Non-market policies and practices, such as those in China, are accelerating the crisis.
Global steel overcapacity is increasing and poses serious risks to global markets, the Organization for Economic Co-operation and Development’s (OECD) Global Forum on Steel Overcapacity (GFSEC) has warned in a report. ministerial statement October 8th.
The Forum called on GFSEC Member States and other countries to counter the non-market policies and practices that create the crisis, noting the limited effectiveness of existing international efforts.
of GFSECThe international organization, which counts the United States and several other major steel producing countries as members, has found that global steel excess capacity has increased from an estimated 532 MMT in 2022 to 551 MMT in 2023. . The excess capacity is now combined by 73 MMT, which exceeds the “combined steel production of all GFSEC member countries”. ” Even more alarming, if the new ongoing and planned capacity materializes, global steel overcapacity will reach 2026, the highest the world has not seen since the peak of the steel crisis in 2016. It will reach an all-time high.
Steel overcapacity may be responsible for the loss of between 134,000 and 190,000 steel industry jobs in member states. GFSEC They estimate that these countries could have hired 15 to 20 percent more steelworkers if excess capacity had not destroyed their economies.
The forum condemns non-market practices that continue to impose global overcapacity, but the statement does not mention China. China is not a member of GFSEC and neither is Russia.
However, the US never said who was responsible for the threat. Sushan Demirjian, Assistant U.S. Trade Representative for Small Business, Market Access, and Industrial Competitiveness, said in an October 8 speech at GFSEC:
“For many years we have been discussing the causes behind overcapacity in the global steel industry, particularly the lack of state-driven industrial goals in the People’s Republic of China and market-oriented conditions in China and other economies. This will continue to harm workers and businesses, create strategic dependencies and systemic vulnerabilities, and undermine our decarbonization efforts.”
Pressure from China’s steel overcapacity is not a new threat. In fact, since the early 2000s, the US steel sector has been under threat of collapse, a crisis inflicted by the Chinese government. for decades In the form of huge government subsidies, low-cost loans, and discounts on energy and inputs.
World steel prices plummeted as Chinese steel mills produced far more than market demand, with the United States bearing the brunt of the blow thanks to its uniquely open market. From 2010 to 2015Ten steel mills were closed and 225,000 steel workers lost their jobs.
Tariff Sections 232 and 301 currently protect U.S. steel mills and workers from the ravages of current overcapacity, but Beijing’s use of transshipment through third countries such as Mexico is increasing. There is.
“One clear conclusion is that current international trade rules are insufficient to discipline the kinds of actions and policies that have led to this crisis,” Demirdjian said. “That’s why addressing global steel overcapacity is a priority for all governments, both for the future of our steel and other vital industrial sectors, and for the functioning and credibility of our multilateral trading system. It should be.”
The USTR has long pushed for new and modern trade tools, such as the Level Playing Field Act 2.0, to streamline avoidance investigations. As the threat of a new steel crisis emerges, the need for such tools is greater than ever. In the meantime, the United States must maintain current steel import tariffs or risk destroying the stability that American steel mills have found after decades of unfair trade.
Check out the latest report I’d like to hear more policy recommendations and learn more about how China’s overcapacity is putting not only the U.S. steel sector at risk, but also industries like automotive and solar power.
