Europe further hit by effects of overcapacity

by Hans Diederichs

The European Steel Association (EUROFER) has issued a joint release alongside eighteen other regional and national steel associations calling for the Global Forum on Steel Excess Capacity to be extended. At the same time, the crisis in the European steel industry – largely a result of the very overcapacity the Global Forum exists to fix – continues to intensify.

“Europe-based steelmakers and those in their partner regions across the whole world are making it clear today that they believe the extension of the Global Forum on Steel Excess Capacity is essential to effectively reduce global production overcapacity in the sector”, said Axel Eggert, Director General of EUROFER.

The Global Forum was established in late 2016, on the instruction of G20 Leaders. It set out to gather information and report on the evolution of steel supply and demand conditions, steel production capacity, and government policies that lead to global overcapacity, such as subsidies. The Forum’s work has already produced results, such as detailed statistics on steel capacity and production around the world and has instigated work to cut excess capacity where it is needed.

“Meanwhile, the impact of this overcapacity is causing ructions around the world. The trade wars being waged, and the resultant rise of protectionist measures affecting products well beyond our sector, has steel overcapacity at its root”, emphasised Mr Eggert.

“Even with the EU Steel Safeguard in place, the EU is having a torrid time. Apparent demand for steel is expected to fall by 3.1% in 2019, even as imports surge in often violently unpredictable ways. We therefore ask the EU Commission to further strengthen the safeguards.”, added Mr Eggert.

Steel imports into the EU rose by 12% in 2018, to the highest recorded level. Today, imports are still well above the 2016 & 2017 levels, which were themselves records at the time. Surges are at least as damaging as sustained high import levels, and the EU saw a 50% drop in total finished steel imports in June 2019, followed by a 50% rise in July when the new safeguard quota period opened.

“Overall global steel overcapacity has fallen only slowly in the past few years, if only because China, in particular, is ramping up production – up 9.1% in the 8 months to August 2019, even as production in Europe has fallen by 2.9%, and in the majority of other regions is also flat or declining. Global overcapacity still stands at some 500 million tonnes and the OECD expects it to rise again in 2020”, stressed Mr Eggert. “This is a deepening crisis which has already seen a number of European steel plants idled or closed, with thousands of steel workers being laid-off over the past year”.

“We call for the Global Forum on Global Excess to have its mandate extended – and for it to continue vigorously for the foreseeable future, either with all members or with the supportive members of the international community”, concluded Mr Eggert.

Source: Eurofer                            Photo: Fotolia

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