1) History, organization, role, and major outcomes of the OECD Steel Committee
∙ The OECD Steel Committee celebrates this year its 40th anniversary! The objective of the Steel Committee is supporting the viability of the steel industry. Means to realize this are policies that reduce market distortions and promote competitive and open markets for steel. The Steel Committee has become over the decades the central platform for multilateral steel problems to be discussed.
∙ The Committee mandate calls on governments to work together in order to: 1) reduce trade barriers; 2) deal with crisis situations in close consultation with trading partners; 3) facilitate necessary structural adaptations that reduce pressures for trade; 4) actions and promote rational allocation of productive resources; 5) avoid encouraging economically unjustified investments; 6) ensure that state-owned enterprises act in accordance with market principles; and 7) facilitate multilateral co-operation consistent with the need to maintain competition.
2) Steel overcapacity as its key agenda item
∙ Excess capacity remains certainly the key challenge for the global steel industry. Considering limited expectations of demand growth, overcapacity persists at near-record levels of 540 Mt. This is further fuelled by increases in capacity in 2018, whose 2% growth brings current global steelmaking capacity up to 2291 Mt. OECD data show that global steelmaking capacity could increase by 1.6% between 2019 and 2021 in the absence of closures.
∙ On the medium and longer term (2035), very slow growth is further expected for steel consumption. This means that unavoidably important further capacity closures will be needed to approach a market balance.
3) The spread of protectionism
∙ Steel trade continues to decline amidst increasing trade actions in the global steel market. Global steel exports decreased by 7.9% in the first quarter of 2018 compared to the same period in 2017. Global imports continued to decrease in 2018, falling by 6.6% in the first quarter of the year compared to the same period in 2017. Aside of close monitoring, steps are needed in the right international fora like the WTO, to evolve towards a sustainable international trade, which is in the long term interest of the whole of the steel sector.
4) Challenge of climate change for steel companies
∙ Steel companies are confronted with different aspects of mitigation and of adaptation. Agreement of Paris and consecutive policy on different levels causes or stimulates further decisions focused on increasing energy efficiency, adapting used energy mix, and other emission reduction measures.
∙ There is also the more recent phenomenon of growing direct impact on the operation of companies and their employees by several climate change effects. If appropriately designed, there can be potential double dividends, supported by policy making.
5) Prospect for the global steel industry
∙ Demand growth next year decelerates further under 1%, and will remain slow on the longer term. It is the sum of a number of underlying, interrelated effects of economical growth and other interrelated factors influencing demand in very different ways, like the evolution of consumption patterns, aging population, the rise of the circular economy concept, and competing products. This illustrates the permanent challenge for forecasters integrating these elements to improve their models.
6) Development of the steel industry
∙ Working together in international institutions like the OECD or the WTO remains a fundamental pillar. These are the fora where governments can work together in a multilateral way based on rules. The steel industry will certainly benefit from authorities learning from each other’s experiences how to address challenges as reductions of capacity, climate objectives or digitalization.