Alliance for American Manufacturing (AAM)

Overcapacity in Steel: China’s Role in a Global Problem

The global steel sector is once again in a state of overcapacity. The sector, predominantly fueled by China’s expansion since 2000, has grown to over 2,300 million metric tons (MT) while only needing 1,500 MT to meet global demand. The result is a global steel sector at unviable profit levels and an influx of cheap steel in the global trading system adversely affecting companies, workers, and the global trading regime. This report was prepared for the Alliance for American Manufacturing (AAM).

Research questions: What is overcapacity? Why is overcapacity a problem? What causes overcapacity? What can be done to address overcapacity?

Key takeaways: Capacity levels in the global steel industry are below 70%, slightly below the worst years of the global financial crisis, and levels at or above 80% are needed for industry profitability. China, as the world’s largest steel producer and net exporter recognizes that excess capacity must be reduced, yet commitments to reduce capacity have not had measurable effects. The global steel capacity problem raises questions about how countries with different development models affect the global trading system and how trade tensions among countries can be reduced.

Infrastructure Investment Creates American Jobs

Researchers explored the current state of transportation infrastructure and the economic impact of additional investment in renewing infrastructure in the United States for the Alliance of America Manufacturing (AAM). Results indicate the U.S. ranks 16th overall in transportation infrastructure and that each dollar of investment returns 3.54 in economic activity, creating 21,671 jobs for each $1 billion invested in transportation infrastructure.

AAM Press Release: No Reason to Wait: Rebuild Now to Save American Competitiveness: October 15, 2014 (see post).