17 April 2025 – Asia’s stock markets rose sharply on Thursday, buoyed by hopes of progress in US trade talks with Japan and possible negotiations with China. A critical look at alleged overcapacity in steel production – are the OECD figures simply unrealistic?
Asia’s stock markets on the rise – hopes of progress in US trade talks
Asia’s stock markets rose significantly on Thursday – fuelled by hopes of progress in the US trade talks with Japan and possible negotiations with China. The Nikkei 225 in particular rose by 1.1%, while the Hang Seng Index in Hong Kong rose by as much as 1.7%. South Korea, Australia and Singapore also recorded significant gains.
Japan-US: Talks on bilateral trade agreement
The optimism was fuelled by newly launched talks between the USA and Japan on a bilateral trade agreement. Both sides are endeavouring to reach a swift agreement in order to avoid the threat of US tariffs. At the same time, China is signalling its willingness to engage in talks, provided that mutual respect is maintained – a potential boost for the entire region.
Japan’s exports rose for the sixth time in a row in March
Economic fundamentals are also supporting the positive market sentiment: Japan’s exports rose for the sixth time in a row in March – despite slightly lower-than-expected figures. In Australia, the labour market continues to recover, with an increase in employment and robust demand.
The combination of diplomatic progress and solid economic data is boosting investor confidence – a ray of hope for the Asian markets.
Is overcapacity in steel production unrealistic?
For years, the European Union and the Organisation for Economic Co-operation and Development (OECD) in particular have never tired of lamenting the ‘overcapacity in steel production’ and repeatedly describing this as one of the main problems in the global steel industry. China in particular is repeatedly cited as the main reason for the existing overcapacity.
EU and US discuss steel overcapacity
This was also recently addressed again in a discussion between Maroš Šefčovič, the EU Trade Commissioner, and US Trade Representative Jamieson Greer and Commerce Secretary Howard Lutnic.
The OECD had estimated global crude steel production capacity at around 2.432 million tonnes in 2023.
The worldsteel association had published crude steel production of 1.904 million tonnes for 2023.
OECD figures on steel production criticised
However, there are various points of criticism regarding the OECD figures. One of the most important is that the statistical figures were derived from the so-called name plate capacities and therefore do not correspond to the reality of production.
OECD figures purely theoretical?
After all, 2.432 million tonnes of crude steel capacity per year would only be available if blast furnaces and electric arc furnaces were to run 24 hours a day, 7 days a week and 52 weeks a year without interruption. This is an unattainable ideal, as experts assume that an Overall Equipment Effectiveness (OEE) of 85% is the maximum that state-of-the-art technical production can achieve. And in steel production in particular, we are a long way from such values in many places.
The question therefore arises as to whether the calculated capacity utilisation of crude steel production in 2023, at around 78%, should not actually have been over 92% – and that under ideal conditions: i.e. with an optimum production value (OEE of 85%), without supply bottlenecks for raw materials or spare parts, without technical faults or maintenance work and with sufficiently qualified personnel at all times.
Can the OECD’s figures on overcapacity in crude steel production be considered realistic and reliable at all, or do they urgently need to be rethought?
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