Escalating Steel Excess Capacity Disrupts Global Market DynamicsAccording to the OECD Steel Outlook 2025, global steel excess capacity is forecast to swell to 721 million metric tons by 2027. This figure outpaces the combined steel production of all OECD member countries in 2024 by approximately 290 mmt, marking a substantial oversupply in the industry. The persistent expansion of steel production capacity, despite sluggish growth in global steel demand, creates market distortions. This imbalance leads to price volatility, unfair competition, and threatens the viability of many steel-producing economies.

Government Policies & Subsidies Distort the Steel LandscapeThe report highlights that policy interventions, particularly in non-OECD countries, are significant contributors to excess capacity. Many governments continue to provide subsidies, protective tariffs, and other financial supports that encourage steel producers to expand capacity beyond market needs. China, in particular, stands out with subsidisation rates that are about ten times higher than those observed in OECD countries. This intense support fuels overproduction and aggressive export strategies, further destabilising global steel markets.

China’s Dominant Role Exacerbates Global Steel ImbalancesChina’s steel exports surged to an unprecedented 118 million metric tons in 2024, more than double the volume recorded in 2020. This export boom has severely disrupted steel markets, especially in OECD countries. The influx of low-cost steel has forced many OECD steel producers to contend with unfair competition, leading to a sharp rise in trade defense measures. Anti-dumping tariffs and safeguards have increased fivefold since 2023, reflecting the escalating tension between trading partners and the urgency to protect domestic industries.

Employment & Profitability Take a Heavy TollThe impact of excess capacity extends beyond market figures to tangible human costs. Between 2013 and 2021, the Global Forum on Steel Excess Capacity estimates that OECD countries lost approximately 113,000 steel industry jobs. The erosion of employment correlates with sharply declining profitability for steel firms, which now operate near historic low margins. This economic strain threatens the future of steel manufacturing hubs and the livelihoods dependent on them.

Environmental Consequences Threaten Decarbonisation CommitmentsIn addition to economic challenges, the excess capacity surge jeopardises environmental progress. The OECD report warns that roughly 40% of new steel capacity planned from 2025 to 2027 will rely on traditional blast furnace/basic oxygen furnace processes. These methods are among the most carbon-intensive in steel production, emitting large volumes of CO₂. Continued reliance on these outdated technologies undermines efforts to transition to low-carbon steelmaking, complicating global climate commitments under agreements such as the Paris Accord.

OECD Secretary-General Advocates Urgent Structural ReformsMathias Cormann, Secretary-General of the OECD, stresses the urgency of reforming the steel sector to counter excess capacity and its repercussions. He calls for governments to eliminate market-distorting subsidies and supports that fuel overproduction. Cormann emphasizes that evidence-based international dialogue and cooperation are essential to restore fair competition and ensure a more efficient, sustainable steel industry capable of meeting future economic and environmental demands.

Targeted International Actions Recommended to Restore BalanceThe OECD outlines three key policy areas to tackle the crisis: structural reforms to remove subsidies and other market distortions; enhanced transparency and disclosure of government support and capacity expansions to enable coordinated international responses; and increased global cooperation to accelerate the development and deployment of low-carbon steel technologies. Such coordinated efforts are critical to phasing out inefficient production and fostering a steel industry aligned with net-zero carbon goals.

Broader Supply Chain & Global Economic ImplicationsThe repercussions of excess steel capacity ripple through numerous manufacturing sectors reliant on stable steel supplies. Volatility in steel availability and pricing disrupts supply chains, affecting industries from automotive to construction worldwide. The OECD underscores the need for harmonized policy frameworks to mitigate these risks, safeguard employment, and facilitate a green transition in steel production. Without swift and coordinated action, global economic stability and environmental ambitions face significant jeopardy.

Key Takeaways

• Global steel excess capacity is projected to reach 721 million metric tons by 2027, exceeding OECD countries’ 2024 production by 290 million metric tons.

• China’s steel subsidisation is nearly 10 times higher than OECD averages, with exports hitting 118 million metric tons in 2024, disrupting global markets and sparking trade defenses.

• Approximately 40% of new steel capacity from 2025-2027 will use emission-intensive blast furnace/basic oxygen furnace methods, risking decarbonisation commitments.