Trade and adjustment challenges in the steel industry are intensifying, exacerbated by growing global excess capacity. Subsidies and other non-market policies and practices are the root cause of the industry’s current problems. Significant shifts in regional steel production and trade are occurring, and, with profitability in the industry weakening, progress in decarbonising steelmaking processes could be significantly undermined. Enhanced international co-operation to eliminate excess capacity and market distortions would help level the playing field and lead to a brighter long-term outlook for the global steel industry.
OECD Steel Outlook 2025
Abstract
Steel is ubiquitous – used in buildings and bridges, cars, railways, tanks and ships, medical equipment, power plants, rockets, nuts and bolts, needles and pins, pipes and tubes, hammers and drills, and much more. Close to 2 billion tonnes are produced worldwide every year, far exceeding all other metals combined. Innovation has been key to the continued prosperity of the industry; approximately 75% of the 3 500 grades of steel now on markets have been developed over the past 20 years (Worldsteel, 2025[1]). Moreover, technological advances have greatly enhanced the efficiency of the industry while curbing the environmental pollutants generated during production.
The industry is highly capital-intensive. Plants range in size from induction furnace-based facilities that produce several thousand tonnes to large integrated facilities with 14 million tonnes of annual capacity per year. Even for smaller facilities, investment costs for new plants can be high, topping USD 1 billion (US dollars). The larger a plant is, the more important it is as a source of employment, as it can provide thousands of jobs at the steel plant itself while generating significantly more employment in the communities where the plants are located. The sector employs around 6 million workers worldwide, with over 1 million steel workers in OECD countries alone.
The steel industries in OECD countries have long been highly innovative and productive, as revealed in patent data, labour productivity and the types of steel products they produce (de Carvalho and Sekiguchi, 2015[2]). Many of these products are essential for building the renewable energy systems needed to transition to low-carbon economies, such as advanced stainless steel for solar panels and high steel grades for lighter wind turbine towers. Corrosion-resistant steel provides opportunities in many emerging energy industries, including innovative, cost-effective new types of steel being developed for water electrolysis systems in hydrogen production (Shavit, 2024[3]). Thus, while the industry is making significant efforts to reduce its carbon emissions from steel production, its products support the green transition across many other economic activities.
Interest in investing in steelmaking is keen worldwide despite the high capital costs and expertise required. Close to 100 countries produce molten steel. Investments in the People’s Republic of China (hereafter “China”) have propelled the country from a moderate production of 26 million tonnes in 1975 (6% of world production at the time) to a capacity capable of producing well over 1 billion tonnes of steel per year (accounting for more than half of world production now), though production has recently shown some signs of stabilisation. At the same time, the role of steel producers in OECD countries has diminished considerably (Figure 1.1), with the collective share of OECD countries in world production halving over the past two decades to 22% in 2024, even as some OECD countries like Korea and Türkiye have expanded, and the number of OECD countries has increased.
Even though most Chinese steel production goes to domestic use, the sheer size of China’s steel sector means that movements in its industry have huge effects on world markets. Since the peak in Chinese steel demand in 2020, the contraction in construction demand has not been accommodated by proportionate adjustments in steel production, fuelling its steel exports abroad (Figure 1.2). The rise in China’s position in the global steel industry is not a purely market-driven outcome. Instead, it reflects a steel industry expansion driven by market-distorting subsidies and other non-market policies and practices.
In million metric tonnes (mmt)
Source: World Steel Association (2024[4]), 2024 World Steel in Figures, https://worldsteel.org/wp-content/uploads/World-Steel-in-Figures-2024.pdf; and OECD, based COMTRADE and ISSB.
In million metric tonnes (mmt)
Source: World Steel Association (2024[4]), 2024 World Steel in Figures, https://worldsteel.org/wp-content/uploads/World-Steel-in-Figures-2024.pdf; and OECD, based COMTRADE and ISSB.
The global steel market is currently in a precarious state. Excess capacity is growing from unsustainably high levels, fuelled by market-distorting subsidies and other non-market practices, mainly in countries outside the OECD. Substantial increases in capacity are planned worldwide over the next three years, with 165 million metric tonnes (mmt) of new capacity additions projected during 2025-27, despite only modest global steel demand growth.
Asian economies are expected to account for 60% of the new capacity, led by substantial increases in China, India and the Association of Southeast Asian Nations (ASEAN). Capacity growth is being further fuelled through cross-border investments involving Chinese steel companies. Most future cross-border investments are expected to occur in Asia and Africa. In recent years, Southeast Asia has been the primary destination for China’s foreign investment, which has contributed to the region’s growing excess capacity. Looking ahead, almost three-quarters of future global cross-border investments will be directed towards the construction of blast furnace/basic oxygen furnace (BF/BOF) steelmaking, which is a relatively high generator of carbon emissions.
In mmt
Source: OECD desk research for capacity data and demand and OECD estimates of steel demand derived from its long-term steel demand model (see Chapter 4), taking into account the Short-Range Outlook published by the World Steel Association (https://worldsteel.org/). Linear interpolation was employed.
With the outlook for global capacity growth outpacing demand, the gap between capacity and demand is expected to increase worldwide to 721 mmt by 2027 (Figure 1.3). This level of excess capacity would exceed the current production in all OECD countries combined by almost 300 million tonnes. With demand growth expected to be sluggish, capacity utilisation could once again decline towards 70%, putting enormous pressure on the viability of even highly competitive steelmakers.
