The global stainless steel industry must improve capacity utilisation if the market is to stay healthy, a leading steel analyst has said.

Necessary measures include reorganisation and elimination of surplus capacity, Markus Moll, md of steel analyst SMR said.

“In 2010, we had no region in the world where [utilisation rates] were entirely level. There are  meltshops which will have to be eliminated,” Moll said.

“There are several companies with meltshops which are drastically under-utilised, so something will have to happen to get capacity utilisation up,” he added.

In Europe, stainless steel slab capacity is expected to fall from the current 8 million tpy to less than 6 million tpy by 2015, he said.

In other regions, including Japan, Korea and Taiwan, there will be some capacity reductions, Moll predicted, but India will continue to see production capacity rise substantially, resulting in utilisation rates that “will not be that good”, he added.

In the USA, stainless production capacity will also increase, despite the expected closures there, he said.

The outlook is not completely bleak, however.

“This does not mean companies will have to go bankrupt, and we believe that in 2015, even in Europe and North America, we will have more players than we do today. But maybe we’ll see some groups breaking up,” Moll said.

“Not all of the mergers we saw in the 1990s and 2000s represent optimal systems under today’s conditions, so I think the number-one solution is reorganisation. Everyone has to contribute,” he added.