The steel crisis is deepening. Subsidies and other non-market policies and practices, the root causes of the current problems, continue to expand, driven primarily by countries outside the OECD area. The median subsidisation rate for Chinese steel firms has almost doubled since 2019, reaching a level 15 times that of OECD counterparts in 2024. The resulting surge in excess capacity is flooding international markets with dumped and subsidised exports that are also benefitting from other government supports; the non-market-driven exports have driven steel prices, weakened supply chains and compromised the economic security of OECD Member countries, despite increased trade enforcement. Compounding these pressures, conflicts in the Middle East are pushing up energy costs and disrupting the flow of raw materials and finished products, hitting an already fragile and energy-intensive industry hard. Co-ordinated international action is required to address the structural issues and impact.
OECD Steel Outlook 2026
Abstract
The excess capacity crisis in the steel industry has deepened. Global steelmaking capacity has expanded steadily even as demand has contracted, pushing the capacity utilisation rate well below sustainable levels. Excess capacity is estimated to have reached 640 million tonnes (Mt) in 2025 and is projected to reach 745 Mt by 2028, as demand grows by a mere 34 Mt while capacity expands by up to 139 Mt during 2026-2028 (Figure 1.1). If realised, global excess capacity in 2028 would exceed current OECD steel production by almost 320 Mt.
Crude steel capacity and demand, 2019-2025 and estimated 2026-2028, in million tonnes (Mt)
Note: Steelmaking capacity and demand are measured in terms of crude steel. The capacity forecasts are based on announced projects underway and planned.
Source: OECD for capacity and all estimates and forecasts of capacity and demand. Demand for 2019-2023 is based on World Steel Association data, and for 2024-2028 on OECD calculations.
Excess capacity is putting pressure on international markets, driving prices down as producers, particularly in China, seek to maintain revenues by exporting surplus steel to foreign markets. This is displacing production in importing countries and undermining the viability of market-oriented steel industries worldwide. OECD Member country producers have seen competitiveness eroded by surges in dumped and subsidised imports, and their positions as exporters of high-quality products have been simultaneously weakened, despite increasing trade actions. If current trends continue, the long-term viability of the sector and the national economic security of many countries will be undermined.
Most of the world’s excess capacity sits in China, whose share of the global capacity/demand gap increased to 54% of the world total in the third quarter of 2025 (GFSEC, 2026[1]). As domestic demand stagnated due to slowdowns in infrastructure spending, Chinese producers redirected output to foreign markets to compensate for lost domestic sales. Steel exports from China have exploded as a result, rising to a record 131 Mt in 2025, up 153% since 2020 and exceeding the total steel production of the European Union in 2025 (Figure 1.2). While some countries welcomed the cheaper steel, others responded by launching new antidumping (AD) investigations and other trade remedy actions to address unfairly traded imports. Some 27 new cases were initiated against China in 2025, representing more than one-third of all antidumping and countervailing duty (CVD) cases filed globally that year.
Total steel exports by region, 2019-2025, in Mt (left); exports as a share of production, in % (right)
Note: Europe’s exports exclude EU27 intra-trade and Asia’s exports exclude ASEAN intra-trade.
Source: OECD based on data from the Iron and Steel Statistics Bureau (ISSB), the United Nations Comtrade Database and the World Steel Association.
Trade actions on steel are rising and spreading globally. In addition to AD/CVD measures targeting narrowly defined products, trade actions have expanded to cover a broad range of steel products and trading partners. However, their effectiveness is being hampered by a growing circumvention problem, particularly in the case of AD/CVD measures, in which exporters reroute shipments through less-affected countries, shift to uncovered products, or misrepresent products to evade measures in place. New evasion methods continue to emerge, highlighting the urgent need to strengthen import monitoring, trade enforcement and anti-circumvention tools. Trade actions have also triggered a deflection effect, with excess-capacity-driven exports redirected to some OECD Member countries with lower levels of trade enforcement or less developed trade remedy frameworks, highlighting the need to strengthen monitoring systems
Looking ahead, members of the Global Forum on Steel Excess Capacity (GFSEC) are developing a comprehensive framework for joint action to address the impacts of pervasive non-market policies and practices on world steel markets (GFSEC, 2025[2]).
Subsidies and other government support measures have contributed strongly to excess capacity both within countries and globally. Such support leads to capacity expansions that are not market-driven, keep inefficient and consistently loss-making plants in operation, and confer competitive advantages on recipient firms that distort the playing field for others. The effects are long-lasting: subsidies used to construct new capacity will continue to injure market-oriented competitors for many decades, given the typical lifespan of a steel plant.
