Ministers of the G20, a group of 20 countries and central banks dedicated to global financial stability, will convene today
Ministers of the G20, a group of 20 countries and central banks dedicated to global financial stability, will convene today to discuss the world’s excess steel supply.
Global crude steel production has more than doubled in recent years from 1,056 million tonnes to a peak of 2,333 million tonnes between 2000 and 2015. Demand, however, has increased at a much slower pace. Rather than shutting down, many steel factories are subsidised due to political fears of lower-class unemployment. Thus, while jobs remain, a surplus has dragged down prices and wages.
To combat this phenomenon, the G20 started its Global Forum on Steel Excess Capacity in 2016. The group has managed to marginally scale back production through cuts in capacity growth, but at 2,251 million tonnes, production remains above demand. If not further reduced, expect the steel industry to continue to falter.
Ironically, Mr Trump’s steel tariffs will likely only exacerbate this problem by undermining competition and worsening conditions for steelworkers. Pushing against this protectionist policy, along with encouraging higher demand through infrastructure projects, will likely be the ministers aim today. Growth in Southeast Asia and the Middle East may help push demand back into equilibrium with supply.