Now some experts claim that the steel industry cannot avoid a long-term recession without resolving the issue of global steel overcapacity. As a result, overcapacity has become a hotly debated and contentious issue.

Calculating Overcapacity

One of the major difficulties in determining the level of overcapacity is the calculation process. The report states that to calculate the extent of overcapacity, an accurate measure of capacity is necessary. However, the common method of calculating overcapacity by using nominal capacity is likely to yield exaggerated figures. This happens because it is physically impossible for plants to operate year-round at 100% nominal capacity, due to various issues such as raw materials supply, facilities maintenance, and the existence of outdated facilities.

Nominal Overcapacity Rate Relative to Steel Demand

The only way to accurately calculate capacity at the highest possible operation rate, known as effective capacity, is by investigating every single steel plant around the world. As you can imagine, this type of study is practically impossible. However, we are getting closer to a more accurate study.

Effective Capacity

In recent years, the Organization for Economic Co-operation and Development (OECD) has perfected its method of quantifying the effective capacity of member states. The OECD bases maximum production on peak market condition during a certain period. The market condition is estimated with consideration to factors such as steel production, price, and profitability.

Using effective capacity to estimate the maximum possible production of steelmakers yields a smaller magnitude of overcapacity. The introduction of effective capacity measurement can potentially dispel worries about overcapacity causing stagnation or recession in the steel market.

Steel Prices and Overcapacity Rate

From 2008 to 2014, global nominal overcapacity increased steadily in size, but demand also grew. According to the report, the degree of nominal overcapacity relative to demand size fluctuated, following the peaks and valleys of steel prices. These findings support the argument that stresses the importance of effective capacity and disregards nominal capacity as a meaningless figure. Hence, some experts refer to overcapacity as a myth because we have yet to learn the exact magnitude of overcapacity and its impact.

Despite this idea of myth and exaggeration, overcapacity is considered the most challenging issue for today’s global steel industry. For this reason, relieving overcapacity remains an urgent issue and it requires the attention and efforts of the global steel industry.

The Reality of Overcapacity

Dr. Rod Beddows, author of Steel 2050, published in 2014, pointed out that “While efforts to reduce capacity are important, the continuous growth of steel demand is essential in lowering overcapacity rates.” One of the biggest concerns in the steel sector today is the future of Chinese demand and supply. But according to Dr. Beddows, we don’t have to worry because Chinese steel demand has not peaked yet. He claimed “There are still over 300 million Chinese requiring industrialization and urbanization. The housing and general building stock needs replacement.” And of course all of this development involves steel products.

Dr. Beddows admits that “Current overcapacity in China is large,” but he stated that “growth plus Xi Jinping’s new policy initiatives for China’s infrastructure and manufacturing will lead to its rapid decline, and by 2017-2018 supply and demand should be in balance.”

Meanwhile, the report states that investment in infrastructure and the growth of the manufacturing sectors in emerging countries such as India and the Middle East is important in creating steel demand, and might offset China’s declining steel demand in the future. However, the global economy has not shown clear momentum for recovery since the financial crisis, and concerns are mounting over a slowdown in the Chinese economy.

Overcoming Overcapacity

No matter how you look at it, overcapacity is a problem and a recurring one at that. Dr. Beddows claimed that “The only way to manage this problem is to create a level playing field in terms of ownership, by eliminating state ownership, and trade in the industry. Regulation in general is also of increasing importance.”

Dr. Beddows suggested ways that the industry can remove state ownership. He said, “Price risk hedging mechanisms and improved service levels to customers are the two most important issues for the industry. I recommend that organizations such as World Steel Dynamics focus on these to help the industry improve.”

So it seems that overcapacity is becoming a reality, but the situation is not as dire as many think. It is possible to overcome the challenge of overcapacity if the Steel industry works in unison to reduce unnecessary excess capacity.

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The blades wielded by the Game of Thrones characters have become synonymous with the show itself, and hardcore fans across the world pay a lot of money to get their hands on replicas of the iconic swords, which each have their own special characteristics and names, like Blackfyre, Dark Sister and Longclaw. But, what makes these weapons so extraordinary?

A Mythical, Magical Metal  

The secret behind the swords’ superiority is the material of which they were forged: Valyrian steel. This mythical alloy, manufactured in the ancient empire of the Valyrians, is noted to be exceptionally sharp and tremendously strong, yet lightweight, making it an ideal metal for a sword. Its rippled patterns make it distinctive from other metals, and because of these properties, the steel is quite scarce and very expensive. Yet what makes Valyrian steel swords most unique and powerful is the fact that they are forged with magic spells and dragonfire in a sword making process that was all but lost over the ages.

While the fictitious alloy was more than likely the result of imaginative thinking than the consultation of chemistry books, George R. R. Martin, author of the A Song of Ice and Fire novel series on which the show is based, drew inspiration from real-life ancient weaponry, more specifically Damascus steel, to dream up the material.

Real-life Inspiration

Similar to its imaginary predecessor, Damascus steel, which originated in South India before the Common Era, was primarily used to make long-bladed weapons which were reputed to be tough, shatter-resistant and able to be honed to a sharp, resilient edge.

Additionally, the blades possessed the distinctive rippled patterns which resembled flowing water. It is said that Islamic knights would look at these patterns before a battle to be reminded of the flowing waters of the rivers of paradise, and be reassured that should they fall, their place in paradise would be secured.

Of course, there were no fire-breathing dragons or wizardry involved in the forgery of these blades, and the metal’s properties weren’t as ideal as those of Valyrian steel. The material did give rise to a number of legends, however.

It was believed that a blade made of Damascus steel could effortlessly cut through a rifle barrel, or cut in half a silk scarf falling across the blade. Some even say that Damascus steel swords were the strongest blades used in the Crusades. Whether there is any truth to these legends or not, the swords were undoubtedly extraordinary for their time.

Also like Valyrian steel, the original method of production of Damascus steel was eventually lost, and the manufacturing of the patterned swords ceased around 1750.

Although Damascus steel blades may be long gone, these intricate swords have been reincarnated, albeit fictitiously, and can continue to be admired, thanks to the Game of Thrones series, which airs on Sundays at 9PM Eastern Standard Time on HBO.

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