Steel Is Essential to the Modern World

         Steel is essential to the modern world. It’s used to build buildings, roads, railways, and other infrastructure. For a developing country, steel is also essential for economic growth.

          Regarding to the article, it mentions that the global supply of steel in China, Japan, Taiwan and Korea has witness a falls but India and other European and Independent States witness increase in the production of crude steel. However, the production of crude steel has falls in Europe Union + 28 and Latin America. The articles expected the production of steel will decrease 2016. At the same, China make a decision on reduce the supply of crude steel to make more profit due to oversupply.

         In economics theory, overproduction, oversupply or excess of supply refers to excess of supply over demand of products being offered to the market. This leads to lower prices and/or unsold goods along with the possibility of unemployment. This phenomena in China is unprofitable to their country. The main factor that why China need to reduce the supply of crude steel is because it will affect the price. Many countries will be affected due to this oversupply of steel in China. For example India, they have to raised import taxes, levied safeguard duties till 2018 and imposed floor prices on shipments to stem the inflow and help domestic players.

         In the demand side, China reduce the demand for steel materials due to economy down. This also affect the Commonwealth of Independent States and Latin America continue to reduce consumption of steel materials but However, demand for steel for infrastructure construction in Southeast Asia, the Middle East and Africa remains strong. In US economy expend steadily so it can prevent the sharp decline of world’s steel consumption in 2016.

          Due to Taiwan’s slowing economy, the output value and sales of steel dropped. They also cut production to earn more profit. Asian market faced growing competition from exports of low-priced steel from China and Korea, while the downward trend in the international prices of steel continued, bringing down the export prices on average. Consequently, the value of exports of Taiwan’s basic iron and steel manufacturing industry fell.

           This match with the demand and supply theory, when one of the countries price of the steel decrease, the countries of demand for the steel will increase and for the others countries, the quantity of demand for the steel will decrease. This shows a negative relationship between the price of steel and the quantity of demand for steel in the given period of time. China’s low-end steels are very competitive in the export markets, adversely affecting domestic sales and exports of Taiwanese steel firms. Their profit has declined from 2014 and increase back in the first half year of 2016.