March 27, 2019 / 1:42 PM / 8 months ago

Planned steel plants will add to supply glut - OECD

PARIS (Reuters) - The global steel industry could face a new supply glut if certain countries, which already contribute to overcapacity in the sector, bring on new steelmaking plants, said the OECD Steel Committee.

A global oversupply of steel had eased after 2015, when excess capacity triggered shutdowns, bankruptcies and job cuts in the sector while setting the stage for U.S. import tariffs.

The committee, made up of representatives from 24 OECD countries and the European Union, said on Wednesday that steelmaking capacity was nearly unchanged last year after easing in 2017 and 2016.

But it still far exceeded demand by 425.5 million metric tons amid low growth prospects for the global economy and the steel market, which look set to persist this year, the OECD committee said.

“Many new investments continue to take place around the world and others are in the planning stages, including in regions where excess capacity is most prevalent,” the OECD committee said in a statement after a meeting this week.

“Should these projects be realised, global steelmaking capacity could increase by 4-5 percent between 2019 and 2021, in the absence of closures,” it added.

Although the committee did not specifically single out China, the country has a major impact on the industry as the world’s biggest producer and consumer of steel, as well as being a large exporter.

Chinese steel mills are adding millions of tonnes of new high-end capacity, just as Chinese demand evaporates for metal sheets used in products ranging from car bodies to household appliances as economic growth in that country slows down.

The OECD committee, which does not include China, called for subsidies and other support measures to be quickly scrapped as agreed in the Global Forum on Steel Excess Capacity.

The forum was set up by the G20 group of countries in 2016 to tackle overcapacity, as well as the state subsidies that cause it and lead to trade tensions.

The United States has been critical of the forum’s effectiveness, pressing ahead on its own with import tariffs contributing to global trade tensions.

Reporting by Leigh Thomas; Editing by Sudip Kar-Gupta

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