chairman of the influential steel committee of the Organization
for Economic Cooperation and Development (OECD) has told
steelmaking countries to ease off subsidizing the sector to
"Excess capacity is
one of the biggest challenges facing the steel industry today,"
Risaburo Nezu said in a statement released after a two-day
meeting of the committee in Paris that wrapped up July 2. "Open
markets for steel are crucial for the health of the
A "high level of
excess capacity is a major cause of the industrys weak
financial performance and is threatening the viability of many
firms," Nezu said, citing statistics underlining a moderate
revival for the sector, based mainly on rebounding demand in
China. "With investment projects continuing to increase in a
number of economies, while steel consumption growth is
anticipated to remain moderate, the global imbalance will
continue to pose risks for the industry for the foreseeable
discussions on this issue and its causes at the committee
meeting, Nezu noted that "subsidies and government support
measures that promote investment in steelmaking facilities or
sustain companies in distress that would otherwise shut down
are a major source of trade friction."
steelmakers to keep production high when demand is weak can
cause dumping, harming steel producers in trading partner
countries, he said.
Export restrictions on
raw materials were a major problem, Nezu said, which "can
exacerbate overcapacity of steel plants in economies that
impose them and tend to hinder fair competition in global steel
The committee itself
agreed to continue collecting information on such measures,
where they are being implemented, and the potential problems
chairman noted that the growth in state-owned steel
enterprises, backed by government finance, could harm efficient
competing private steel companies.
"There is a need for
increased transparency regarding the behavior of (state-owned
enterprises), particularly with respect to the regulatory
advantages, subsidies or other benefits that they may receive,"
Participants at the
meeting noted that all major steel-producing economies should
cooperate to address these and other government interventions
in the sector.
"Efforts in this
direction could help reduce the extent of excess capacity and
minimize the recurrence of past cycles of trade disturbances
and remedial trade actions," Nezu said.
The steel committee
has representatives from 27 OECD developed world member
countries and involves other steel-manufacturing countries,
including Brazil, Argentina, Egypt, India, Malaysia, South
Africa, and China. These countries account for most of the
worlds steel production and trade.
While global steel
consumption growth has moderated in the first quarter of this
year vs. the fourth quarter of 2012, growth in the beginning of
2013 was still higher than what was registered in the third
quarter of 2012, the committee was told.
steel consumption growth rates seen in the last quarter of 2012
and the first quarter of 2013 "reflect an increase of apparent
steel consumption in China, whereas steel consumption in the
rest of the world decreased," Nezu said.
production increased 9.1 percent year on year during the first
quarter, or a new projected all-time annualized high of 767
global steel production totaled an annualized 787 million
tonnes in the first quarter, down 3.7 percent compared with the
same 2012 period.
The energy sector
could be a growth area for steel, especially in energy
exploration and transportation.
transformation and transportation currently account for about
12 percent of total steel output, according to Nezu.
A version of this
article was first published in AMM sister publication Steel