Surplus steel production capacity will resume growth in 2020

The gap between global production and production capacity is expected to reach 700 million tons in 2020, increasing for the first time since 2016, the OECD Steel Committee said at its last virtual meeting.

The association noted that the latest available OECD data show that global steel production capacity could grow to 2,455.8 million tonnes /year. This new growth will widen the gap between production and installed capacity after a series of cuts in the period 2016-2019.

Global excess capacity is expected to grow by 41.8 million tonnes this year, mainly due to new capacity in the Middle East and Asia. “The Committee noted with concern that a number of planned capacity increases are based on expectations of increased future demand, including demand in export markets,” comments the OECD.

The growth in capacity, coupled with the hardships caused by the coronavirus outbreak, is expected to cause uncertainty this year. In addition, there are concerns about continued growth in production in China, despite falling demand for steel worldwide. “The Steel Committee noted with concern the deviation from the global trend in China, where steel production reached record levels in the first half of 2020 and stocks reached historically high levels,” he said.

“These developments pose a risk of oversupply in China, exacerbating global imbalances as a result of the demand shock for Covid-19,” the OECD said. “In this context, the Steel Committee recognized that the work of the Global Forum on Steel Overcapacity (GFSEC) is more important than ever.”

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