A new report by international accounting firm Ernst and Young said that the world's steelmakers must cut output and restructure in order to remain profitable.

The report said that the industry is beset by an oversupply of steel and falling prices, forcing producers such as Australia's BlueScope Steel to cut production and jobs.

Mr Mike Elliott, Ernst and Young's head of global mining and metals, said that oversupply is putting pressure on company profits. He added that "We've seen this overcapacity that has been there for a quite a number of years now, certainly in the lead up to and then since the global financial crisis. And this is really putting a lot of pressure on all global steelmakers, and much of the margins that most are making are razor thin."

Mr Elliott believes any worsening of the debt woes plaguing Europe will hit the steel industry hard. He said that "If the world does move towards a form of financial crisis then the steel sector has been particularly hard hit over the last few years because of the loss making or very, very narrow margins."

He said that "And in many places the world has been highly dependent on varying levels of government assistance. That government assistance is going to be under greater pressure."

(Sourced from www.abc.net.au)