Overcapacity: the global steel industry is difficult to solve
August 17 06:33:19, 2025
**Abstract [Introduction]:**
Overcapacity has become a major challenge for the global steel industry, one that must be addressed in the coming years. According to a report by Morgan Stanley, countries like the United States, India, and Japan have performed well due to strong demand, while oversupply has not yet created significant pressure on their markets, leading to more positive outlooks. However, South Korea faces a different situation—its demand is weak, but new production capacity continues to rise. China, although still experiencing solid demand, suffers from severe overcapacity. Meanwhile, Europe's stagnant demand and difficulty in reducing excess capacity make it hard for the region to resolve its own overproduction issues.
**China’s Urbanization is the Main Driving Force for Demand**
China’s steel demand growth has slowed down to a more normal pace, but urbanization remains the key driver for future demand. The Chinese government aims to increase the urbanization rate to 70% by 2030. Morgan Stanley estimates that each 1 percentage point increase in urbanization could boost steel demand by 50 million tons. This demand will mainly come from real estate, transportation infrastructure (such as highways and subways), and public service projects like hospitals and schools.
Real estate construction accounts for 42% of total steel demand, while infrastructure development makes up 25%. The construction machinery sector accounts for 15%, and despite some improvement in excavator sales in March, current demand is not enough to significantly improve equipment utilization. Sales in this sector are expected to grow by about 3% in 2013. The automotive industry contributes 6% of total demand, and its short- to medium-term outlook remains relatively strong, with an expected 10% sales growth in 2013.
**Overcapacity Has Become a Difficult Problem for the Global Steel Industry**
China’s steel industry is facing a serious overcapacity issue. In 2013, the capacity utilization rate was expected to be around 77%, rising slightly to 83% by 2018. Despite efforts by the government to phase out outdated production and consolidate the industry, total steel production capacity reached 920 million tons by the end of 2012. Additionally, nearly 50 million tons of new capacity were expected to come online in 2013. Unless some companies close due to long-term losses or excess capacity is cut, overcapacity will continue to plague the sector.
The best-end steel market in China is automotive panels and high-end special plates, while the worst is marine steel.
**Europe Is Unable to Bear the Loss of Capacity Reduction**
Over the past 40 years, the European steel industry has struggled with limited structural growth in demand, reflecting a mature and aging economy. Steel demand has shifted from investment-driven to consumption-based, leading to a decline in demand intensity. Currently, the EU-27 has about 40 million tons of surplus steel capacity, with long products and commodity-grade sheets being the most overproduced. Eastern and Southern Europe face even more severe structural overcapacity.
Although cutting capacity in Eastern Europe could help reduce overall overcapacity, many mills remain operational due to lower labor costs. The best steel end markets in Europe are those for automotive and oil/gas industries, where ArcelorMittal holds a dominant share. On the other hand, the construction industry is considered the weakest steel market.
**Japanese Restructuring Effect Inhibits Overcapacity**
Japan’s steel market has seen limited structural growth due to its mature economy. However, demand is expected to rise by 4% in 2013. Earthquake reconstruction and public infrastructure projects boosted construction demand by 7% in 2012, and these factors are expected to support steel demand until 2015. The automotive industry has experienced fluctuations, but loose monetary policy has led to a weaker yen, which benefits exports. Shipbuilding demand, however, is expected to continue declining.
On the supply side, Japanese steel companies have consolidated, leading to reduced production capacity. The best terminal steel market in Japan is the long product market, especially H-beams and rebars, while stainless steel and shipbuilding plates are among the worst-performing segments.
**The Rest of the World: The U.S. Is Hard to Be Alone**
As a developed country, the U.S. steel industry has a favorable demand outlook. Apparent steel demand is expected to rise by 2.8% in 2013, with stronger growth anticipated after 2014. From 2015 to 2018, the average annual demand growth is projected to reach 4.6%. Key drivers include the recovery of the non-residential construction market, manufacturing, and the shale gas industry.
However, overcapacity and import competition remain pressing concerns. The collapse of RG Steel led to the closure of 6.5 million tons of capacity, but increased production in the southern U.S. has filled the gap. Despite strong demand, overcapacity limits price increases, and no effective solution has been found yet.
Import challenges also persist, as fluctuating prices and trade frictions have made the U.S. market more volatile. When domestic prices exceed foreign prices by $100 per short ton, imports surge, limiting further price gains. Morgan Stanley expects the U.S. steel industry’s capacity utilization rate to reach 83.8% in 2014, rising to 89.2% between 2015 and 2018.
The best terminal market in the U.S. is non-residential construction, where Nucor and Steel Dynamics are expected to perform well. Thin-plate products, however, represent a weaker segment.
**India’s Oversupply Is a False Proposition**
India, as a large developing country, sees its steel demand primarily driven by the automotive and infrastructure sectors. The automotive industry consumes a lot of high-end flat products, such as cold-rolled and coated sheets, accounting for about 12% of total steel demand. Infrastructure development, supported by government initiatives in railways, ports, airports, and urban projects, is expected to drive healthy growth in long product demand over the next five to seven years.
Despite strong demand, overcapacity is unlikely in the near future. This is due to raw material shortages caused by the iron ore mining ban and delays in new projects due to land, environmental, and financial issues. India’s steel production is expected to grow at a compound annual rate of 8.2% through fiscal year 2017.
The best end-market for steel in India is automotive thin sheet, with Tata Steel holding a 52% market share and Bhushan Steel at 47%.
The rod seal belongs to the dynamic seal. It is the seal that moves with the piston rod. It is one of the important components on the hydraulic support.
3. Use position of piston rod seal:
Guide sleeve, piston
4. Working principle of piston rod seal:
It is used at the contact part between the guide sleeve and the outer cylinder to seal the emulsion in the outer cylinder.
5. What effects will be caused by improper use or operation of piston rod seal:
1. Improper selection of cavity support material will wear the cavity and piston rod.
2. The size of the friction pair is inappropriate, causing wear.
3. Improper thread guide angle of cylinder barrel and piston end wear the sealing ring.
4. The seal ring is worn due to improper installation guide angle of the seal.
5. The surface of cavity and piston rod is rough, with scratches and worn seals.
6. The outer cylinder leaks and the jack does not maintain pressure.
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