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China said fueling steel overcapacity growth

Jun 17, 2014 | 03:59 PM | Nat Rudarakanchana

Tags  steel, American Iron and Steel Institute, AISI, Organization for Economic Cooperation and Development, OECD, Thomas Gibson, China, China capacity steel capacity

NEW YORK — Global steel capacity is still expanding and outpacing steel demand growth, the top executive of the American Iron and Steel Institute (AISI) told AMM, citing recent talks at a meeting of the Organization for Economic Cooperation and Development’s (OECD’s) steel committee.

"It’s clear that capacity is still coming online," AISI chief executive officer Thomas J. Gibson told AMM June 16 on the sidelines of AMM’s Steel Success Strategies XXIX conference in New York. "And steel demand is not keeping pace."

Pointing to excess capacity in China, he noted that "the situation is going to keep getting worse and not better, unless governments start acting a little more responsibly."

The world steel market was the target of discussiuons at an OECD steel committee meeting in June (, June 3).

Until China’s central government is able to exert real authority over provincial governments and some original equipment manufacturers, talk of cutting excess Chinese steel capacity remains rhetoric, Gibson said. "The proof is going to have to be actual reductions in capacity," he told AMM.

Early work on the institute’s next short range outlook, which forecasts markets for the next six months, indicates slightly stronger U.S. steel demand and shipments than expected. But imports are meeting a significant slice of demand, displacing domestic shipments, according to Gibson.

"Import market share for finished steel is now 26 to 27 percent, trending up," he said. "It’s a broad-based surge," he added, citing the impact of imports in an array of steel products, including oil country tubular goods (OCTG), plate and coil and hot-rolled products.

The AISI wants the Obama administration to label China a currency manipulator, which could strengthen the steel industry’s position in trade disputes and support federal legislation on trade impacts of currency manipulation.

Chinese representatives at the OECD talks claimed that only 40 percent of the country’s steel industry is state owned or controlled, Gibson said, adding that this claim conflicts with common and independent industry estimates, which label 94 percent of China’s steel capacity as state backed.

The Chinese claim is "propaganda," Alan Price, a partner at Washington-based Wiley Rein LLP who represents some U.S. steel companies in trade cases against China and who attended the OECD meetings, said.

"This claim is not true," he told AMM via e-mail. "When you peel back the actual ownership in the companies and examine who controls the actual shareholder, the industry is still overwhelmingly state controlled."

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