How should the excess steel capacity problem be solved ?

An article in the Wall Street Journal (November 28, 2012) describes the glut in steel capacity -an estimated 1.8 billion tons, compared to demand which is 1.5 billion tons. The reason, fragmented capacity with the top five companies comprising 18.2 % of the market, fragmented mills in China which has 46 % of the world’s capacity and a lack of appetite for consolidation. Should European politicians intervene and organize a “coordinated scheme of capacity cutting” that a European CEO proposes ? Will the impending falling prices (which have already dropped 35 % compared to 2008 prices) open up new markets and thus help the industry ? Or will this overcapacity create competitive pressures to invest in higher margin unique technology intensive products that will help industries like the auto industry ?

About aviyer2010

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