The OECD Steel Committee expressed deep concern following meetings last week over the deterioration in steel market conditions related to the Covid-19 crisis. It also agreed to accelerate work to build a comprehensive database of subsidies and other government support measures provided to steel producers.
Global steel demand is expected to recover only partially in the near term, with the level of finished steel demand in 2021 expected to remain below pre-pandemic levels in most regions, says committee chairman Ulf Zumkley. “The main risks to the steel market outlook include the impacts of growing global excess capacity, supported by harmful government subsidies and investment policies that are putting the long-run viability of producers at risk,” he says in a note seen by Kallanish.
The latest available data from the OECD show that global steelmaking capacity increased to 2.45 billion tonnes in 2020. The gap between global steelmaking capacity and crude steel production increased to 625.4 million tonnes. A number of planned capacity increases are being supported by governments and not driven by market considerations, the committee points out. Several of these investments are cross-border in nature.
The pandemic has accelerated the decline in global steel trade. The committee held discussions to better understand the reasons for and effects of recently implemented trade policy measures on steel and raw materials. It also discussed new work including in the area of duty circumvention in the steel sector.
Committee members agreed to advance their work in the area of state-owned enterprises (SOEs) with two key objectives. This first is to better understand the market context of cross-border investments by SOEs and the financial conditions of the relevant firms and, second, to shed light on the financing of SOEs and support measures provided to them.
Members agreed to resume collecting subsidy data on the world’s largest steel producing jurisdictions, including jurisdictions where recent data on increasing production has raised concerns about potential government support.
Adam Smith Germany
