At the recent 74th Organization for Economic Co-operation and Development (OECD) Steel Committee meeting held in Paris, participants from OECD and non-OECD economies discussed the prospects for improved growth in global steel demand, future steelmaking raw materials supply-demand balances, and highlighted the importance of energy markets for the steel industry as well as the overcapacity problem.
The OECD Steel Committee said that the excess capacity is one of the biggest challenges facing the steel industry today. The Steel Committee indicated that market downturns, government interventions and other market-distorting practices are among the factors contributing to the capacity imbalance, concluding that governments and the industry will need to work together to address the near- and long-term issues associated with excess capacity in a comprehensive manner.
Global steel consumption growth has moderated from a year-on-year rate of 5.4 percent in the last quarter of 2012 to 4.2 percent in the first quarter of 2013, according to data from the Commodity Research Unit. Industrial production in advanced economies posted weak growth in 2012, linked to the contraction of industrial activity in the euro area and in Japan. Industrial production growth in emerging economies has also been slowing in 2012, but remained at relatively strong levels.
According to the most recent Short Range Outlook released by the World Steel Association in April 2013, world apparent finished steel use is expected to increase by 2.9 percent in 2013 and by 3.2 percent in 2014, following a growth rate of 1.2 percent in 2012. In 2013, apparent steel use is expected to increase by 0.4 percent in developed economies, which would be a slight improvement following a demand contraction of 1.9 percent in 2012.
Regarding the steelmaking raw materials supply-demand balances, the OECD Steel Committee pointed out that restrictions on the export of steelmaking raw materials are widespread and negatively impact future production by reducing firms' incentive to undertake new exploration in the country imposing restrictions. These restrictions also lead to higher global raw material prices. Given the large announced mining capacity additions, the iron ore and coking coal markets could, in an optimistic scenario, be in excess supply in the next five years. Future global scrap needs are expected to increase by 120 million mt by 2017.
