At the global level, steel excess capacity increased to 640 million tonnes (Mt) in 2025: it is now exceeding the total OECD steel production by more than 200 Mt, and it is projected to continue rising steadily, reaching 745 Mt by 2028. Global steelmaking capacity has increased for four consecutive years, reaching a new high of 2 445 Mt in 2025, some of which has been geared towards exports. Regional developments have diverged significantly, however, with the OECD area suffering a contraction in capacity, while some non-OECD economies recorded solid growth during this period. India and Southeast Asia have been significant drivers of the Asian capacity expansion, supported by relatively strong demand growth and, in the case of Southeast Asia, inward foreign direct investment by Chinese steel firms. The Middle East has also been a significant source of new capacity additions. Current developments raise concerns of over-investment, adding to the severe oversupply situation that is already heightening trade tensions globally.
OECD Steel Outlook 2026
Abstract
The steel industry continues to expand globally, with the strong support of governments in many jurisdictions. Global steelmaking capacity has risen for five consecutive years, reaching a new record-high level of 2 445 million tonnes (Mt) in 2025, even as global steel demand contracted for the fourth year in a row. As a result, global excess capacity climbed to 640 Mt in 2025, exceeding total OECD steel production by more than 200 Mt. The excess capacity trend is expected to worsen, increasing steadily over the next three years to reach up to 745 Mt by 2028.
Most of the capacity expansion seen over the past few years has occurred outside of the OECD area, in aggregate, though some OECD Member countries have witnessed some capacity growth that has been offset by declines in others. Many emerging economies have concluded that they need a growing national steel industry to meet domestic demand and, in many cases, to become important global exporters of steel. Often, capacity expansions overshoot domestic steel demand, and the surplus is simply dumped on international markets. While governments embrace the necessity and value of open markets and competition, there is, at the same time, recognition that efficient plants worldwide are being hit by a surplus of steel flooding their markets, often sold by subsidised mills at prices far below their full cost of production.
The problem is not a new one. Back in the 1970s, overly optimistic long-term forecasts for steel demand attracted investment in new facilities worldwide. Then the first oil shock hit, even as new furnaces were being lit. Governments in many OECD Member countries intervened with schemes to address trade and adjustment problems, but steel trade relations were seriously strained. Since its establishment in 1978, the OECD Steel Committee has provided a venue to help ease tensions by bringing policymakers together to enhance transparency and explore ways to best address trade and adjustment problems. Over the years, members of the committee underwent structural reforms to rationalise, privatise and eliminate structural excess capacity in their steel industries. However, problems have re-emerged globally as capacity expansions have accelerated in many developing economies, exposing markets to structural oversupply again. The severity of the situation promoted the creation of the Global Forum on Steel Excess Capacity, which has focussed on enhancing transparency and seeking solutions to the crisis.
Global steelmaking capacity continues to expand, while capacity utilisation drifts lower
In 2025, global steelmaking capacity was 1.3% above the 2021 level (+31.1 Mt), reflecting growth in partner economies that was partly offset by a decline in capacity in the OECD area (Figure 3.1). With demand weakening worldwide, capacity utilisation rates continued their general decline, falling to a recent low of 76% in 2025 (Figure 3.2), well below rates considered sustainable for the steel industry. Further declines are forecast for 2026. The global capacity utilisation will remain low at around 74% until 2028, in light of strong capacity growth coupled with a weaker outlook for production.
Significant structural changes have occurred regionally, with Asia becoming more dominant in global steelmaking
Regional developments over the past five years underscore a persistent and fundamental shift in the global steelmaking landscape (Table 3.1). Between 2021 and 2025, OECD Member countries’ steelmaking capacity declined by 2.8 Mt (-0.4%), led by declines in Japan (-8.8 Mt, or -7.2%) and the United Kingdom (-4.8 Mt, or -39.7%). In contrast, partner economies increased their total capacity by 33.9 Mt (+1.9%), even as China reduced its capacity by 11 Mt (-1.0%) during the same period. This growth in other partner economies has been the principal driver of global capacity expansion.
