Global excess capacity to touch 606mt in 2020: Forum

Steel Insights Bureau

Excess capacity in the global sector is going to increase significantly this year, to a level of at least 606 million tons and is likely to remain high for the foreseeable future, Global Forum on Steel Excess Capacity (GFSEC) said following a meeting in Paris.

“Market imbalances are now growing, with steel production continuing to expand rapidly, notably in China, despite the severe demand downturn. These reactions are made possible by the existence of excess capacity and a lack of market function. Moreover, new plants continue to be built domestically or abroad with the support of governments. Until policy actions are taken to reduce structural excess capacity and allow markets to work more efficiently, the industry and its workers will continue to suffer unnecessarily,” the forum said in a statement issued following the ministerial meeting held virtually on October 26, co-organised by the forum’s co-chairs – the European Union and Korea – and facilitated by the OECD.

India refuses data sharing

Incidentally, India was the sole member of the forum that refused to share its planned capacity data. During the two rounds of information sharing in 2020, GFSEC members exchanged information and reviewed developments on steelmaking capacity in their economies.

Members also discussed capacity developments taking place in G20 economies that are not members of the GFSEC.

All but one of the GFSEC’s 31 members, India, participated in the information sharing rounds conducted by the GFSEC in 2020.

These members provided updated data on crude steelmaking capacity in 2019, confirmed or provided updated data for 2014-2018 and, where applicable, provided preliminary information on capacity developments in the first half of 2020.

“India was the only GFSEC member that did not participate in the information sharing process in 2020. In light of India’s non-participation, the report used public data from the OECD to measure India’s crude steelmaking capacity,” a report issued by the forum said.

The development comes on the back of China’s exit from the forum in 2019.

“In this respect, members regret the decision by the People’s Republic of China and Saudi Arabia to discontinue their membership of the Forum as of 2019 and look forward to the resumption of India’s participation in 2021. The excess capacity affecting the steel sector is a genuine global issue, which requires a multilateral engagement by all G-20 countries,” the forum said.

Forum member capacity down from 2018 levels

Based on data submitted by GFSEC members (and data from the OECD for India), total steelmaking capacity among GFSEC members amounted to 953.4 mt in 2019. This combined capacity corresponds to about 40 percent of global capacity and 75percent of capacity outside China.

These data indicate that total combined capacity among GFSEC economies declined from 957.2 mt in 2018 to 953.4 mt in 2019.

On the basis of these data, between 2014 and 2019 steelmaking capacity in the 31 GFSEC member economies increased by 5.1 mt.

Demand recovery can’t absorb new capacities

The downward trend in steel demand served as a clear indicator that developments in demand would not be sufficient to address the problem of excess capacity in the steel sector; such progress would require structural reform on the supply side, the forum said.