Steel overcapacity reaches historic high of 737 million tons

A worker looks at steel piled up at a steel wholesale market in Shenyang in northeast China's Liaoning province. A new report found global steelmaking overcapacity was at an all-time high, largely because of China.

A new study by the Global Forum on Steel Excess Capacity found that steelmaking overcapacity worldwide hit a record 737 million tons in 2016, "the highest level seen in the history of the steel industry."

That's a problem because surplus steelmaking capacity depresses prices, cuts into profitability, threatens jobs and "jeopardizes the very existence of companies and branches across the world," according to the report.

"Two years of dialogue and meetings resulted in a 52-page report and a set of principles that acknowledges there is global steel overcapacity which is continuing to grow," the United Steelworkers union said in a statement. "For the participants in the Global Forum, this may be viewed as a victory, but for workers in the steel sector in the United States, it is just another sign that political leaders are fiddling while Rome burns."

New steel capacity coming online, particularly in China, has caused significant damage to the U.S. steel industry. The Global Forum on Steel Excess Capacity estimates 33 percent of American steelmaking jobs have vanished during the last two decades, and U.S. steel production has plunged by 43 percent from its peak in 1973.

“We are grateful and appreciative of the leadership and commitment of the U.S. government to address the global steel overcapacity crisis and the market-distorting government policies and practices that have driven it," said Thomas Gibson, American Iron and Steel Institute president and CEO. "The massive build-up in steel capacity in other countries, which has fueled historic levels of unfairly traded imports into the U.S., is the most critical issue facing the steel industry today."

Gibson said the report issued by the Global Forum "properly focuses on the need for governments to eliminate market-distorting subsidies and other measures that contribute to excess capacity and to ensure a level playing field between private sector steel producers and state-owned enterprises."

Gibson said these and the other policy recommendations presented by the Global Forum will only be meaningful if they are actually implemented by governments.

"Promises alone will not solve the problems facing the global steel industry; concrete actions by governments must follow in short order," he said.

Gibson asked the federal government to take more action against steel imports, which have captured 28 percent of the market share this year.

"Continued aggressive enforcement of the full range of U.S. trade laws, including Section 232 and our antidumping and countervailing duty laws, is critical to ensure that the U.S. industry is not further damaged by unfair trade in steel," Gibson said. "In our view, a trade policy that couples vigorous enforcement with continued international engagement offers the best opportunity for successfully addressing the global overcapacity crisis in steel.”

Philip K. Bell, president of Steel Manufacturers Association, said the report confirmed a need to eliminate foreign subsidies that allow for unfair pricing.

"While it is good to see the cooperation between countries and to continue diplomatic efforts to deal with this issue, until the forum identifies specific measures, timetables and targets, the overcapacity problem will persist," Bell said. "This is a first step in a process that I hope becomes more robust over time."


Business Reporter

Joseph S. Pete is a Lisagor Award-winning business reporter who covers steel, industry, unions, the ports, retail, banking and more. The Indiana University grad has been with The Times since 2013 and blogs about craft beer, culture and the military.