World Steel Price Collapse Undermines Global Recovery

29 June 2016

The current global steel price collapse, which joins oil in a formative worldwide “glut” is, unfortunately, signaling further deterioration of the gross domestic product recovery percentage, projected by the professional “stargazers” earlier in the year.

While the current global oil glut traces its present surplus to the voluminous U.S. millions of daily “crude” barrels injected into limited world market demand, steel’s current price collapse is due to China’s vast overproduction. This has had no rationale in relation to global demand. At present production levels, China, alone, could totally requite global demand, with a surplus left over.

This unprecedented production capability by a growing variety of Chinese steel mills is playing increasing price havoc with big users/producers India, the U.K., the U.S., and Germany. These all have substantial domestic steel production and export capability, which have been severely undercut by China’s low ball pricing.

Part of the problem lies in the fact that the Chinese have had no agreements with other major steel producers, and their specific export activities. This Beijing world-dominating steel production first generated with the Communist Mao-Tse-tung regime that urged its incipient industry to stretch its capacity to the very limit.

The alarm bells that have been sounded around the world are encouraging frantic steel producers to aggressively cut prices in a vain attempt to protect their domestic markets and exports from the tidal wave of unprecedented Chinese overproduction.

While this unrestrained Chinese steel production is not limited by global treaties with other major producers, the reaction at the market levels is more severe; as large overstocks of steel derivatives have been piling up all over the world, at both the distribution and end-use levels.

The latest example of this capacity overage is India’s Tata Steel conglomerate. They have announced the closing of its steel plants in the United Kingdom, which are employing thousands of workers. This has generated political calls for setting up tariff walls by the major developed nations, but this after the fact move may be coming too little, and too late.


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