OECD Steel Committee Worries About Oversupply

15 Dec 2010 • by Natalie Aster

As the global steel market gradually emerges from one of its worst downturns in decades, the organization of Economic Cooperation and Development's Steel Committee is concerned about "the growing imbalance between capacity and demand."

The OECD Steel Committee's meeting last week in Paris ended with a communiquA© that "despite some improvement in market conditions, the steel industry still faces challenging years ahead"-especially since it may take as long as four years for demand to match pre-recession levels. That's because the group worries that capacity expansion and production growth in developing nations could trigger another round of production cutbacks, layoffs and slumping prices in developed nations between 2010 and 2013. So, the projections about future years "suggest that global capacity may exceed demand by a wide margin," the statement adds.

The meeting was attended by representatives from the 30 OECD countries as well as Argentina, Brazil, China, Taipei, India, Russia, Malaysia, Romania, Slovenia and the Ukraine.

In the near term, wide regional differences appear to be evident about 2010 purchasing expectations. "China, India and several other emerging countries are already experiencing demand growth," according to a statement, "while most OECD countries are experiencing a slow recovery."

The statement by the committee notes that despite the decrease in 2008-2009 world steel demand, steelmaking capacity has not adjusted accordingly-and actually has increased in some regions. In fact, OECD projections suggest that world steelmaking capacity will rise from 1.806 billion metric tons in 2009 to 1.986 billion in 2012, "as producers resume many of the expansion projects that were put on hold in the aftermath of the economic crisis."

World steel demand is expected to rebound in 2010, and then grow by 6%-7% annually in later years to reach a level near 1.5 billion metric tons by the end of 2012. Thus, the outlook suggests that the gap between world capacity and demand, which averaged approximately 216 million metric tons during 2000-2007, could widen significantly over the next few years to 486 million metric tons by 2012.

Source: Purchasing


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