Europe's steel sector has been in a long decline. Industrializing countries traditionally produce steel because it is used not only in industrial sectors such as construction but also in finished goods — such as automobile manufacturing — that can create immense economic growth, as in Germany and Japan. But the resulting economic wealth begets a more educated population that demands higher wages than can be earned by tending a blast furnace, leading a country out of steel production. It moves instead toward the services sector (or sometimes high-end manufacturing), where those with higher levels of education can earn higher wages. Then the next country moves into steel production to fill the demand, as China did most recently. China is on the cusp of changing its status from non-market to market economy. The countries of Europe, especially those with struggling steel sectors, will be picking sides over whether to support the change to its trade status.
Of course, it is not always a clear-cut transition. While Western Europe has largely moved from manufacturing to services, value in the steel sector remains. By innovating to make thinner and more durable steel, countries such as Germany can compete with developing economies such as China. Nations have also found it useful to maintain a steel industry to serve their automobile sectors, another area that still yields profits.
Over the last 30 years China has embarked on its own industrialization path on a scale that was previously unprecedented. Total Chinese steel production in 2013 was 22 times output in 1980. The Chinese share of global output rose from 5 to 50 percent over the same period. However, an equally dramatic rise in Chinese demand largely absorbed its new supply of steel, somewhat tempering the global market's reaction to China's growth.
Unfortunately for China and the world's steel producers, that trend has reversed in recent years. In 2007 Chinese production began to overtake demand, creating surpluses. In 2013, Chinese demand actually started to shrink, but production levels were slow to respond. Thus, in 2015, UBS calculated that China had produced 440 million metric tons more steel than it could consume that year, roughly four times Italy's total production output. The result has been a surge of steel in global markets, driving prices down and leaving China exposed to allegations of dumping, the practice of purposely exporting a product at lower prices than what it sells for domestically, often in an effort to capture more of the global market. In 2014 alone, China was the subject of 55 percent of all global anti-dumping investigations.