Crude steelmaking capacity and global steel demand, 2000-2025, in million tonnes (Mt)
Note: Capacity data are in net terms (taking into account capacity additions and closures) and reflect information available up to December 2025. Demand refers to apparent domestic consumption of finished steel products, as provided by the World Steel Association.
Source: OECD for steelmaking capacity and the World Steel Association for steel demand.
Crude steel production as a percentage of capacity, 2019-2025 and estimated 2026-2028
Note: Capacity data reflect information up to 2024.
Source: OECD for crude steelmaking capacity and World Steel Association for crude steel production.
In Asia, India was the main driver of capacity expansion during 2021-2025, adding 41.4 Mt of steelmaking capacity (+28.8%), while capacity in Association of Southeast Asian Nations (ASEAN) economies grew by 5.5 Mt (+6.9%). The Middle East remained the second-largest contributor, with capacity rising by 7.2 Mt (+8.1%) over the same period (Table 3.1).
In million tonnes
Note: The capacity data reflect information up to December 2025. "Europe" includes both OECD Members and partner economies in Europe, as well as Türkiye. Please see Annex C for detailed capacity data by individual economies. Figures for the European Union include all EU Member States. ASEAN: Association of Southeast Asian Nations; CIS: Commonwealth of Independent States.
Source: OECD Steel Secretariat.
Table 3.2 shows the expected future steelmaking capacity development by region up to 2028. When looking at future capacity additions, the OECD classifies investment projects as “underway” (and thus likely to be completed during the projection period) or “planned” (which are less certain but could still come on stream). Projects underway are those already under construction or for which equipment contracts have been awarded, and a major financial or state commitment has been made. Planned projects, on the other hand, are more uncertain because they are either at the feasibility or early planning stage, have not yet received financial or government support, or are not scheduled for completion at a specific date.
Information on announced investment projects indicates that 46.7 Mt of gross capacity additions are currently underway worldwide and are therefore projected to come on stream during the next three-year period (2026-2028). A further 92.1 Mt of capacity additions are currently in the planning stage for possible commissioning during the same period. If all the underway and planned projects come online, total additional capacity could, as mentioned earlier, reach as much as 138.8 Mt by 2028.
In million tonnes
Note: The capacity data reflect information up to December 2025. “Europe” includes both OECD Members and partner economies in Europe, as well as Türkiye. Figures for the European Union include all EU Member States. Estimates regarding steelmaking capacity in 2028 and expected percentage changes are based on gross additions only; as such, the actual capacity levels will be affected by closures that may occur during the period. ASEAN: Association of Southeast Asian Nations; CIS: Commonwealth of Independent States.
Source: OECD Steel Secretariat.
Examining regional capacity developments, Asia is projected to see significant increases in steelmaking capacity over the next three years, assuming all ongoing projects are realised and not offset by closures. The region currently has a total of 24.3 Mt (+1.5%) of capacity additions underway for commissioning in 2026-2028, with an additional 59.7 Mt (+5.1%) in the planning stage. China is expected to reverse its recent declines in capacity and lead the expansion list. India will continue to be a major factor, with the two countries together accounting for 83.8% of Asia’s steelmaking capacity additions.
Following Asia, the largest increases in capacity are projected for the regional aggregate of “Other Europe” (including Türkiye) and the Middle East. In “Other Europe”, Türkiye accounts for 78.8% of the planned capacity increase, which reflects in part the continuation of domestic demand growth enjoyed over the past decade. Prospects for the Middle East are uncertain due to current geopolitical tensions there.
In other regions, steelmaking capacity additions are projected to increase over the next three years as follows: an increase of 2.3 Mt (+2.0%) in the Commonwealth of Independent States (CIS) and Ukraine, 25.5 Mt (+9.1%) in Europe, 10.6 Mt (+6.4%) in North America, 0.4 Mt (+0.5%) in Latin America and 2.1 Mt (+32.1%) in Oceania. In Africa, there are currently no specific ongoing projects.
Figure 3.3 shows the potential gross capacity additions by region and production type from 2026 to 2028. Of the world total of 138.8 Mt of capacity currently underway or in the planning stages for completion over the next three years, basic oxygen furnace (BOF) projects account for 46% of the total, while electric arc furnace (EAF) projects account for 51% of the total. Significantly, China and India will continue to direct investment to integrated steel projects, while most investment elsewhere will add capacity through the installation of electric furnaces.
