The surplus capacity in the steel industry between myth and reality

Excess capacity in the steel industry has become a hotly debated and controversial issue. Some experts in the field claim that this industry cannot avoid the long-term recession without solving the problem of steel overcapacity worldwide.

From 2008 to 2014, the worldwide nominal excess capacity increased constantly in volume. But also the demand has increased. According to the report, the degree of nominal overcapacity in relation to the size of the demand fluctuated. These findings support the thesis according to which the importance of effective capacity is emphasized. And the nominal capacity is not taken into account, as a meaningless figure.

Therefore, some experts refer to overcapacity as a myth. Because we still have to learn about the exact extent of the excess capacity and its impact.

The surplus capacity in the steel industry needs an urgent improvement

Despite this idea of ​​myth and exaggeration, excess capacity is considered the most challenging problem for the steel industry today, worldwide. For this reason, improving the excess capacity remains an urgent problem and requires the attention and efforts of the steel industry worldwide.

Dr. Rod Beddows, author of „Steel 2050„, published in 2014, pointed out that „While efforts to reduce capacity are important, continued growth in steel demand is essential in reducing overcapacity rates.” One of the biggest concerns in the steel sector today is the future of supply and demand in China. But, according to Dr. Beddows, „there are still over 300 million Chinese who need industrialization and urbanization.”. And, of course, all this development involves metallurgical steel products.

Dr. Beddows also suggested ways in which industry could eliminate state ownership. He stated: “price hedging mechanisms and improved customer service levels are the two most important issues for the industry. I recommend that organizations such as World Steel Dynamics focus on these to help improve the industry.”

Article source: http://globalblog.posco.com/the-myth-and-reality-of-global-steel-overcapacity/