It’s not that we’re producing too much, it’s just there’s not enough demand – the argument from China, which is under pressure to curb steel output amid a global glut.
Ministers and trade officials from over 30 major steel producing countries have just failed to agree on how to tackle an industry crisis at a meeting in Brussels.
The US threatened China with trade action.
“Unless China starts to take timely and concrete actions to reduce its excess production and capacity … the fundamental structural problems in the industry will remain and affected governments – including the United States – will have no alternatives other than trade action to avoid harm to their domestic industries and workers,” US Secretary of Commerce Penny Pritzker and US Trade Representative Michael Froman said in a statement.
But Commerce Ministry spokesman Shen Danyang insisted: “China’s steel output is targeted at meeting domestic demand. We do not give any subsidies to stimulate steel exports and at the same time have raised export taxes on some steel products.”
He went on to say: “China has already done more than enough. What more do you want us to do? Steel is the food of industry, the food of economic development. At present, the major problem is that countries that need food have a poor appetite so it looks like there’s too much food.”
Indeed Beijing has recently agreed to scrap some export subsidies on products including steel.
But China is the world’s top steel producer, and critics say its capacity far exceeds its needs.
China’s Iron & Steel Association ( CISA) just announced production actually hit a record high last month as a recent big rally in steel prices in China encouraged mills that were shut to reopen.
In its monthly report, the CISA said a recent rally in steel prices in China – up 42 percent so far this year – was unsustainable given the rising production, and it warned that increased protectionism in Southeast Asia and Europe would make steel exports more difficult.
“The big rise in steel prices has led to a rapid reopening of capacity that had been shut or suspended … a large rise in output will not be good for the gap between market demand and supply,” the CISA said.
The OECD, which was one of the organisers of the Brussels meeting, says global steelmaking capacity was 2.37 billion tonnes in 2015, but declining production meant only 67.5 percent of that was being used, down from 70.9 percent in 2014.