Cover story№ 2 November 2018



The Chinese government resolved in 2015 to reduce excess steelmaking capacity by 2020 in order to curb negative environmental impacts and improve the financial state of the industry. The target is to close down more than 20% of capacity and the Chinese government announced this July that it will speed up the liquidation of outdated steelmaking facilities. According to official data, the Chinese have already reduced domestic capacity by 150 million tonnes per year (equal to the combined capacities of the US, Canada and Mexico).

The closures will not affect China’s status as the main global supplier of steel (see Figures 1). At the same time, the Central Bank of China is continuing to devalue the yuan in order to protect its industry, including the steel industry. Growth in prices for Chinese steel will also have a positive effect on producers: Morgan Stanley expects price rises of 7% this year.

The Chinese government is targeting a reduction in excess capacity by 2020, with the aim of reducing the industry’s environmental impact while improving its financial situation


Production in the region, without China, grew by 5.5% in 2017, despite the fact that Japan, the second largest steel producer in the world, reduced its output by 0.1%.

Figure 1. Top-10 steel-producing countries

Indian and Vietnamese steelmakers launched more capacity, reacting to a reduction of Chinese export volumes. South Korea and Taiwan also contributed to the growth, increasing volumes by 3.6% and 6.8% respectively. No increase of Chinese exports is expected this year, so the Economist Intelligence Unit (EIU) predicts production in Asia without China to grow by 3.8% in 2018. Forecasts for 2019 are more modest (1.5% growth), although experts see large potential for greater steel volumes from companies in Vietnam and India. The EIU predicts that India will increase production by 5% in 2018, overtaking Japan. Development of the Indian steel industry has been driven by minimum import prices, which were introduced in 2016 for a period of five years. Previously, the price of products made using Indian steel was higher than the market, so there were few takers for products imported from India.

The year saw strong production growth for many product types, with particularly good results for wire and seamless casing pipes

North America

In 2017, the United States, Mexico and Canada together increased production by 4.9%, including a 6.3% increase in Mexico alone. US producers were focused on resolving operational issues and volume increase in the first half of the year was only 1.3%, but acceleration in the second half gave year-on-year growth of 4%. The EIU forecasts 4.5% volume increase in the three countries during 2018. The extension of US steel import tariffs (at a level of 25%) to the EU, Canada and Mexico from June will have a major impact on the full-year results.

European Union

European regulators are increasingly inclined to raise import duties in order to support the continent’s manufacturers. Tariffs on galvanised steel from China rose to 17.2-28.5% in March after the Europeans had already raised duties on hot-rolled steel from Russia, Iran, Brazil and Ukraine to 60-90 euros per tonne. On July 19, the European Commission brought in quotas for imported steel equal to the average export volume over the past three years. Anything above those quotas will be taxed at a rate of 25%. Exceptions were made for the EEA countries (Norway, Iceland and Liechtenstein).


According to the World Steel Association, world steel production grew by 4.8% (to 1194 million tonnes) in January-August 2018 compared with the same period last year. The growth leaders were:

  • China (+5.8% to 617 million tonnes);

  •  India (+6.7% to 71.1 million tonnes);

  • United States (+4.8% to 56.9 million tonnes).

The quotas will remain in force for a maximum of 200 days. Most foreign producers expect to reduce their supplies to the European market, but steel production in Europe in 2018 will increase by only 2.5%, according to EIU forecasts (growth in 2017 was 4%). European producers may find it harder to export. For example, Algeria is expected to reduce the import of steel reinforcement from Europe order to support its own steelmakers. Production at European steel reinforcement plants may fall as a result, despite redirection to alternative markets.


Steel production in Russia in 2017 totalled 71.7 million tonnes, which is 1.2% more than in 2016. Evraz, NLMK, Severstal, MMK, Metalloinvest and Mechel accounted for 64.7 million tonnes of total output (see Figure 2). Rolled steel product output increased by 1.4% to 66 million tonnes, according to the Metal Expert news agency. However, the output trend varied greatly through the year: production slowed down by 8.9% year-on-year in the first quarter and by 1.6% in the second quarter, before rising by 6.2% in the third quarter and then slowing again in the fourth quarter by 10.2%. Output of many product types increased, and volume growth was particularly marked for wire (+31.7%) and seamless casing pipes (+19.8%). Russian manufacturers have already produced 46.4 million tonnes of steel in January-August 2018, according to WSA estimates, which is 1.9% more than in the same period last year.

Figure 2. Output and headline financials of leading Russian steelmakers


The world’s eighth-largest steel producer exported products worth USD 13.8 billion in 2017, according to the Turkish Statistical Institute (TurkStat), including supplies to the United States worth USD 1.2 billion, which makes Turkey sixth in the world by exports to the US market.

According to data from the World Steel Association, between January and August 2018, global steel production increased by 4.8% compared with the same period last year

However, the United States doubled duties on Turkish aluminium and steel to 20% and 50%, respectively, on August 10 with an immediate knock-on effect on the Turkish currency, which suffered a record one-day fall. Despite this, results in terms of volumes from Turkish steelmakers in August were impressive: according to the Turkish Steel Exporters Association (CIB), Turkey sold 1.6 million tonnes of steel to other countries in the last summer month (+36.4% year-on-year) for USD 1.2 billion (+43% year-on-year). The CIB reported an increase in exports by 5.8% in the first eight months of the year, during which Turkish producers sold 12.7 million tonnes of steel products abroad. Revenues grew even more strongly (+28.5%) to USD 9.6 billion, reflecting the overall increase in world steel prices.

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