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Global risks for steel and aluminum markets


Published: - 05/11/2019 Author: Scaccabarozzi, Ed. Staff
Global risks for steel and aluminum markets

On 22 October 2019 the European Steel Association (EUROFER) alongside eighteen other regional and national steel organizations converged in Brussels calling for the Global Forum on Steel Excess Capacity to be extended.
Some days later, on 31 October, a new meeting was held in Tokyo. Sixteen steel industry associations have expressed their will "to continue the Forum's work on the issue of steel excess capacity" and called upon the few dissenting members to reconsider their position on the matter.

Initially scheduled to expire in November this year, the Global Forum was established in late 2016 following the G20 Leaders’ instructions. Its main purpose is to gather information and report on the evolution of steel supply and demand conditions, steel production capacity, and government policies that lead to global overcapacity - subsidies for one.

This very overcapacity is at the root of many disputes and conflicts around the world, such as trade wars and the consequent rise of protectionist measures. China is largely increasing steel output even as production in EU and in the majority of other regions is declining. Global overcapacity still hovers around 500 million tons and it is expected to rise again in 2020. We are talking about a deepening crisis which has already seen a variety of European steel plants idled or closed, resulting in thousands of steel workers being laid-off over the past year. Steel imports into the EU rose by 12% in 2018, reaching record-breaking numbers. Today, those figures are still well above the levels of 2016 and 2017. Sustained high import levels are as damaging as surges are: in June 2019, EU finished steel imports plummeted by 50%. In the following month, after the opening of the new safeguard quota period, those imports rose by 50%.

For such reasons the extension of the Global Forum is essential, according to Europe-based steelmakers and their partners around the world. Steel manufacturers are sailing in dangerous waters, and aluminum companies are no less.

During the Organization for Economic Cooperation and Development’s (OECD) Global Trade Forum in Paris, France, senior leaders from aluminum associations around the world asked governments to take urgent actions to investigate and reform those policies which put the global aluminum market in jeopardy. The OECD’s report of January 2019 measured government support for 17 of the world’s largest aluminum companies: 85% of the identified subsidies - amounting to USD $70 billion - went to 5 aluminum manufacturers in China. This figure is concerning for a number of motives, therefore such report highlights the need for urgent action to level the playing field for the aluminum market around the world.



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