About the Global Forum
The Global Forum on Steel Excess Capacity (GFSEC) is an international platform to discuss and find collective solutions to the challenge of excess capacity and enhance market functioning in the steel sector. It brings together policy makers and relevant stakeholders to share information and cooperate in line with the call of G20 Leaders at the Hangzhou Summit in September 2016. The GFSEC was formally established in December 2016 in Berlin. Global Forum members include eight of the ten largest steel producing economies in the world.
The Global Forum is an open platform for all G20 members and interested members of the Organisation for Economic Co-operation and Development (OECD). The GFSEC is facilitated by the OECD, which provides technical, analytical and meeting assistance to support the Global Forum, its steering group and chairmanship.
What is the issue of excess capacity?
Steel is an essential material used in virtually all manufacturing sectors and construction applications, and the steel sector plays an important role in connecting economies through its central position in global value chains. With more than 90 countries producing on aggregate more than 1.9 billion metric tonnes of crude steel in 2021, few challenges have more global impact than those facing the steel sector.
Excess steelmaking capacity creates significant difficulties for steel producers in advanced, emerging and developing economies alike. It depresses prices, undermines profitability, generates damaging trade distortions, jeopardizes the very existence of companies and branches across the world, creates regional imbalances, undermines the fight against environmental challenges and dangerously destabilizes world trading relations. It especially undermines income opportunities of employees.
Recognising the serious problem of excess capacity in the global steel industry, at their September 2016 summit in Hangzhou, G20 Leaders called for the formation of a Global Forum on Steel Excess Capacity (GFSEC) to increase information sharing and cooperation. As many countries have set objectives to lower carbon emissions, the GFSEC is also engaging in discussions on decarbonisation of the steel industry, given that this issue is closely intertwined with excess capacity. As noted in the 2021 GFSEC Ministerial report, reducing steel excess capacity is essential for improving the environmental performance of the steel industry.
The GFSEC Ministerial meeting
GFSEC Ministers of Trade and Foreign Affairs, as well as other high-level officials, have gathered yearly to approve the GFSEC Ministerial report, usually in the lead up to the G20 Summit. GFSEC Ministerial reports present an overview of steel market and excess capacity trends, the work of the GFSEC and progress made, and key policy messages for tackling excess capacity challenges facing the steel industry.
Recent developments
The link between steel excess capacity and decarbonisation
By contributing to 7% of total energy sector emissions, the steel industry is key to achieving climate goals. About 90% of global steelmaking capacity is located in countries that have announced net-zero targets.
The low-carbon transition of the steel industry requires a deep transformation, along with the combination of various decarbonisation options. This shift implies envisioning a long-term strategy that calls for a sound business environment, which is not compatible with excess capacity. Addressing excess capacity is critical to pave the way for successful steel industry decarbonisation and, ultimately, to meet climate goals.
The 2021 GFSEC Ministerial report highlighted that the low-carbon transition represents one of the main challenges for the steel sector. In this way, the GFSEC aims to reflect the implications of decarbonisation, with a special focus on the intersection with excess capacity. By providing a collaborative platform, the GFSEC seeks to foster cooperation to address such global challenges.
Further reading
The impact of COVID-19 on the steel industry
As the global economy has been hit by the COVID-19 pandemic, the steel industry and the whole steel value chain have suffered from the crisis in a very significant way. The underlying distortions caused by the existing overcapacity have further aggravated the situation.
It is in this context that GFSEC members and industry representatives met at a virtual stakeholder event on 7 July 2020 to discuss the impacts of COVID-19 on steel markets and the expected recovery path, policy responses to the crisis, and the longer-term effects that the crisis may have on excess capacity and the overall health of the global steel industry.