Global steel production capacity continues to increase despite weak demand, which threatens to cause prices to fall and competition to deteriorate.
Steel is a critical material for a wide range of industries, from construction and manufacturing to electric vehicles and data centers.
The OECD says government subsidies are a major driver of global surplus capacity, with most of the increase in steel production capacity over the past two decades occurring outside OECD countries, often with government support.
According to OECD’, in 2024, the average Chinese steel firm received subsidies equivalent to 15 times the subsidies received by producers elsewhere based on total assets.
At the same time, Chinese steel producers exported a record 131 million tons of steel in 2025’te; This is according to 2020’ %With an increase of 153, the European Union was more than ’'s total steel production that year.
The warning comes at a time when OECD’ expects global steel surplus capacity to increase from 640 million tons in 2025’ to 745 million tons in 2028’, as steel production capacity continues to increase much faster than demand.
Global steel demand is expected to increase by only 34 million tons between 2026 and 2028, while producers plan to add up to 139 million tons of new capacity in the same period.
China’in is expected to play an important role in this expansion, with plans to increase its steel production capacity to 38.6 million tons by 2028; This is the largest increase planned by any country.
If these projects continue, the OECD says the global overcapacity will exceed the current annual steel production of all OECD countries by almost 320 million tons, underlining the extent of the imbalance the sector faces.
Policymakers fear that permanent surplus capacity could undermine the profitability and long-term viability of local steel industries, increasing dependence on imports of a material deemed strategically important for construction, defense, energy infrastructure and manufacturing.
Speaking at the OECD Council of Ministers Meeting, OECD Secretary General Mathias Cormann said: “We need to address the root causes, including harmful subsidies and other non-market applications. This means stronger international cooperation and an equal playing field for steel producers everywhere.”
The OECD also found evidence that some exporters have overcome trade barriers by sending semi-finished steel to Southeast Asia ’ for processing before re-exporting it to OECD markets. China’in exports semi-finished products to the region %The 300’ increase points to a possible route to avoid customs duties and anti-dumping measures.
Energy costs and trade tensions increase pressures
At the same time, the sector is grappling with rising energy costs in connection with the Iran war. Energy, steel production costs %It can make up 40’, making the industry especially vulnerable to high prices.
The report also highlights the increasing pressure on the supply of raw materials. No country producing steel is completely self-sufficient in the inputs required for steel production; Export restrictions on basic materials are increasing worldwide. Forty-two countries are now restricting the export of steel scrap, an important raw material for the production of electric arc furnaces.
Europe is particularly vulnerable to these pressures. The region's steel producers often face higher labor and energy costs, as well as stricter environmental standards, compared to many international competitors.
As a result, European producers are generally less able to withstand long-term low prices compared to their competitors, who enjoy 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 weaken.
