At the 79th Organization for Economic Co-operation and Development (OECD) Steel Committee meeting held in Paris on November 30 and December 1, participants called for immediate action to address the excess capacity challenge and its effects in the steel sector. They also exchanged views on past experiences with restructuring in the steel industry and their relevance for the current steel crisis, the sluggish growth of the global steel market, the weak financial health of steelmaking companies, and expressed concerns about the economic and social implications of a further deterioration of the outlook.
According to the Steel Committee, despite weak market conditions, steelmaking capacity is projected to grow further in 2015 2017. Capacity in the OECD area is expected to remain roughly unchanged. Much of the world’s capacity growth is likely to occur in developing Asia and in regions that are currently net importers of steel, though some investment projects may be cancelled or postponed given the weak market situation. Overall, world capacity is expected to increase to 2.42 billion mt in 2017.
Demand weakness coupled with further increases in steelmaking capacity over the next few years, in an environment of already low steel prices, unsustainably weak profitability, and mounting debt, suggests that adjustment pressures are likely to grow significantly in the short to medium term, the OECD Steel Committee noted.
Regarding trade measures escalating in the industry, the Steel Committee stated that, while trade actions and government support measures may provide short-term relief, they do not remove the sources of friction that ultimately lead to recurring crises in the global steel industry.