Trade Cases

Global Forum Report on Excess Steel Capacity Nearing Completion

October 10, 2017

The Global Forum on excess steel capacity is getting closer to releasing its report. The Forum was convened after the G20 meetings in Paris and has outlined six key principles in a draft report that is circulating among 33 participating countries. Comments are due by Oct. 10 with a possible final draft delivered to G20 ministers on Nov. 17.

A draft obtained by Inside U.S. Trade says:

The overcapacity issue “requires the attention in a global format with broad participation of economies.” Goals should be set and published by the Forum if appropriate.
Market distorting subsidies and government support measures should not be endorsed, including subsidies that “sustain uneconomic steel plants, encourage investment in new steelmaking capacity which otherwise would not be built, facilitate exports of steel products, or otherwise distort competition by contributing to excess capacity.”
All types of mill ownership should be subject to the same regulations and rules in order to establish and maintain a fair playing field. “Irrespective of ownership, all enterprises acting in the steel market (whether privately owned or directly or indirectly owned, fully or in part, by their governments or by government-related entities) should not receive directly or indirectly subsidies or other type of support that distort competition by contributing to excess capacity, and should follow the same regulations with economic implications and rules, including bankruptcy procedures.”
Market-based outcomes in the steel industry should be prioritized: “Open and competitive markets and a market-driven approach to resource allocation based on the competitive positions of steel enterprises should be the driving forces of the steel sector. New investment, production and trade flows should reflect market-based supply and demand conditions.”
Capacity should be reduced by eliminating consistently unprofitable firms, “Zombie” firms, obsolete capacity, and those who are noncompliant on environment, quality and safety standards.
Governments should share information on steel capacity on a regular basis, updating information not less than three times per year.

Phillip Bell, president of the Steel Manufacturers Association, attended the meeting in Paris and told reporters on a media call on Monday that there has been “a lot progress on the report.” An important step, said Bell, was the collection of data from China that was individualized by region and mill rather than aggregated. He was unsure if the final report would be issued before or after a scheduled ministerial meeting on Nov. 30.