BlueScope Steel chief executive Paul O’Malley has issued a bleak warning for Australian iron ore and coking coal exporters, saying China’s steel capacity has already peaked, implying a slowdown is imminent for raw materials exporters.

Mr O’Malley told The Australian Financial Review yesterday that more Chinese steelmakers will be forced to follow BlueScope’s move to cut its output by half a year ago as the impact of crippling overcapacity continues to weigh on steel prices globally.

“My personal view is that China has already seen peak steel capacity,” Mr O’Malley said. “I think there is a significant overproduction of steel in China at the moment. And therefore to the extent that we’re at peak steel capacity in China at the moment you will see a slowdown.”

China had been on track to produce about 700 million tonnes of steel this year, but moves to wind back steel production and run down inventories have raised questions over whether volumes could actually decline on last year’s 683 million tonnes. More worryingly, official China Iron and Steel Association figures show the country had already built 850 million tonnes of capacity by the end of 2011, with expectations that this figure could rise to more than 900 million tonnes by the end of this year.

BHP Billiton and Rio Tinto reiterated forecasts for China to keep producing more steel each year until at least 2025, with output expected to peak at more than 1 billion tonnes.

Complicating the outlook for production is an increasingly hostile stance from China’s trade partners, with Mr O’Malley yesterday confirming the steelmaker will look to include China in a recent anti-dumping investigation into hot-rolled coil markets.

”It [China] wasn’t [included] on the HRC complaint but that’s something we’ll have to revisit,” he said.

“I do think it’s a trend that we just need to be concerned about and if you look to the last quarter of this calendar year having an anti-dumping process out there to discourage unfair trade is an important thing for us to do.”

Mr O’Malley said aligning production with domestic demand would be critical for steelmakers everywhere, not just within China.

“As you go through the changes there is additional steel available to export but just to put it in context, Japan steel exports as much as China does,” he said. “This is not just a China-only story, this is a number of countries looking for new markets that ultimately may need to wind back on capacity.”

But Mr O’Malley said he was positive that BlueScope has positioned itself well for what he called the “new world order”.

“I think there are many countries that have too much capacity as we did and will have to wind back and I think perhaps we’ve done it earlier than others but we won’t be the last to do it,” he said. Australian iron ore exporters and coking coal producers have suffered massive price falls over the third quarter off the back of declining steel output and pressured margins.

Yancoal Australia managing director Murray Bailey said yesterday the outlook for coking coal would be tough as steel markets remained under pressure, forcing it to re-test investment plans. “We’re seeing some interesting behaviour from the Chinese steelmakers because of their high stocks,” he said. “We expect coal prices to remain both weak and volatile.”