The surplus of steel is unlikely to disappear quickly

The World Steel Association this week painted a grim picture of future global demand, saying consumption of finished steel this year is likely to reach just 1,487 million tonnes, a 0.5 percent drop from last year, which in turn is 3 percent lower than in 2014. In October last year alone, the association predicted a surge in demand, saying that consumption this year would be 1,523 million tonnes.

Countries that have reached the 10-year supercycle are currently on the downward path. China, Russia and Brazil are showing contractions, with only India providing growth. Indian demand is expected to grow 5.4 percent this year and next, reaching 88 million tonnes in 2017.

Unfortunately, to combat the decline in global demand, it is necessary to get rid of chronic overproduction, especially in China, but this will not happen anytime soon. Regardless of Beijing's promise, China's massive overcapacity will take a long time. Fearing civil unrest that job losses could cause, state governments and Beijing are likely to soften major restructuring plans.

According to official data from China, production capacity is just over 1.1 billion tons per year, although analysts estimate that another 100 million tons are likely to be produced illegally. Official data indicate overcapacity of 300-400 million tons per year, and consumption will decline this year by 4 percent to 645.4 million tons, and another 3 percent in 2017.