When firms compete on a level playing field, market share reflects genuine efficiency and cost advantages. When subsidised firms enjoy preferential support, however, unsubsidised producers are structurally disadvantaged and destined to lose ground. Recent OECD analysis provides empirical evidence of how subsidies weaken market signals and distort competition in the steel sector (OECD, forthcoming[3]), finding that the higher the level of subsidisation, the weaker the link between a firm’s market share and indicators such as profitability, cost efficiency, capacity utilisation and debt level.
Subsidies lower production costs, enabling recipients to undercut competitors on price. Pervasive subsidisation signals to unsubsidised competitors and potential market entrants that future margins will be thin, reducing their incentive to modernise, expand capacity, or even enter the market at all. Subsidised firms may further benefit from preferential access to public procurement and other demand-side measures, diverting steel orders their way regardless of their underlying competitiveness. The preferential treatment sometimes has an important international component, whereby, for example, China provides aid for infrastructure projects in Africa and Southeast Asia, and the Chinese firms involved in the projects source steel directly from Chinese producers.
Long-lasting solutions to the excess capacity problem must therefore address the subsidies and other non-market policies and practices that prevent market forces from driving outcomes in the global steel sector. Unless constrained by subsidy providers themselves or disincentivised through measures taken by trading partners, market-distorting subsidies will continue to fuel an already unsustainable excess capacity problem. They lock-in high-cost capacity, crowd out more efficient producers, erode economy-wide welfare, distort trade and give rise to trade frictions. They also result in further geographical concentration of steel-producing and manufacturing activities, with concomitant risks for economic security and the resilience of supply chains.
Pervasive subsidisation in non-market economies is also slowing the transition to low-emission steel production (OECD, forthcoming[4]). By keeping emission-intensive and inefficient plants operating, subsidies hinder the closure of emission-intensive assets. The global excess capacity challenge has already led to the postponement of several low-emission projects worldwide, and excess capacity further impairs companies' ability to invest in low-emission technologies at commercial scale, squeezing internal cash generation and raising borrowing costs.
Subsidies and other market-distorting support continue to increase, mainly outside of the OECD area. In China, the typical (median) steel firm now receives subsidies in the form of grants, tax concessions and below-market borrowings 15 times higher relative to its asset size than a typical firm elsewhere, up from ten times more in recent years (Figure 1.3). The country’s steel subsidy rate has nearly doubled since 2019. Without market-based structural reforms, this level of support will continue to sustain excess capacity many years to come.
In 2025, Chinese support measures were dominated by 59 new provincial and municipal subsidy programmes to support the domestic steel industry (OECD, forthcoming[5]), encompassing grants and preferential finance. Three categories of potentially distortive measures stand out. The first ties public support directly to realised production volumes or sales performance, reducing firms’ marginal operating costs, encouraging continued output, and postponing the closure of marginal facilities. The second comprises large, policy-driven preferential credit programmes extended to incumbent steel producers without explicit capacity-reduction requirements. The third distorts trade directly, with several provinces embedding export promotion within broader industrial upgrading frameworks that combine cost-reduction instruments with market-access support, in several cases explicitly linking support to export competitiveness, potentially fuelling overproduction and prolonging the life of uncompetitive facilities.
Subsidy divided by asset, median, 2006-2024
Note: Grants, below-market borrowing and tax concessions of the typical (median) steel firm as a share of the firm’s assets.
Source: OECD MAGIC database.
Government support to the steel sector has become increasingly prominent in regions where capacity is expanding rapidly, including in the Middle East and North Africa (MENA) and the Association of Southeast Asian Nations (ASEAN) (OECD, 2025[6]). Updated data show that steel producers in the MENA region continue to benefit from a wide range of subsidies, reflecting the strategic role envisioned for the sector in most of the region’s national industrial development plans (OECD, 2025[7]). These include energy subsidies for electricity and natural gas, preferential treatment of state-owned enterprises (SOEs), preferential financing, procurement-related support, and fiscal and regulatory incentives. Some countries in the region additionally subsidise other steel inputs and provide strategic investment programmes, industrial zones and state-directed joint ventures. Some of the measures also foster downstream integration with domestic consuming industries, supporting demand for the steel supplied by local producers. OECD research indicates that while energy subsidies remain the most significant source of market distortions, the cumulative effect of all these measures is to sustain steel production well beyond what market demand would support, with spillover effects in international steel markets. These domestic support measures are increasingly compounded by cross-border investment. Approximately one-fifth of future global capacity investment involves state-sponsored cross-border investments, with more than half involving Chinese companies, often in joint ventures with SOE participation. Around 86% of these Chinese-linked investments are in higher-emission integrated facilities, with the bulk concentrated in Asia.