Potential gross steel capacity additions by region and production type, 2026-2028, in million tonnes (Mt)
Note: Capacity data include both underway and planned projects and do not account for possible closures that may occur during the period. BOF: Basic oxygen furnace; EAF: Electric arc furnace; CIS: Commonwealth of Independent States.
Source: OECD Steel Secretariat.
Capacity expansion is strong in parts of Asia
China
In 2021, the Chinese government introduced mandatory rules governing the replacement of outdated facilities with new plant and equipment (MIIT, 2021[1]). Motivated by concerns about overcapacity and the environmental impact of older production lines, the policy prohibited any net increase in steelmaking capacity. Companies were generally required to shut down more capacity than they built, following prescribed replacement ratios. The measures also aimed to encourage greater use of EAFs, strengthen environmental oversight, and impose stricter supervision of capacity-swap transactions.
The goal of reducing net capacity, however, proved elusive. A swapping mechanism requiring producers to link capacity additions to closures sometimes resulted in limited or no effective reductions as the facilities that were being closed often involved older, less efficient plant and equipment, which, in some cases, were operating at low levels, or not at all (Zhang, 2024[2]). The government therefore suspended the capacity-replacement mechanism in 2024, with the stated intention of strengthening the rules and aligning them more effectively with China’s evolving environmental and decarbonisation objectives (MIIT, 2024[3]).
The Ministry of Industry and Information Technology (MIIT) then developed a proposal for improving the policy measures, releasing it for public comment in October 2025 (MIIT, 2025[4]). The draft proposes tightening compliance, eliminating phantom capacity and better integrating the system with the country’s carbon-reduction agenda. The revisions would narrow eligibility for capacity that can be used as replacement (for example, by requiring proof of sustained operation), raise replacement ratios by unifying them at stricter levels, and introduce carbon performance incentives.
A central pillar of this policy is the mandate for a stringent 1.5:1 replacement ratio as a nationwide baseline for integrated steelmaking. The 1.5:1 replacement ratio requires steel producers to permanently retire and dismantle 1.5 units of existing, legally registered production capacity for every 1 unit of new capacity they intend to commission. In contrast, the replacement ratio for EAF is maintained at 1:1, which remains more lenient than the requirement for the integrated route.
Against this background, as discussed above, China could nevertheless retake the lead in capacity expansion worldwide through 2028, adding up to 38.6 Mt of crude steel capacity by 2028. The net effect of such expansion, however, will depend on the extent to which there are corresponding closures under the new policy currently under consideration.
India
Spurred by high levels of actual and projected infrastructure spending, the Indian steel industry is now the fastest-growing steel-producing nation in the world. The country added an average of more than 10 Mt of crude steel capacity per year during 2021-2025, with the upward trend expected to accelerate, resulting in a capacity of 191.3 Mt to 217.1 Mt by 2028. The 41.4 Mt increase in capacity during 2021-2025 exceeded the net increase in global steelmaking capacity by 10 Mt. India was the clear leader in net capacity increases, as the next largest net increases in capacity were less than 10 Mt.
Indian growth in steel production is strongly supported by the government, which in 2017 set a target of 300 Mt of capacity for 2030-2031, projecting that steel demand for finished products would be on the order of 230 Mt (a crude‑steel equivalent of 255 Mt) (Government of India, 2024[5]). Domestic steel demand has indeed been growing faster than capacity recently. In the process, India shifted from being a significant net steel exporter in recent years to a country where imports slightly exceeded exports in 2024 and 2025. The OECD’s projections suggest that if capacity reaches the government target by 2030, it will exceed demand in crude steel equivalent by approximately 90 Mt.
