China Steel Corporation (CSC), Taiwan’s leading integrated producer of steel products, will cut capacity by 20% in December to cope with the sluggish global steel market, with downstream producers including Yieh Phui Enterprise Co., Sheng Yu Steel Co. and Kao Hsing Chang Iron & Steel Corp. expected to follow suit.

The global steel industry is encountering slowing sales due to the European sovereign debt crisis, flooding in Thailand and oversupply in China.

Declining demand is depriving Taiwan’s downstream producers of steel products of new orders, so they have asked CSC to reduce wholesale prices of its major products to be shipped in January and February 2012.

Despite good performance in October and November in terms of order acquisition, CSC predicts to have orders to fill only 80% of capacity in December.

The last time CSC slashed capacity was in the fourth quarter of 2008 and the first quarter of 2009 to cope with the global financial crisis, cutting capacity by between 25% and 30%. With production-cutting by the major steel mills worldwide, the global steel market quickly returned to normal in the second quarter of 2009.