The years of excess steel making capacity, especially in China, have put an unrelieved pressure on the global steel sector. In 2014, when steel demand growth ceased in China, the largest steel consumer, the problem of excess capacity turned into the real overproduction crisis. An excess is typical for both steel making and mining industry. The largest mining companies continue their capacity expansion projects that they started years ago, when the outlook for the industry was quite different from what it is now.
In spite of the expected growth in steel consumption in the short term by 2% in 2014 and another 2% in 2015 (according to the recent WSA outlook), this growth will hardly cover the constantly increasing steel production. According to Ernst & Young estimations, about 300 million t of steel making capacity needs to be removed for the industry to reach the balance.
The global overproduction is inevitably followed by the stiffening competition and a slump in prices. According to Metal Expert assessment, prices for some types of steel products dropped by around $100/t over the year, while iron ore halved.
In the current conditions of oversupply and increased competition, the global steel market is obviously poised for restructuring. Steelmakers all over the world should change their business models and adjust their strategies to improve operation efficiency. Naturally, the particular interest is focused on the world’s largest steel manufacturer, ArcelorMittal.
