q.L and TMK IPSCO (TRMK.MM).

On May 22, a U.S. trade panel unanimously backed a government probe that could lead to steep U.S. duties on an estimated $2.6 billion of the U.S. imports. The U.S. Commerce Department is expected to make a preliminary ruling on countervailing duties in early July and anti-dumping duties in September.

In April, a Chinese newspaper quoted a senior industry official as saying China would retaliate if the United States decided to investigate the complaint. [ID:nPEK19067]

POWER

China's Commerce Ministry said it had launched an anti-dumping case into U.S. and Russian imports of grain-oriented flat-rolled electrical steel and was investigating subsidies for the steel product in the United States.

Grain-oriented electrical steel, also known as grain-oriented silicon steel, is used for the cores of high-efficiency transformers, electric motors and generators.

Wuhan Iron and Steel Group, China's third-largest steel mill and largest silicon steel producer. Baosteel, the biggest mill, has also started up silicon steel production.

The investigation was prompted by Wuhan, a company executive said.

"Imports had seriously hurt Chinese mills' profits. Due to the price war, domestic prices have fallen to 25,000 yuan a tonne this year from 45,000 yuan in the previous years," said the executive, who asked not to be named as he was not authorised to speak to media.

The executive declined to comment on the production cost of the product in the mill.

The investigation also reflects Beijing's worries that shrinking exports and climbing imports will hinder the recovery of its steel industry, which is struggling to break even.

"The problem is China has started to import some normal steel products, such as hot-rolled steel sheets, this year. Previously, most of the imports were high-end products that China cannot produce itself," said analyst Henry Liu at Macquarie Bank.

Analysts said the investigation could hit Russia's Novolipetsk Steel (NLMK.MM), since China is one of the key markets for their electrical steel.

"However, launching an investigation does not guarantee that China will soon introduce tariffs on transformer steel," Renaissance Capital analyst Boris Krasnojenov said.

Novolipetsk said it intends to cooperate with the investigation, and that it hopes an outcome is reached that is favourable to the company and its Chinese partners.

Customs data showed that China was a net importer of nearly 900,000 tonnes of crude steel in April, the second month running that inflows have exceeded outflows for the country, which had been a net steel exporter since 2005.

The other U.S. producers who filed the complaint against Chinese imports were Maverick Tube Corp, V&M Star LLP, V&M TCA and Wheatland Tube Corp.

(Additional reporting by Polina Devitt and writing by Alfred Kueppers in Moscow)