Excess steel capacity matter of concern as demand subdued

Jan 14 2014, 14:52 IST
Comments 0
SummaryThe report suggests that China carries around 46% of excess global capacity.

Despite signs of revival in the US and partly in EU, subdued demand in the global steel market still prevails. Periodic reports on China provide an uncertain picture of the shape of things the steel industry will face following the proposed economic restructuring from investment-led to consumption-driven economy.

While crude steel production growth in China is maintained at 7.8% in the first 11 months of last year, the level of consumption is surely coming down. With exports not exhibiting a quantum jump in 2013, the excess capacity syndrome is going to plague the Chinese steel industry in 2014.

A recent report estimated excess global capacity of steel at around 542 million tonne.

The report suggests that China carries around 46% of excess global capacity.

Although China is committed to close substantial capacity annually on account of environmental considerations, a few fresh capacity additions would be undertaken by state-owned enterprises.

So, if the demand scenario in China continues to be weak and exports go on as usual, the excess capacity earlier estimated may surface.

Product-wise analysis may throw some additional facts.

In HR coils, the current capacity of 217 million tonne (mt) in China has to meet full domestic demand, leaving an exportable surplus resulting in 95% capacity utilisation.

In CR coils/ sheets, the current Chinese capacity of 140 mt is to cater to domestic demand and exports. In the case of galvanised products, current capacity of 66.5 mt has been created with utilisation rate pegged at not more than 53%.

As regards Plate, the current capacity has been estimated at 89 mt with current capacity utilisation around 75% and primary demand emanating from shipbuilding and machinery and equipment sectors. The same report has identified excess capacities at 106 mt in EU, 81 mt in CIS countries, 63 mt in Japan, 15 mt each in the US/ Canada and Latin America and 14 mt in the rest of the world.

India’s current level of crude steel production (78 mt in 2012-13) indicates a capacity utilisation of 81%. In the next three years, India will be adding nearly 30 mt of fresh capacity in both long and flat categories. India can fully meet the indigenous demand for HR coils, plates, galvanised products and long products, except minor tonnages in API>5LX 100 grade, special grades and over dimensional plates which get imported.

India is also exporting these categories. It is likely that downstream industries

Single Page Format
Ads by Google

More from Commodities

Reader´s Comments
| Post a Comment
Please Wait while comments are loading...