overcapacity

[oh-ver-kuh-pas-i-tee]
noun, plural overcapacities.
capacity beyond what is normal, allowed, or desirable.

Origin:
1925–30; over- + capacity

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World English Dictionary
overcapacity (ˌəʊvəkəˈpæsɪtɪ)
 
n
the situation in which an industry or business cannot sell as much as it produces

Collins English Dictionary - Complete & Unabridged 10th Edition
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Example sentences
Big tumors, or several tumors dispersed throughout the body, present an
  overcapacity problem.
We would have reduced some of the overcapacity that plagues the global industry.
According to the cruise line executive, another problem is overcapacity.
The domestic oil market is being rocked by declining demand and overcapacity
  issues.
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