China Differs With Peers on Steel Capacity Forum Extension

(Bloomberg) --

China failed to reach an agreement with other countries on furthering the work of a three-year-old forum designed to resolve the global steel industry’s overcapacity.

While a majority of members wanted to extend the forum beyond next month, China said that the organization has achieved its goal and should expire, Japan’s Industry Minister Hiroshi Kajiyama, who chairs the meeting of the Global Forum on Steel Excess Capacity, told reporters in Tokyo. Governments of various nations discussed the matter at a ministerial-level meeting in the city on Saturday.

Overcapacity is an ongoing point of contention and China, producer of half the world’s steel, typically bears the brunt of blame for a glut of cheap metal. The country has said it’s restructuring its industry and curbing excess supply. The latest meeting of the forum comes as the outlook for steel consumption dims, with demand outside China expected to almost stall this year.

In the lead up to the gathering, more than a dozen industry groups from Europe, North America and Asia called for the forum to be extended beyond its current expiration in 2019. Global steel overcapacity “has fallen only slowly in the past few years, if only because China, in particular, is ramping up production,” it said.

While steel industry reforms in China have made progress, the issue of illegal new capacity has cropped up again, Xing Tao, Deputy Director, Raw Materials Department, Ministry of Industry and Information Technology said in September. Some companies have been continuously churning out steel even amid safety and environmental risks, and supply has risen too fast, Xing said. The country’s crude steel output is up 8.4% this year.

Chairman Kajiyama said on Saturday that members of the forum widely shared the importance of continuing to work on curtailing overcapacity and ensuring that future efforts toward this goal are pursued by an “open platform,” where G-20 and OECD members can join.

Global output capacity has doubled since 2000, according to a statement from the trade ministry, citing data from the OECD and the World Steel Association. Excess steel capacity has been cut from a 2015 peak of 700 million tons, and is currently at 400 million tons, equivalent to four times the size of the Japan’s total output, the ministry said.

To contact the reporter on this story: Masumi Suga in Tokyo at msuga@bloomberg.net

To contact the editors responsible for this story: Shamim Adam at sadam2@bloomberg.net, Phoebe Sedgman, Anto Antony

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