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International Steel Committee says gloomy outlook for market

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Interventions by a number of governments and their support measures create overcapacity, significantly distort the market, discourage structural adjustment and lead to increased trade tensions.

International Steel Committee says gloomy outlook for market

The Steel Committee noted with concern the deviation from global downward trends in smelting in China, where steel production reached record levels in the first half of 2020 and where inventories reached historic highs.

“The consequences of the pandemic were significant for the steel industry. In early 2020, growth in global steel consumption turned sharply negative due to the initial impact of COVID-19 on the downstream industries, and steel prices continued to decline. Most of the major steel producing countries have seen a significant reduction in steel production this year due to market conditions, "says statement Ulf Zumkli, Chairman of the Committee on Steel of the Organization for Economic Cooperation and Development (OECD).

He noted with deep concern the growth in steelmaking capacity, which may not reflect market fundamentals, leading to a capacity gap that is expected to reach 700 million tonnes in 2020 after a reduction between 2016 and 2019.

In this context, the Steel Committee recognized that the work of the Global Forum on Steel Overcapacity (GFSEC) is more important than ever. These include tackling the growth of global overcapacity supported by government subsidies and investment policies that threaten the long-term viability of producers and therefore require urgent solutions.

The latest available OECD data shows that global production capacity could grow to 2.45 billion tonnes in 2020.

The Steel Committee noted that the COVID-19 pandemic and its negative impact on demand have led to a decline in steel trade, although there are significant differences between major economies.

The committee also discussed recent changes in trade policies affecting the steel trade, while participants shared information about their own trade measures and listened to concerns from other members whose producers have become affected by these changes. The need to avoid protectionism, including all unfair trade practices and recognition of the role of legitimate trade protection instruments in this regard, was reiterated.

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