Synopsis:
The global steel industry is experiencing significant changes in trade dynamics, with China's increased exports and the rise of smaller Southeast Asian countries. These developments, along with carbon emission reduction measures, could lead to escalating trade tensions and further fragmentation of the global steel market.
Article:
The steel industry is facing a tumultuous time as trade dynamics shift and tensions simmer. The Organization for Economic Cooperation and Development Steel Committee recently expressed concern about the risk of escalating trade disputes in the steel sector. China, a major player in the industry, has seen a remarkable 40% increase in exports compared to the previous year, approaching the peak levels of 2016 when the steel industry was grappling with overcapacity, low profitability, and mass layoffs.
Global steel exports have surged to 282 million metric tons, largely driven by China's growth. Additionally, several smaller nations in Southeast Asia have bolstered their export positions due to rapid capacity expansion outpacing domestic steel demand. In contrast, many other major steelmaking countries have experienced less favorable outcomes.
These developments could trigger a more widespread use of trade remedies, coinciding with challenges to carbon emission reduction measures. Consequently, the global steel market may become even more fragmented. The OECD is intensifying its efforts to address trade policy circumvention and foster cooperation on government strategies to respond to such cases.
Members of the Steel Committee are also striving to establish a fairer playing field in the global steel market. A recent study reveals that subsidies per unit of steel capacity in the form of grants have increased fivefold between 2025 and 2021 in non-OECD countries that are not committee members. Meanwhile, subsidies in the form of below-market-rate financing (soft loans) have doubled. This stands in stark contrast to OECD economies, where subsidy levels have remained unchanged.
The report emphasizes that current and past subsidies are contributing to global overcapacity, which has a long-lasting negative impact on international steel markets. Furthermore, the issue of a level playing field is crucial for the decarbonization of the global steel industry. While many companies are transitioning to low-carbon production methods by shutting down blast furnaces and converters, global blast furnace and converter capacity continues to expand rapidly, often fueled by subsidies.
The steel industry faces numerous challenges, including trade tensions, carbon emission reduction measures, and subsidies that contribute to overcapacity. Establishing a fairer playing field and fostering cooperation among nations will be critical in navigating these challenges and ensuring the long-term sustainability of the global steel market.
Conclusion:
The global steel industry is at a crossroads, grappling with shifting trade dynamics, escalating tensions, and the need for decarbonization. As China's exports surge and smaller nations gain ground, the risk of trade disputes and market fragmentation looms large. The OECD's efforts to address trade policy circumvention and promote cooperation will be crucial in establishing a fairer playing field. Simultaneously, the industry must confront the challenge of decarbonization while contending with subsidies that contribute to overcapacity. Navigating these complex issues will require collaboration and a commitment to long-term sustainability in the global steel market.
Source: STEELGURU
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