June 2023 GFSEC Ministerial to discuss rising excess capacity challenges

On 8 June 2023, Ministers from GFSEC members met in Paris to discuss the increasing risks of steel excess capacity world-wide and the need for global cooperation to address this. Excess capacity leads to low steel prices, depresses the profitability of the steel industry and can lead to job losses in the sector. It hampers innovation activity and contributes to trade frictions, and slows the needed investments for low-carbon steelmaking, while leading to wasteful energy use and higher emissions than would otherwise be the case.

The steel industry plays an important and critical role in economies. The sector accounts for around 2% of global output and 3.8% of exports. As one of the most widely used materials across manufacturing activities, and an essential input for constructing buildings and infrastructure, the steel sector enables high value-added activity across a range of sectors, many of which are critical for economies. End uses of steel range from tractors to use in nuclear reactors, medical devices and in aerospace. Of the 1.8 billion tonnes of global steel demand in 2021, 52% was used in building and infrastructure, 16% in mechanical equipment, 12% in automotive, 10% in metal products, 5% in other transport, 3% in electrical equipment and 2% in domestic appliances. The steel sector is also an important employer. Oxford Economics estimates that, in 2017, the steel industry employed six million workers globally, with every two jobs in the steel industry supporting a further 13 jobs in the steel industry’s global supply chain.

Global steel excess capacity – when the production capacity for making crude steel exceeds demand for steel – has recently increased, and could continue to rise in the coming years. In 2022 alone, global steelmaking capacity increased by 32.0 million metric tonnes (mmt) to 2463.4 mmt, the highest global capacity figure in history. The gap between global crude steelmaking capacity and steel demand expanded from 475 mmt in 2021 to 570 mmt in 2022. Therefore, in 2022, the level of the global excess capacity gap already exceeded the total steel production of GFSEC members combined (491 mmt) by nearly 80 mmt. Recent work by the OECD Steel Committee indicates that 166.1 mmt of new ongoing and planned capacity could come on stream during 2023-25. With only modest growth in global steel demand in the next few years, the excess capacity gap could widen by an additional 74 mmt to reach 644 mmt by 2025, which would be the highest level of global excess capacity since the steel crisis of 2016 that led to the establishment of the GFSEC by the G20.

Ministers from various non-GFSEC members were also invited to attend the meeting.

The meeting led to the adoption of a Ministerial statement available in English and French.

Meeting summary

Reference sheet

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