Japanese steel makers are monitoring developments after leaders of the Group of Seven nations addressed the problems of overcapacity in a communique.
A senior official of a Japanese steel maker welcomed the document, adopted at the two-day G-7 Ise-Shima summit last week, saying it contained “more in-depth comments than expected” on oversupply.
Discussions with China, one of the world’s largest steel suppliers, will be needed to resolve the issue.
Crude steel production in China totaled 800 million tons in 2015, accounting for about half of global output. China’s steel exports in the year came to 112.4 million tons, exceeding crude steel production in Japan.
Surging steel shipments from China have caused prices to plunge, causing pain for steel makers around the world.
Twelve steel industry groups in the world, including the Japan Iron and Steel Federation, issued a joint statement prior to the G-7 summit.
“Government support measures and other policies have contributed to significant global excess capacity in steel, unfair trade and distortions in steel trade flows around the world,” the statement said, apparently referring to Chinese government subsidies.
Against this backdrop, the industry groups urged the G-7 nations to discuss countermeasures at the Ise-Shima summit.
The G-7 communique recognized “global excess capacity,” mainly in the steel industry, as “a pressing structural challenge with global implications.” It stressed a need to urgently address the issue “through elimination of market-distorting measures.”
The communique also said that G-7 countries “are prepared to consult with other major producing countries,” using opportunities such as meetings of the Organization for Economic Cooperation and Development.
But the OECD failed to make progress in the issue of excess supply at a meeting of its steel committee in Belgium in April, which China took part in.
The Chinese government has repeatedly indicated that it plans to scrap inefficient production facilities, but it is questionable whether Beijing will implement this as it is likely to lead to massive job cuts.
“Achieving major results quickly may be difficult,” a Japanese steel industry official said, adding, “I hope gradual improvements will be made through repeated discussions.”