overcapacity


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overcapacity

a situation in which a firm or industry has too much production CAPACITY on hand relative to current demand levels. This may be only temporary because of a downturn in the BUSINESS CYCLE. Alternatively, the decline in demand may be permanent (see PRODUCT LIFE CYCLE) or due to the industry having overinvested in new plant relative to long-run demand potential. In this case, overcapacity, leading to greater competition for limited sales is often removed by the disappearance of inefficient firms from the industry, or by RATIONALIZATION schemes involving the MERGER of firms and closure of redundant plant.

overcapacity

see EXCESS CAPACITY.
References in periodicals archive ?
Global overcapacity is a major factor behind the steel crisis and has already cost us thousands of jobs.
There is still overcapacity in the market,' Bautista had said.
A slowing economy and problems with industrial overcapacity have reduced investment opportunities, said Fan Gang, a Chinese central bank vice governor.
This overcapacity, which has allowed Chinese steel producers to inundate markets across the world with cheap exports, has triggered calls for global monitoring of China's steel output.
The handling of the stock market and currency reform has revealed serious leadership and policy shortcomings, but the management of the real economy over the last several years seems to be proof of nothing less than a system-generated overcapacity crisis.
Nine other provinces have yet to make any dent in their coal production overcapacity.
Premier Li insisted that China was taking strong and determined measures to tackle the problem of overcapacity, adding that China does not use subsidies to give its industries a competitive edge.
Overcapacity in China's industrial sectors is causing mounting losses with weak demand for output and high financial leverage.
Delta said Sunday it had reduced flights between Atlanta and Dubai this winter, blaming overcapacity on US routes to the Middle East by subsidized and state-owned airlines, underscoring a trade row.
The effect of this overcapacity is low freight rates, which will undermine the profitability of the container shipping sector.
In the report, BCG anticipates continued overcapacity in the container shipping industry, with no market recovery in sight.
Emr Properties' hospitality and retail activities are providing it with a strong buffer against market volatility, although the risk of overcapacity hangs over the company, according to Moody's Investors Service.