The root cause of the crisis is the persistence of non-market policies and practices in many source economies. Subsidies distort costs and erode the competitiveness of market-oriented producers; moreover, capacity expansion divorced from domestic demand transmits surplus production onto world markets. Both dynamics operate independently and both require source-country structural reform. Trade tools deployed by importing countries are enforcement responses to dumping and subsidisation, but they treat consequences rather than causes.
Trade actions to address the impacts of the current crisis are increasing globally (OECD, forthcoming[8]). They include trade remedies, notably AD/CVD actions targeting specific products and countries, as well as wider measures covering broad ranges of steel products and trading partners, including actions to address serious injury from import surges and to protect national security, including economic security. Narrowly targeted AD and CVD measures are effective at addressing specific instances of unfair trade practices but are neither designed nor adequate to address the dramatic effects of global excess capacity on world steel markets, nor can they address the effects of dumped and subsidised steel on downstream sectors (e.g. shipbuilding, cars and heavy machinery).
The number of active steel AD/CVD measures initiated since 2016 climbed to 395 in 2025, with 75 new investigations launched during the year, slightly below 2024 but reflecting a sustained, high level of enforcement activity. China remained the primary target, accounting for 27 of the new cases. Eighteen countries initiated cases, led by Canada with 20 and Brazil with 9. Japan also joined the group of petitioners, launching investigations against China, Chinese Taipei and Korea.
While investigations remain time-consuming, processing times have been shortening: the average duration between initiation and imposition of provisional duties fell from 200 to 144 days in 2025. However, the effectiveness of these actions is being increasingly hampered by trade circumvention. Previous OECD analysis found that nearly one-fifth of steel products subject to AD/CVD measures resulted in trade flow shifts strongly indicative of rerouting to evade duties (OECD, 2022[9]), and the latest OECD analysis confirms that circumvention remains prevalent in global markets (OECD, forthcoming[10]).
Drawing on a new dataset covering over 260 product- and country-level cases, the analysis shows that following AD/CVD investigations imposed by OECD Member countries against China in 2023 and 2024, OECD imports from China of the subject products declined as expected. However, in 88 cases, Chinese exports of the same products to ASEAN countries increased, and in 51 of those cases, exports of identical products from ASEAN countries to OECD markets subsequently increased. The most significant shifts were observed for hot-rolled plates and hot-rolled wide coils. Reinforcing this pattern, China’s semi-finished steel exports to Southeast Asia surged by 300% in 2025, potentially providing the raw material for downstream rolled products that were subsequently exported by ASEAN countries to OECD markets.
These suspicious trade patterns illustrate how transhipment through third countries actively undermines targeted trade measures, even though such practices represent only one of many channels through which excess steel exerts a global impact (see Figure 1.4).
With 3 500 grades of steel on the market in a wide range of shapes and sizes, there are also plentiful opportunities to make minor product modifications that place exports outside the scope of AD and CVD orders. This is a key reason why broader, more sweeping trade measures are proving more effective at addressing the effect of excess capacity. A steel exporter facing an AD/CVD order on hot-dipped galvanised steel, for example, may export the base material to a third country where it is coated and re-exported as galvanised steel to the original target market, falling outside the scope of the original measure. Similarly, shipping a hot-rolled product to a third country for cold-rolling changes the four-digit tariff code entirely, circumventing the AD/CVD duty. Such forms of evasion are generally not possible under broader safeguard measures, which tend to cover most steel products from most countries.
Trade diversion presents a further challenge: steel driven out of one market through a trade action simply re-emerges in another. Trade measures, particularly AD and CVD, are intended as domestic measures to specifically address unfairly traded imports in a specific market that causes injury to the domestic industry; they are not designed to address distortions in other markets. New analysis shows that this effect has dampened the overall effectiveness of trade measures in keeping distorted steel out of OECD markets (OECD, forthcoming[8]). Chinese steel subject to antidumping measures by some OECD Steel Committee members was frequently redirected to other members with weaker enforcement regimes in place, shifting the burden rather than eliminating it.
Note: Global steel trade operates as an interconnected system, in which shocks in one market, including export surges driven by excess capacity, are transmitted across countries and value chains, reshaping trade patterns and altering competitive dynamics. Excess capacity affects trade flows through two sets of channels. The first, excess-capacity-induced channels, relates to excess capacity directly driving exports from the economy where it originates. The second, trade-policy-induced channels, arises from the trade policy responses that certain countries adopt to address the damage caused by low-priced steel imports. FDI: Foreign direct investment.
