G20 nations for global forum to address excess steel capacity
Major steel producers China, India and Japan
along with other G20 nations have called for increased sharing of information
as well as more cooperation by forming a global forum to address the issue of
excess steel capacity.
Significance of this move:
The development assumes significance in the
backdrop of the problem caused in international markets due to excess steel
capacity amidst softening of prices, which eroded sales and profits of firms
across countries, especially at a time when the global economy recovery is
weak. The forum facilitates increased information sharing and cooperation.
- This move also assumes significance as it comes in the backdrop of nations such as the U.S. imposing heavy duties on imports of cheap steel from countries such as China.
Background:
The decision was announced by G20 leaders
recently. G20 leaders recognised the “structural problems, including excess
capacity” in some industries, exacerbated by a weak global economic recovery
and depressed market demand that have caused a negative impact on trade and
workers.
- The leaders also recognised that “subsidies and other types of support from government or government-sponsored institutions” can cause market distortions and contribute to global excess capacity and therefore require attention.
Why is it important for India?
India, the world’s third largest steel producer,
too is facing a spate of cheap imports from China, Japan and Korea.
- This has hit the sales and profits of domestic steel producers and also impacted their liquidity, which in turn has affected their capacity to repay loans and meet interest payment deadlines having a cascading effect on the number of nonperforming assets (NPAs) with the banks.
- Steel sector in India accounts for the highest number of NPAs with the banks.
