Global steel overcapacity to rise despite weak demand, OECD warns
Global steelmaking capacity continues to expand despite weak demand, threatening to push prices lower and distort competition.
Steel is a critical material for a wide range of industries, from construction and manufacturing to electric vehicles and data centres.
The OECD says government subsidies are a major driver of global overcapacity, with much of the increase in steelmaking capacity over the past two decades taking place outside OECD countries, often with state support.
In 2024, the median Chinese steel firm received subsidies equivalent to 15 times those received by producers elsewhere, relative to total assets, according to the OECD.
At the same time, Chinese steelmakers exported a record 131 million tonnes of steel in 2025, a 153% increase from 2020 and more than the European Union's total steel production that year.
The warning comes as the OECD expects global steel overcapacity to rise from 640 million tonnes in 2025 to 745 million tonnes by 2028, as steelmaking capacity continues to grow far faster than demand.
While global steel demand is expected to increase by just 34 million tonnes between 2026 and 2028, producers are planning to add up to 139 million tonnes of new capacity over the same period.
China is expected to play a major role in that expansion, with plans to add up to 38.6 million tonnes of steelmaking capacity by 2028 – the largest increase planned by any country.
If those projects go ahead, the OECD says global excess capacity would exceed the current annual steel production of all OECD countries by almost 320 million tonnes, underlining the scale of the imbalance facing the industry.
Policymakers fear that persistent overcapacity could undermine the profitability and long-term viability of domestic steel industries, increasing dependence on imports of a material regarded as strategically important for construction, defence, energy infrastructure and manufacturing.
Speaking at the OECD Ministerial Council Meeting, OECD Secretary-General Mathias Cormann said: "We need to tackle the root causes, including harmful subsidies and other non-market practices. That means stronger international co-operation and a level playing field for steel producers everywhere."
The OECD also found evidence that some exporters may be circumventing trade barriers by shipping semi-finished steel to Southeast Asia for processing before re-exporting it to OECD markets. A 300% rise in Chinese semi-finished steel exports to the region points to a possible route for avoiding tariffs and anti-dumping measures.
Energy costs and trade tensions add to pressures
At the same time, the industry is also grappling with rising energy costs linked to the Iran war. Energy can account for up to 40% of steel production costs, making the sector particularly vulnerable to higher prices.
The report also highlights growing pressure on raw material supplies. No steel-producing country is fully self-sufficient in the inputs required for steelmaking, while export restrictions on key materials are increasing worldwide. Forty-two countries now restrict exports of steel scrap, a crucial raw material for electric arc furnace production.
Europe is particularly exposed to these pressures. The region's steelmakers typically face higher labour and energy costs, as well as stricter environmental standards, than many international competitors.
As a result, European producers are often less able to withstand prolonged periods of low prices than rivals benefiting from lower costs or stronger government support.
"If current trends continue, the long-term viability of the sector and the economic security of many countries will be undermined," the OECD warned.
