The Directorate of the Science, Technology and Innovation Steel Committee of the Organisation for Economic Co-operation and Development (OECD) has published a report regarding the latest developments in steelmaking capacity taking place around the world, and expectations for the next few years.
According to the report, global excess capacity continues to be a significant challenge facing the global steel industry and is expected to expand in the coming years, driven by the continuous investment activity in new steelmaking capacity, especially in Asia. A total of 53.5 million mt of capacity is currently underway for completion over the next three years, while an additional 90.8 million mt of capacity expansions are in the planning stages. If all these projects are implemented, global steelmaking capacity could increase by 5.9 percent between 2023 and 2025. While steel market conditions showed some modest improvement in 2021, the market situation is now weakening and excess capacity pressures are building.
Many of the new investments in Asia will be geared towards the installation of traditional, large-scale blast furnace/basic oxygen furnace facilities, while the capacity growth in other regions is focused mainly on electric arc furnaces. Chinese steel companies continue their capacity investments abroad, mainly in Asia but also Africa, while steelmaking capacity in China remained relatively stable in the last few years.
Global crude steelmaking capacity could increase by 29.5 million mt or 1.2 percent to 2.46 billion mt in 2022, the report said. By region, the Middle East and Asia (particularly Iran, India and Vietnam) account for nearly a third of that estimated growth.
Meanwhile, capacity utilization rates are expected to deteriorate in 2022. The gap between global capacity and production is expected to expand due to weak steel production and continued growth in capacity. World steel production as a share of capacity could decrease from 78.5 percent in 2021 to 77.1 percent in 2022. This means global steelmaking capacity is expanding despite deteriorating global steel demand, which will put pressure on steel prices and weaken the steel industry’s profitability.