G7 to tackle global steel glut at Japan summit

A summit meeting of the Group of Seven nations later this month will adopt steps to tackle a global glut in steel, arising mostly from overcapacity in China, which account for roughly half of the global steel production.

If adopted, it is likely to put pressure on China to curb excess production of the material used in construction to cars, Reuters reported quoting a draft text released by the G7.

Chinese steel production hit a record high earlier this year, and with dumping of steel from the country, steel mills from Asia and Australia to Europe and the US are under threat of closure.

"We recognise the negative impact of global excess capacity across industrial sectors, especially steel, on our economies, trade and workers," the draft text says.

"We are committed to moving quickly in taking steps to address this issue by enhancing market function, including through coordinated actions that identify and seek to eliminate such subsidies and support, and by encouraging adjustment."

G7 leaders will meet on 26-27 may in Ise-Shima near Nagoya, a major car production and steel manufacturing centre.

China's steel output hit a record in March as rising prices and better margins overseas prompted mills that had been shut or suspended to resume production.

Rising production pushed down steel prices in China and steel futures in China registered their biggest weekly fall since 2009 on Friday.

But this has not helped rein in China's steel production as producers continued to operate at near capacities, causing a further glut in steel production.

China also failed to coordinate with other major steel producers on measures to tackle the overcapacity crisis, prompting the United States, European Union and others to call for urgent action.

Germany and France have urged fellow EU members to tighten trade restrictions against the flood of cheap Chinese steel and take other measures to protect the bloc's own steel producers.

Chinese officials have said that they are taking sufficient steps to curb capacity, while at the same time stating that blaming China is a way to justify protectionism.

China, meanwhile, announced plans to shed as much as 150 million tonnes of domestic crude steel capacity in the next five years to tackle the overcapacity and help domestic firms with losses and debts.

Cheap Chinese steel exports have been cited as one reason for Tata Steel's decision to sell its British steel operations.

Australian steel and mining company Arrium has gone into administration, while in Germany falling demand for steel is threatening job losses at steel mills.