From a policy perspective, the government considers steel to be of strategic importance, which is reflected in the development of its National Steel Policy 2017 (Government of India, 2017[6]). While prices, production and investment decisions are left to producers, the government nevertheless plays a large role as a facilitator by creating a policy environment conducive to the development of the industry (Ministry of Steel, 2025[7]). It has done so in a number of ways, including by: 1) promoting Indian-made steel in government procurement; 2) launching a Production Linked Incentive scheme to boost specialty-steel production through a cash subsidy of 4-12% of the value of incremental increases in production (Ministry of Steel, 2021[8]); 3) tightening quality standards on imports; 4) promoting energy efficiency through the issuance of tradable energy-saving certificates to companies that exceeded mandated energy‑reduction targets (Bureau of Energy Efficiency, 2026[9]); 5) working to secure the availability of raw materials for the industry (Government of India, 2017[6]); and 6) actively promoting decarbonisation in the industry through a carbon-credit trading framework (Ministry of Steel, 2024[10]). Looking into the future, the prime minister has mentioned 2047 as a year when Indian steel production might reach 500 Mt (NEWKERALA, 2025[11]).
Southeast Asia
The South East Asia Iron and Steel Institute (SEAISI) has raised concerns about the mounting impact of the global excess capacity crisis on the ASEAN region. The pressure is intensified by regional expansion plans that significantly outpace projected steel demand, leaving the regional market increasingly vulnerable to disruptive shifts in steel trade flows.
Viet Nam and Indonesia have emerged as the primary drivers of capacity growth in the region, with annual capacity levels of 29.0 Mt and 23.8 Mt, respectively. In Viet Nam, the government announced a strategic plan for the industry in February 2026 under which the country would move toward full self-sufficiency over the next 25 years. Production would increase from its 2025 level of 24.7 Mt to 65-70 Mt of crude steel per year by 2050, with an interim goal of 33-36 Mt per year by 2035 (ASEMConnect, 2026[12]). The roadmap specifically prioritises the domestic production of high-value segments where the country currently remains heavily dependent on overseas supply. This includes specialised steel for the automotive, shipbuilding, energy, and rail infrastructure sectors. By replacing these high-end imports with indigenous production, the strategy seeks not only to secure domestic supply but also to establish a competitive base for high-value exports to global markets (Kallanish, 2026[13]).
Middle East
The Middle East has been the second-fastest-growing region after Asia in terms of both volume and growth rate of steelmaking capacity. The Islamic Republic of Iran (hereafter “Iran”) accounted for 62% of total steelmaking capacity in the Middle East in 2025 and led regional expansion. Its situation has, however, been significantly affected by the conflict in the region, which could well affect nearby countries and beyond. The volume of capacity additions until 2028 are projected to significantly outpace demand in the region, although significant uncertainties surround these forecasts due to the conflict.
Chinese investors will continue to take a leading role in financing foreign-integrated steelmaking facilities
Figure 3.4 illustrates the breakdown of cross-border investments for projects scheduled to start from 2025 and beyond. Cross-border investments account for approximately 21% of the capacity associated with all future investments, with more than half involving either a Chinese company alone or joint ventures with Chinese companies. These investments also need to be seen in the context of China’s broader capacity relocation practices, whereby domestic capacity reductions have been accompanied by financial support for new steelmaking capacity overseas, including through Chinese capital, equipment, parts and materials (State Council, 2015[14]). Regionally, over 93% of these investments are concentrated in Asia, with the remainder directed towards Africa. In terms of equipment types, about 86% of Chinese investments (the average of both entirely Chinese and joint ventures) focus on BOF plants.
Among cross-border investments involving Chinese companies, 70% include at least one state-owned enterprise (SOE). The average capacity per project for SOE-involved investments is 3.3 Mt higher than the 2.4 Mt average for private-owned enterprises (POE), indicating a tendency for larger-scale investments by SOEs (Figure 3.5).
Cross-border investments scheduled to start operation in 2025 and beyond, by investing economy and technology, in % (left) and by host region, in million tonnes (Mt) (right)
Note: BOF: Basic oxygen furnace; EAF: Electric arc furnace; JV: Joint ventures; ASEAN: Association of Southeast Asian Nations.
Source: OECD Steel Secretariat.
Breakdown of cross-border investments in 2025 and beyond, by equipment type for Chinese SOEs and POEs, in million tonnes (Mt)
Note: BOF: Basic oxygen furnace; EAF: Electric arc furnace; SOE: State-owned enterprises; POE: Private-owned enterprises.
