EXCESS CAPACITY THREATENS THE GLOBAL STEEL MARKET
The steel committee of the Organization for Economic Cooperation and Development (OECD) has expressed concerns about the deteriorating global steel market due to increasing excess capacity.
The issue of excess capacity is expected to worsen in the future, with a focus on expanding primarily in blast furnaces and basic oxygen furnaces (BF/BOF) technologies.
OECD states, "Global steel production capacity is predicted to increase significantly over the next three years, with 150 million tons of new production capacity under construction or in the planning stage for 2024-26."
This capacity increase occurs in the context of a sluggish global economic environment that has limited steel-buying activities. The crisis in China's real estate sector has also raised concerns as surplus steel products flood the global market.
Due to these factors, the current market's excess capacity is estimated at 612 million tons, according to OECD's estimates.
"Global excess capacity could lead to profound crises in the steel industry in the future, diminishing the financial prospects of the steel sector, exacerbating trade conflicts, and jeopardizing the long-term viability of steel mills as well as the livelihoods of workers in countries affected by the pandemic," the source said.
India and China are at the forefront of capacity expansion, as local governments in these countries provide abundant financial support to steel companies to encourage equipment modernization and various other activities.
Global steel production for this year is expected to increase by an additional 56 million tons to reach 2.5 billion tons.
OECD has criticized these market-distorting subsidies, calling for greater transparency and tighter monitoring of capacity investments underway to ensure higher market stability. The source also mentions that closer collaboration with the Global Forum on Steel Excess Capacity will be implemented to enhance awareness of this issue.
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