Lorena and I had an interesting encounter with the Swedish secretary of trade last night. We discussed the upcoming Copenhagen summitt and the challenges posed (yes, the US is possibly more difficult to deal with than China). Furtheremore, and perhaps more related to economics & China, the Secretary referred to a very interesting report, one which we have not yet read (will post it later) talking about the excess capacity of steel produced by Chinese plants. Total steel production in China amounts to 800 million tons, 150 million excess capacity. The overcapacity causes dumping and lower steel prices in other markets. Worth noting is that China’s excess capacity alone amounts to the total steel demand in Japan and Korea, combined.
We just wanted to share this reflection as discussed with the Swedish Secretary and point out the extensive influence and power that China has on market relations around the world. Will post this report next week and continue the discussion of Chiense overcapacity pushing down margins for steel producers globally.
/Lorena & Erik
December 3, 2009 at 4:15 am |
Karthik from Unclemilton:
Another group had posted an article about overcapacity. Am looking forward to discuss the issue in the class.
December 3, 2009 at 5:34 am |
It’s hard to say whether it’s oversupply or underdemand, or both. But as I’ve said in another blog, if the underdemand is cyclical (due to economic downturn) then the demand will eventually catch up, and no big deal. If it’s oversupply, then trade tariff may again be a bargain between China and its trade counterparts.
December 7, 2009 at 5:07 pm |
I don’t know if there is still so-called over-capacity worldwide of the steel, as sunny said. But maybe at least, the spillover is good for ease the situation in china and indirectly eases the same problem world wise, because the burden could be shared.
CHENHUI