OECD Steel Committee: Global steelmaking overcapacity returns after four years

Wednesday, 30 September 2020 17:47:43 (GMT+3)   |   Istanbul
       

At its 88th session held virtually on September 24-25 and 28-29, the Steel Committee of the Organization for Economic Co-operation and Development (OECD) discussed the outlook and the future of the steel sector, growing excess capacity and increasing trade tensions. The committee also discussed the challenges facing the global steel industry and policies to promote adjustment and ensure a fair playing field in the sector. The OECD expressed grave concerns about the deterioration of steel market conditions related to the coronavirus, causing demand and production disruptions that have impacted all economic sectors.

The latest available data from the OECD show that global steelmaking capacity could increase to 2.45 million mt in 2020. The global excess capacity could rise by 41.8 million mt in the current year, mainly supported by new capacities becoming available in the Middle East and Asia. The committee stated that the gap between global production and capacity is expected to reach 700 million mt in the current year, after narrowing between 2016 and 2019. The committee noted concerns that a number of planned capacity increases are premised on expectations of an increase in future demand, including demand in export markets.

In the OECD’s September 2020 Interim Economic Outlook, it is forecast that world GDP will drop by 4.5 percent in 2020, before picking up by five percent in 2021. Most major steel-producing economies have experienced significant contractions in steel production this year due to the coronavirus. The Steel Committee noted with concern the divergence from this global trend in China, where steel production reached record volumes in the first semester of 2020. These developments pose a risk of oversupply in China, exacerbating global imbalances. Besides risks related to the pandemic, the main risks to the outlook include the impacts of growing global excess capacity, supported by government subsidies and investment policies that are putting the long-run viability of producers at risk and should therefore be addressed urgently.


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