Unrelenting Capacity Amid Demand Doldrums

The global steel industry is entering 2025 under immense strain. According to the OECD, planned steelmaking expansions could add 165 million metric tons of capacity between 2025 and 2027, an increase of 6.7%. However, global demand is expected to grow by only 0.7% annually through 2030. This imbalance could push capacity utilisation down to nearly 70%, a threshold below which many steelmakers struggle to remain profitable. Most of this new capacity, around 58%, will come from Asian countries, predominantly China and India, worsening an already precarious overcapacity crisis.

China's Gargantuan Footprint & Subsidy Distortions

China remains the juggernaut of the steel sector, but its economic model has raised alarm. Chinese government subsidies are 10 times higher than those in OECD nations, encouraging the continuation of uneconomic operations and leading to investment in facilities that otherwise wouldn't survive market forces. Subsidies include below-market loans, discounted energy rates, tax breaks, and direct grants. This overwhelming support has distorted international competition, sustained inefficient plants, and further deepened global capacity woes.

Steel Floodgates: Export Surge Triggers Trade Shields

China’s steel exports hit a record 118 million metric tons in 2024, flooding global markets with cheap products. This deluge led to 81 new antidumping investigations by 19 countries, nearly five times the number in 2023. Most of these actions targeted Asian producers, with China alone accounting for over one-third. Many countries, including major steel importers, have responded with sector-wide tariff hikes and stricter import controls. This growing protectionist stance is a direct reaction to market distortions caused by subsidised and redirected Chinese exports.

Circumvention Conundrum: Rerouting Steel to Evade Duties

Steel exporters have become increasingly adept at dodging trade measures. Producers often reroute exports through third countries or alter product forms to bypass specific tariffs. OECD analysis from 2013 to 2020 found that 21.5 million metric tons ($14.4 billion) of steel trade involved suspicious circumvention. In response, several governments are tightening customs scrutiny and introducing stricter origin-verification laws. Yet, enforcement remains inconsistent, and global steel trade continues to see large volumes of rerouted material undermining policy intentions.

Decarbonisation Dreams Dashed by Excess & Emissions

The steel industry is one of the largest industrial emitters of CO₂. Yet efforts to decarbonise are hamstrung by overcapacity and thin margins. Over 40% of the new 165 million metric tons capacity planned for 2025–2027 will use the highly polluting blast furnace/basic oxygen furnace method. Cleaner technologies like electric arc furnaces or hydrogen-based direct reduction require major capital investment, stable profitability, and access to renewable energy and high-grade iron ores, conditions not widely met, particularly in emerging economies.

The Future: Hydrogen, High-Grade Ores & Geographic Shifts

Many steel producers have signalled intentions to invest in low-emission alternatives. Around 74% of companies plan to implement carbon capture, utilisation, and storage at their BF/BOF facilities. Another 52% intend to adopt hydrogen-based ironmaking for electric furnaces. These cleaner methods depend on access to high-purity ores and abundant renewable power. As such, steel production may shift geographically, favoring nations with rich mineral deposits and sustainable energy grids. This rebalancing could also reshape global trade patterns for both raw materials and finished steel.

Collaborative Compass: Global Solutions for a Localised Crisis

Amid fractured markets, a coordinated international response remains elusive but essential. The OECD urges greater co-operation among governments and industry bodies to share best practices, data, and regulatory tools. Tackling excess capacity, aligning climate goals, and enforcing fair trade rules require joint global frameworks. Without collective action, isolated policies risk escalation of trade conflicts and further destabilisation of an already fragile steel ecosystem. Only with global commitment can a level playing field be restored for this foundational industry.

Key Takeaways:

• The steel industry faces a 165 million metric ton capacity surge from 2025 to 2027, despite sluggish 0.7% annual demand growth.

• China’s subsidies and record 118 million metric ton exports in 2024 have triggered a sharp rise in global trade actions.

• Decarbonisation efforts remain stalled due to thin margins, excess capacity, and reliance on high-emission production technologies.