Global steel oversupply firmly on the Group of 20 meeting agenda

THE global steel glut is shaping up as a hot-button issue as leaders of the Group of 20 (G-20) major economies meet in China, securing a mention in their communiqué.

That would show that overcapacity in steel — for which China has come in for criticism — remains on the radar for the world’s biggest economies months after it was raised in the discussions at a Group of Seven summit in Japan.

The wording of the G-20 communiqué is not final and could be altered before its release, according to two officials involved, who asked not to be identified because the negotiations are confidential. A copy of the planned statement was seen by Bloomberg.

“We recognise that the structural problems, including excess capacity in some industries, exacerbated by a weak global economic recovery and depressed market demand, have caused a negative impact on trade and workers,” G-20 leaders will say, according to the communiqué. “We recognise that excess capacity in steel and other industries is a global issue, which requires collective responses.”

The statement for the Hangzhou meeting echoes one from a July G-20 gathering of finance ministers that expressed concern about the outlook for global growth. It warns that growth is still weaker than desirable and warns against a protectionist mood on trade and investment.

China has recently found itself stymied on potential investments in the UK and Australia. China has said the steel issue is one of demand rather than supply.

Cutting overcapacity required global action, China Vice-Finance Minister Zhu Guangyao said on Friday. Fewer accusations and more co-operation on the matter would benefit the global economy, Zhu said, adding China had been first among the major economies to take action in reducing overcapacity.

“There are concerns on specific issues like steel production, which today is excessive,” said Brazil’s Finance Minister Henrique Meirelles. “That will be a theme,” he said, in reference to discussions at the G-20 summit. China, which had built up considerable capacity, was at the heart of the issue, Meirelles said.

The global flood of Chinese steel is stoking trade tensions with countries from India to Europe, and US legislators asked US President Barack Obama to raise the issue with his hosts at the G-20.

Chinese President Xi Jinping has ordered as much as 150-million metric tonnes, or about 13%, of annual capacity to shut by 2020 as part of the Communist Party’s plans to address industrial overcapacity amid slowing demand for basic materials. China makes about half of the world’s steel.

The draft communiqué calls for the formation of a global forum on steel excess capacity, to be facilitated by the Organisation for Economic Co-operation and Development. “We look forward to a progress report on the efforts of the Global Forum to the relevant G-20 ministers in 2017,” it said.

Obama and Xi met at the weekend on the sidelines of the G-20, where they discussed China’s role in “addressing industrial excess capacity, including in the steel and aluminium sectors, as part of a global effort,” according to a White House statement.

Earlier in 2016, a group of 25 countries, including the US, said they were unable to persuade China to take greater accountability for the overcapacity in steel production.

In June, Donald Trump, the Republican nominee for US president, vowed that if he were elected, his administration would ensure “American steel for American infrastructure.”

Speaking to reporters on the sidelines of the G-20 meeting, European Commission president Jean-Claude Juncker said there was an urgent need to take the steel issue seriously.

“As far as the overcapacity of the steel sector is concerned, we consider that this is a global problem, but there is a specific Chinese dimension we have to address, and we did address in the last months.”

The draft communiqué separately warns that financial market volatility is a downside risk to growth.

This year could be the lowest growth year since the global financial crisis, IMF director Christine Lagarde told business leaders earlier on Saturday at a panel in Hangzhou.

Bloomberg

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