With Chinese steel production and inventory data pointing to high volumes amid the global coronavirus pandemic, it is going to continue to put pressure on global steel markets, American Iron and Steel Institute CEO Thomas Gibson said in an interview with S&P Global Platts this week.
"I do think overcapacity is going to be an enormous issue coming out of this crisis," Gibson said.
While China was the first country to see the effects of the pandemic in January, its first-quarter 2020 crude steel production rose 1.2% year on year to 234.45 million mt, according to data released by the country's National Bureau of Statistics April 17. The increase in steel production combined with battered end-user demand took China's finished and semi-finished steel inventories to around 100 million mt by the end of March, three times as high as at the end of March 2019, Platts analysis show.
China's steel inventories declined 2.96% in April, but not as fast as most market participants expected, indicating end-user demand recovery has not been strong enough to absorb surplus steel supply, according to China Iron & Steel Association data released April 24.
In response to the impact of the pandemic, US domestic mills have aggressively cut production in recent weeks, with mill capacity utilization falling to 55.8% by the week that ended April 25 from 81.6% in the week that ended March 7, according to AISI data. European steel production has also been cut by roughly 50% in recent weeks.
While international meetings have been heavily curtailed in the wake of the virus — including March's meeting of the Organisation for Economic Cooperation and Development (OECD) — global efforts to combat excess steel capacity are ongoing, Gibson said.
The OECD's global forum on steel excess capacity launched a website last week in an effort to keep attention focused on the issue, Gibson said.
"The efforts to deal multilaterally with global overcapacity have never really abated, the crisis has just made it more difficult to meet in person," he said.
With US mill utilization rates falling apace, the Section 232 tariffs on US steel imports introduced in March 2018 remain a vital component to recovery and should remain in place, Gibson said. With the crisis impacting markets around the globe, it may also lead to an uptick in trade measures in other countries to limit the adverse effects of imports, he said.
"I think other countries have been and will continue to look to their own trade remedies to make sure they don't become the dumping ground for this glut of steel inventory," Gibson said.
Source: S&P Platts