Global steel oversupply crisis

China's slowing economic growth has led to a decline in steel consumption, resulting in overproduction and causing a crisis both domestically in China and globally.

Illustrative image

China is restructuring its iron and steel industry amidst a prolonged and severe crisis of oversupply in the global steel industry. World steel prices are at their lowest level in 12 years.

Sebastien Marlier, a commodities economist at The Economist, stated: "The steel industry is in a very difficult situation. Steel prices have fallen by half since 2011-2016. We are at the end of a commodity cycle, and the victims are steel producers with higher production costs. China accounts for approximately 50% of global steel production and 40% of global steel demand. Therefore, even a slight decrease in domestic steel demand in China can have global repercussions, because if China has an oversupply, its steel will be exported worldwide, putting pressure on producers globally through lower prices."

China is facing increasing international pressure to end its steel oversupply, which is flooding the market and driving foreign producers to the brink of collapse. Examples include Tata Group in the UK and ArcelorMittal in Belgium, which have decided to close factories and lay off workers.

Last year, the consumption of all types of steel in the Chinese market reached only 668 million tons, meaning there was an inventory of over 130 million tons. To address this inventory, Chinese companies sought to export to the global market, and steel exports last year reached a record high of over 110 million tons, a 20% increase. In 2015, China's steel exports to other countries were ten times the total annual steel production of the UK.

According to VTV