Figures from China show it has cut nearly 100 million tonnes of legal steel capacity and 120 million tonnes of illegal low-grade capacity since last January, but industry analysis shows only marginal declines in overall capacity. According to the latest estimate from the Organisation for Economic Cooperation and Development (OECD), global steel-making capacity stood at 2.36 billion tonnes in the first half of 2017, easing just 0.6 percent from 2.37 billion in 2016.
The figures are evolving and may not yet reflect the full extent of capacity reductions taking place, a source close to the OECD Steel Committee, which produced the estimates, said. But he also said the overall global overcapacity picture was worrisome.
According to the OECD steel capacity report on which the estimates were based, some 23 million tonnes of potential output additions are underway in the Middle East, primarily Iran. These should come on stream during 2017-2019, with another 7 million tonnes planned for possible start-up during the period.
The extra capacity is headed in part for the export market given that the World Steel Association (worldsteel) estimates demand in the Middle East will grow by a total of just 3.7 million tonnes this year and next.
Iran, which became a net steel exporter for the first time last year, says it aims to export 20-25 million tonnes of steel annually by 2025, equivalent to almost a third the amount of steel China is set to export this year.
Experts say that to meet demand and sustain profits, the steel industry requires at most 400 million tonnes of spare capacity over and above the current 1.63 billion tonnes it produces each year. But with global production potential at 2.36 billion, the industry has some 730 million tonnes spare. Source : REUTERS Pipe Industry Co., Limited (www.wilsonpipeline.com)
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