NEW YORK — As much as 70 percent of today’s global steel industry is owned by government entities, distorting the basic fundamentals of a market-driven economy and leading to massive structural oversupply on a worldwide scale, according to Nucor Corp. executive chairman Daniel R. DiMicco.
"One of the greatest banes of our industry for a long, long time—decades—has been state-owned steel industries. They’re not market driven; they’re politically driven. ... And politically driven translates to massive overcapacity," DiMicco said in a keynote address at the Steel Success Strategies XXVIII conference in New York, sponsored by AMM and World Steel Dynamics Inc., Englewood Cliffs, N.J.
Between 65 and 70 percent of the global steel sector is controlled by state or national governments, he said, noting that such state-owned steelmaking companies are neither low-cost nor market driven, resulting in a glut of subsidized capacity with no home but the world export market.
"Unfortunately, we in the United States are the world’s dumping ground, including for rebar and for other products," DiMicco said.
"According to Organization for Economic Cooperation and Development (OECD) estimates, there is global demand for about 1.5 billion tonnes of steel per year, but that’s far below the 2.1 billion to 2.3 billion tonnes of capacity fighting to supply that demand, he said.
Much of that overcapacity is coming from China, but Turkey and other major steelmaking nations relying on a major export strategy are also to blame, DiMicco said.
"No nation should build 300 million tonnes of excess capacity they don’t need, no matter what your growth trajectory is, particularly when you can build steel mills as fast as (the Chinese) can. This shouldn’t be the case anywhere in the world. A developing nation? Yes, build a steel industry. But don’t build one that depends on exports to survive," he said.
"Build it to create jobs in your country (and) drive economic growth internally, but don’t be building it so you export 20 million of 35 million tonnes of your production. That’s ridiculous," DiMicco said, citing estimated export figures from Turkey. "That is basically flaunting and making a laughing stock out of the concept of market-driven economies and free trade."
The solution, he said, is going to require pressure from the global steel sector and key governments around the world.
"To get ourselves out of this mess ... it’s going to take enlightened leadership. It’s going to take a global community that says enough is enough. The distortions are too great; it’s time to correct (it)," he said.
DiMicco’s message to the global steel sector is clear: "Stop exporting your overcapacity. There’s too much in the world. Take your medicine at home (and) get rid of your antiquated, excess capacity of which there are hundreds of millions of tonnes."
"The challenge in particular for China is you’ve done great things. You’ve done things that no other country in the world has done. A lot of good things, miraculous things in what you’ve built. But you’ve overdone it," he added. "Please get your act together and become part of the global community in a non-threatening way."