Source: OECD Steel Secretariat.
Blast furnaces entail long-term commitments and must be run continuously to be viable
Trends in pig iron capacity from blast furnaces (BFs) indicate that much of the structural excess capacity identified in the crude steel sector remains entrenched in the upstream ironmaking segment. In 2024, global pig iron production from BFs reached approximately 1.3 billion tonnes, approximately ten times that of direct reduced iron (DRI), which stood at 145.6 Mt. China, the biggest source of steel produced in integrated steelworks, accounted for approximately 70% of global production.
While the overall growth rate of pig iron capacity is modest, this headline figure masks starkly contrasting developments across regions. Currently, advanced economies are planning BF closures due to ageing assets or transitions in steelmaking processes. Conversely, emerging economies, particularly in Asia, are commissioning and expanding large-scale, state-of-the-art BFs. This pattern, in which capacity reductions in certain regions are offset by massive new additions elsewhere, keeps global pig iron capacity elevated, complicating efforts to address global excess capacity.
The commissioning of such large-scale BF necessitates significant initial investment and a lifecycle often spanning several decades to achieve economic viability, creating a profound “lock-in effect”. This structural rigidity and the need to operate a blast furnace continuously between furnace relines generate persistent supply-side pressures that are decoupled from market signals.
Global blast furnace capacity, 2025 and beyond (2026 onwards), in million tonnes (Mt)
Note: Data reflect new capacity developments announced during the second half of 2025.
Source: OECD Steel Secretariat.
The market for high-quality direct reduced iron is tight, further complicated by questions over the continuity of supply
Global DRI production has nearly doubled over the past decade, reaching 145.6 Mt in 2024. The market is highly concentrated, with India and Iran accounting for over 70% of global output. Looking ahead, Iran was advancing projects to add 11.8 Mt of new DRI capacity, representing approximately 40% of the total projected global expansion, but the conflict in the Middle East is likely to significantly change these prospects.
The outlook for the DRI market is broadly positive, with demand rising in line with the expansion of EAF steelmaking and the decarbonisation pressures that are pushing producers toward DRI-based metallics (S&P Global, 2026[15]). On the supply side, the Middle East is the world’s largest DRI market, and a major source of exports. Geopolitical developments, and existing sanctions on Iran, however, are creating uncertainty about the continuity of supply, cost and further investment in the sector.
Next to scrap-based EAF steel production, DRI also provides a foundation for low-emission steelmaking when fed with hydrogen (H2). However, a number of planned low-emission projects have been recently cancelled or postponed due to adverse market conditions and weak demand stemming from the current excess capacity crisis. OECD research shows that in the first half of 2025, several projects, corresponding to 19% of the total expected low-emission pipeline by 2027, were put on hold amid global excess capacity, high energy prices and regulatory uncertainty (OECD, forthcoming[16]). Suspended projects concerned BF-BOF to EAF conversions (27%), H2-DRI projects (18%), as well as carbon capture, utilisation and storage projects (15%). The continuous growth of government-supported steelmaking capacity, therefore, not only exacerbates ongoing market challenges but also hampers the deployment of low-emission capacity, while also putting newly built emission-intensive capacities at risk of becoming stranded assets in the not-too-distant future.
References
[12] ASEMConnect (2026), Prime Minister of Vietnam on approval of scheme for development of steel industry till 2030, orientation toward 2050, https://asemconnectvietnam.gov.vn/law.aspx?ZID1=10&ID1=2&MaVB_id=3114.
[9] Bureau of Energy Efficiency (2026), Perform Achieve Trade (PAT), https://beeindia.gov.in/show_content.php?lang=1&level=1&ls_id=185&lid=72.
[5] Government of India (2024), Ministry of Steel, https://www.pib.gov.in/PressReleaseIframePage.aspx?PRID=2082773®=3&lang=2 (accessed on 12 April 2026).
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[13] Kallanish (2026), Vietnam targets steel capacity growth, structural upgrades, https://www.kallanish.com/en/news/steel/market-reports/article-details/vietnam-targets-steel-capacity-growth-structural-upgrades-0226/ (accessed on 26 February 2026).
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