Global steel recovery at risk from capacity ramp-ups outside China
According to the latest estimate from the Organisation for Economic Cooperation and Development (OECD), global steel-making capacity stood at 2.36 billion tonnes in the first half of 2017, easing just 0.6 percent from 2.37 billion in 2016.
The figures are evolving and may not yet reflect the full extent of capacity reductions taking place, a source close to the OECD Steel Committee, which produced the estimates, said. But he also said the overall global overcapacity picture was worrisome.
“Excess capacity remains at alarmingly high levels,” OECD Steel Committee chair Lieven Top said late last month, following the release of the estimates at its bi-annual meeting.
According to the OECD steel capacity report on which the estimates were based, some 23 million tonnes of potential output additions are underway in the Middle East, primarily Iran. These should come on stream during 2017-2019, with another 7 million tonnes planned for possible start-up during the period.
The extra capacity is headed in part for the export market given that the World Steel Association (worldsteel) estimates demand in the Middle East will grow by a total of just 3.7 million tonnes this year and next.
Price rises have been driven by the Chinese capacity cuts, but these should wane going forward. The China Iron and Steel Association said the country had essentially completed its five-year target, set last year, to cut 100-150 million tonnes of excess capacity.
Much of the blame for the global steel sector crisis of 2015 has been directed at China - producer of half the world’s steel - with 121 duties in place globally on Chinese output as of end-June this year, a U.S. Department of Commerce report showed.
In the United States, President Donald Trump has repeatedly threatened to take a tough line on what he says is unfairly traded Chinese steel, even launching an investigation into whether steel imports pose a risk to U.S. national security.
”Politicians in the West and western steel producers love to blame China for overcapacity, which is fair to an extent; but Chinese mills have shouldered most of the burden of capacity reductions in the last two years,” Roger Bell, director of mining research at Hannam and Partners, said.