Peak Steel Demand from China to Spark Trade Conflicts

Published Date : Jul 09, 2015

The demand for steel in China is at its peak, if the Japanese experience of 1970s is looked upon. This is likely to spur greater trade conflicts as the country ships excess production to other countries.

Currently, the declined production of the commodity in China indicates that growth period steel in the country is over, also signaling the slowing pace of economic expansion. According to a senior research advisor at RIETI, who is associated with Japan’s trade ministry, a prolonged slump is expected, with growth in demand not likely to occur for next 10 to 20 years.

The adviser further added, in any country after attaining a certain stage of economic development, the demand for steel is retarded. China has excess capacity which is about 300 million tons to 400 million tons, which is equivalent to three to four times of Japanese output. The situation is difficult to be dealt with, he further added.

The adviser’s views were reflecting concerns that runs deep in the industry, which was battered by flooding of cheaper commodity from China, which accounts for production of half of the steel in the world. Diminishing demand in China and supplies from emerging markets such as Brazil and India are likely to calm the market and potentially mend conflicts among suppliers.

The scenario in China is likely to trigger additional cases of trade actions among suppliers of steel in pursuit to protect earnings, as commented by President of the Japanese agency, Growth & Value Stocks Research. The industry is facing challenge from higher negative elements than positive factors.

Between April 2010 and 2015, the steel sector was responsible for 5% to 25% trade related complaints made to the World Trade Organization.