As a result of the crisis, the installation of new capacity has slowed down markedly and that would prevent overcapacity and prices from declining, observers here said.

With major steel projects already postponed or cancelled, capacity build-up between 1997 and 2000 will be about 37 per cent less than what had been forecast.Only the United States has continued to install new capacity backed by strong demand and buoyant markets.

The Indian steel industry has been facing weakening demand with declining prices since 1996. And fears of over-capacity, resulting from new ambitious projects, caused a number of them being postponed and delayed indefinitely in 1997, the report said.

These, the reports notes, include TISCO's Gopalpur project, Nagarjuna's project and projects of Mukand and Rashtriya IspatNigam Ltd.

The annual steel review of the United Nations Economic Commission for Europe estimates that total new crude steel making capacity in North America and Asia should reach maximum of 56 million tonnes, including nine million tonnes in North America and 47 million tonnes in Asia, which is 32.7 million tonnes less than previously forecast.

Last year's forecast was for a huge 88.7 million tonnes increase in North America and Asia over a four year period, from 1996-1999.

But downturn in the economies in Asia has changed the whole scenario.In South Korea, Hundai has cancelled a plan to construct a greenfield integrated steelwork with a capacity of six million tonnes in handong.

In Thailand, Thai special steel industry suspended its plan for the new steelworks based on the blast furnace with a capacity of three million tonnes. The Sahabiria group's expansion plan to construct a direct reduced iron plant and a hot strip mill with a capacity of two million tonnes was also suspended. In Malaysia,government cancelled its plan to construct three million blast furnace greenfield steelworks.

In Indonesia, the report says, the first thin slab continuous caster which is to be installed by the joint venture between Krakatau and Posco will be delayed.

The United States, on the other hand, has continued to install new facilities on the back of good steel demand.