Source: OECD (2025[11]).
Indirect steel trade, where excess capacity steel targeted by trade measures becomes embedded in downstream products such as metal containers, fasteners, hand tools and certain types of machinery and equipment, presents a further circumvention challenge. Case studies show that trade actions on steel products, while reducing direct steel imports, are typically accompanied by increases in trade of downstream products, potentially offsetting the effectiveness of the original measures. Foreign direct investment (FDI) in steel plants abroad presents a related challenge: while FDI is a natural market development as firms seek footholds in growing markets, it can also serve as a channel to circumvent trade actions. By investing in steelmaking or processing facilities in third countries, firms can maintain market presence and shift exports between jurisdictions as trade actions evolve, or invest directly in a target market to secure continued access regardless of the measures in place.
China has been particularly active in investing abroad, with cross-border investments accounting for approximately 21% of all future steelmaking capacity investments globally, more than half of which involve either a Chinese company alone or joint ventures with Chinese companies, many of which are state-owned (OECD, forthcoming[12]). These investments are heavily concentrated in Asia, which accounts for over 93% of the total, with the remainder directed towards Africa. Notably, around 86% of Chinese cross-border investments focus on large blast-furnace-based plants, which typically operate at a greater scale and higher emissions intensity than electric arc furnace facilities, raising concerns about both additional capacity and the carbon trajectory.
The excess capacity crisis is depressing steel prices through oversupply in international markets, while the industry simultaneously faces rising input costs driven by expanding export restrictions on some steelmaking raw materials, particularly ferrous scrap, chromium ore and nickel ore. While excess capacity is depressing steel prices, higher input costs and more restriction on raw material exports pose additional long-term risks to industry viability and requires close monitoring.
No steel-producing country is fully self-sufficient in the raw materials and minerals its industry requires. Production depends on a wide array of inputs, from traditional materials such as iron ore, metallurgical coal, and ferrous scrap to alloying and quality-enhancing materials such as ferromanganese, chromium, and nickel, as well as zinc and tin for galvanising and coating. Each plays a critical role at different stages of the steel value chain, from primary ironmaking to advanced finishing. Securing access to these inputs is increasingly challenging, however, as many are geographically concentrated, exposed to geopolitical tensions and subject to growing trade restrictions. Nickel and chromium have seen the most rapid increase in restrictions in recent years (OECD, 2025[13]), typically imposed to promote domestic processing and downstream value addition. Scrap is also increasingly treated as a strategic input, with some countries restricting exports to both secure domestic supply and, given its role in lower-emission electric arc furnace steelmaking, to support their emission-reduction goals.
The steel industry is also facing intensifying competition for critical materials from other strategic industries (OECD, forthcoming[14]). Most national critical mineral strategies are predominantly oriented toward securing minerals for the energy transition, digital technologies, aerospace, defence and advanced manufacturing, with steelmaking frequently a secondary concern. As several inputs critical to steel production grow in importance for these sectors, their availability and affordability for steel producers are coming under increasing pressure.
This evolving demand landscape raises competing‑use tensions as minerals historically serving the steel sector are reprioritised toward other strategic industries, even where steelmaking is itself critical to producing the outputs those sectors require. With bottlenecks and vulnerabilities in mineral supply chains growing, and domestic actions in one country increasingly affecting the steel industries in others, the case for greater international co-ordination is becoming harder to ignore.
Geopolitical tensions in the Middle East are adding a further layer of complexity. Energy costs, which in general account for between 20% to 40% of total steel production costs, with large differences across regions (Worldsteel, 2021[15]), will weigh on steel firms’ financial margins. Rising freight rates and shipping delays are also raising steel firms’ costs, and the potential diversion of Chinese steel exports away from the region is likely to increase steel import pressures on other markets.
Current efforts to address the impact of global excess capacity fall far short of what is needed to counter the surge in dumped and subsidised exports and establish a level playing field where investment, production, and trade are market-driven. Pervasive subsidies and dumping introduce serious distortions that exacerbate overcapacity and distort trade relations, while most trade measures offer only temporary relief and do not address the root causes of the crisis. With excess capacity projected to keep rising through 2028, the urgency of accelerating national and international action has never been greater.
Recognising the urgency of the crisis, GFSEC Ministers have committed to address the root causes and negative effects of global steel excess capacity, developing a new comprehensive framework for joint action. With 28 major steel-producing economies accounting for almost 70% of global steel imports, these efforts represent the most significant collective response to the steel crisis to date – and the best prospect yet for establishing a genuinely level global playing field for the steel industry.
References
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