The OECD calculated that, if current and planned capacity-building projects are realized and there are no closures over the three-year period, the additions to global steelmaking capacity could amount to 88-110 million tonnes per year, with the bulk of new capacity located in Asia and the Middle East.
In Asia, there are projects under way to add 53.4 million tpy of gross capacity with another 10 million tpy planned for 2019-21. Together, these represent a potential increase of 3.6-4.3% in 2021 compared with 2018’s capacity for 1.473 billion tpy.
The region with the next most significant volume additions is the Middle East, where projects are under way to add 25.1 million tpy, with a further 2.7 million tpy planned for 2019-21. This would represent a potential increase of 37.3-41.3% in 2021, compared with 2018’s level of 67.3 million tpy.
The OECD report gave the total global steelmaking capacity in 2018 at 2.234 billion tpy, a decrease of only 0.3% from the figure for 2017.
The report noted that, while data from the first half of 2018 had indicated a probable slight increase in capacity for that year, data on closures and project postponements in the second half of the year suggested that overall capacity actually decreased slightly during 2018.
A separate OECD paper, also published on Tuesday, noted that steel market fundamentals softened markedly during the second half of 2018 amid a weakening of the global economic outlook, a rise in trade frictions, and the persistence of excess capacity.
“Market data suggest that steel consumption growth stalled in most economies in 2018, and that the 2017 recovery may be losing momentum,” the report said.
In its Short Range Outlook for April 2019, the World Steel Association said that global finished steel demand was set to increase by just 1.3% year-on-year in 2019 to 1.735 billion tonnes, and by just 1.0% in 2020 to 1.752 billion tonnes.
In light of this, the capacity increases forecast by the OECD appear likely to exacerbate the overcapacity in global steelmaking, which is already significant.
“Governments participating in the OECD Steel Committee consider excess capacity to be one of the main challenges facing the global steel sector today,” the OECD said.
Meanwhile, at the summit of the G20 group of developed nations in Osaka, Japan, on June 28-29, political leaders could not agree to extend the mandate for the Global Steel Forum.
G20 leaders established the Global Steel Forum in 2016 with the goal of making the first definite steps toward the elimination of this global steelmaking overcapacity.
“The summit results from Osaka are disappointing for the steel industry,” Hans Jürgen Kerkhoff, president of German steelmaking association WV Stahl, said. “There was an urgent need to extend the mandate for the Global Steel Forum by another three years. The problem of massive overcapacity remains unresolved in the global steel industry.”