China, Mideast war weigh on global steel sector: OECD

The global steel sector remains in crisis, the OECD said Thursday, as China subsidising production has resulted in a flood of cheap steel on the markets while the war in the Middle East has dented demand.

"Global steelmaking capacity has expanded steadily even as demand has contracted, pushing the capacity utilisation rate well below sustainable levels," the Organisation for Economic Cooperation and Development (OECD) said in its annual report on the sector.

The OECD noted that steel is necessary for nearly all industrial activities, as well as being critical in many strategic sectors.

It noted that excess capacity reached 640 million tonnes last year and is expected to rise to 745 million tonnes by 2028.

That puts excess capacity at more than a third of the roughly 1,800 million tonnes in steel demand last year.

Meanwhile, the OECD forecasts steel demand will rise by only 0.9 percent per year through 2030.

The OECD, which unites 38 industrialised nations, most of them industrialised, said most excess steel capacity is from China, at 54 percent of the total.

It noted Beijing had nearly doubled the subsidy rate for Chinese steelmakers since 2019, taking it to 15 times the rate steelmakers in OECD countries receive.

As China's domestic market has slowed, Chinese steelmakers have stepped up exports.

"The resulting surge in excess capacity is flooding international markets with dumped and subsidised exports," said the report.

Meanwhile, the conflict in the Middle East has pushed up energy costs for the energy-intensive industry, while disrupting supply chains.

"Co-ordinated international action is required to address the structural issues and impact," the OECD said, noting a global coalition of steel-producing nations that excludes China was working on a comprehensive framework to address the situation.

The OECD report pointed out that the flood of cheap dumped steel was threatening the financial viability of high-quality producers despite increasing trade restrictions.

"If current trends continue, the long-term viability of the sector and the national economic security of many countries will be undermined," it warned.

AFP

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