Steel companies continue to invest in new factories, but the demand for steel does not keep pace. This threatens large overcapacity in the sector, warns the Organization for Economic Cooperation and Development (OECD).
According to the think tank, the global demand for steel will increase much less rapidly in the coming years than before, partly due to trade tensions and a slowdown in economic growth. Yet there are still many new steel mills on the roll. Once they start running, production capacity is expected to grow by 4 to 5 percent between 2019 and 2021. According to the OECD, that is much more than the question justifies.
Such a surplus of production capacity is disadvantageous because it puts pressure on prices and profit margins. Moreover, in times of economic downturn, too large a supply can lead to price dumping, which can lead to job losses or even steel companies to die. The OECD therefore calls for measures to combat surpluses. For example, certain countries should stop subsidizing their own steel sector.