Steel-using downstream industries in OECD countries, such as automotive or machinery manufacturing, also feel the impact of global excess capacity, as cheaper inputs give unfair, non-market advantages to competitors in countries that are sources of global steel excess capacity. Global excess capacity can thus inflict significant long-term economic damage throughout the steel supply chain in countries that do not engage in market-distorting policies and practices. This underscores the importance of the work of the Global Forum on Steel Excess Capacity to address global excess capacity and its consequences.
The combination of excess capacity, oversupply and price pressures is eroding steel companies’ profit margins globally. Steel industry profitability margins have declined noticeably over the last few years and are currently close to historic lows.
The need to level the playing field is more urgent than ever. Global excess capacity and the subsidies and other non-market policies and practices that contribute to it have significant negative impacts on market-oriented steel industries that suffer from its effects. Global excess capacity leads to steel job losses, weaker industrial supply chains and reduced investment in innovation and next-generation steel technologies.
Downstream industries that are heavily reliant on steel, including energy and other strategic sectors, face risks as well. In particular, there is a longer-term risk of market dependence and economic vulnerability for these industries as excess capacity depresses steel prices and encourages the production of indirect exports of steel-containing goods. As OECD countries become more reliant on foreign-subsidised steel, critical infrastructure and manufacturing could face risks in times of crisis.
Market-distorting subsidies and the host of other government supports and interventions are driving excess capacity and distorting competition. Some governments, mostly outside of the OECD, intervene heavily with non-market policies and practices targeting the steel industry, which aim to create national champions, expand domestic steelmaking capacity regardless of market fundamentals, maintain failing firms, or indirectly support higher value added production of steel-intensive goods further downstream. As a result, the steel industry is one of the most heavily subsidised industrial sectors globally.
China’s steel subsidisation rate (as a percentage of firm revenues) is five times higher than the average for other partner economies, with Chinese state-owned enterprises (SOEs) receiving even more than private firms in China.1 The subsidisation rate in partner economies is, in turn, double that of OECD countries (Figure 1.4). Government supports for the steel sector have become increasingly prominent in regions where steelmaking capacity is rapidly expanding, such as in China, Middle East and North Africa (MENA) and ASEAN areas. The OECD Steel Committee regularly reviews recent subsidy developments in areas where capacity is growing rapidly and publishes its findings each year. Two recent reports examined Chinese financial incentives to encourage technological upgrades and value-added steel production as well as energy and other subsidies in the MENA and ASEAN areas.2
Subsidies have a significant effect on capacity expansions in countries outside the OECD. Where subsidies are used, measures include below-market borrowings, government grants, subsidised energy prices and preferential tax treatment. New research presented in this Outlook finds that a grant worth USD 1 million annually sustained over a number of years is associated with an increase of some 5 000‑10 000 metric tonnes in steel production capacity in partner economies. Grants are cash infusions to improve the financial situation of companies. Other types of subsidies received by steel firms and covered by OECD estimates are below-market borrowings (loans provided at better conditions than what the market would offer absent government intervention or government implicit guarantees) and tax concessions (special provisions for selected firms that lower the taxes that would otherwise be payable).
As a percentage of firm revenues
Note: Subsidies indicated in the figure above are the sum of the subsidies entailed in cash grants, below-market borrowings and income tax concessions.
Source: OECD Manufacturing Groups and Industrial Corporation (MAGIC) database.
There are, however, many other support measures for which estimates are difficult to obtain, due to both governments’ lack of transparency and methodological difficulties. They include equity infusions inconsistent with market-based conditions, non-market-based equity swaps, government provision of goods and services for less than adequate remuneration, export-contingent subsidies, and input support at preferential or non-market rates, including land, energy and raw materials to steel companies at preferential rates.
Pervasive subsidisation leads to capacity expansion that would not occur under market conditions, or keeps loss-making steel producers in the market, encouraging them to maintain their steel production levels. Subsidies distort markets by generating excess capacity and fuelling oversupply of steel. The surplus steel from the subsidising countries is then exported at prices that do not reflect the true production costs. The underpriced steel, in turn, displaces the steel production of market-oriented steel producers in importing regions, reducing their profitability and depressing their market share at home and in third markets abroad. Given the long lifespans of steel plants, coupled with the extremely high monetary and social costs of closing those plants once they are put in place, the excess capacity generated by these policies can, unfortunately, have negative effects that linger on for decades.
These interventions create structural advantages for firms benefiting from them and undermine fair competition and supply chain resilience. The result is a global steel market distorted by non-market forces, where producers which do not benefit from the subsidies cannot compete on equal footing. Recent OECD analysis of subsidies reveals that the steel industry is one of the largest sectoral recipients of subsidies, a result that is also clear from the prominence of steel in countervailing duty trade remedy cases.
The continued problems of excess capacity and subsidisation have led to significant shifts in steel trade flows. Chinese steel exports have more than doubled since 2020 (Figure 1.5), reaching a record-high 118 mmt in 2024, while the country’s steel imports have plunged by almost 80% to 8.7 mmt. Some other economies with rapidly growing capacity are also posting rapid export growth, though from much lower levels. These changes concerning China’s steel exports and imports pose a significant trade-related challenge for many OECD and other market-oriented economies, as their exports declined while imports surged. Since 2020, steel imports increased by around 13% in the European Union and the United Kingdom, 18% in Japan and Korea, 40% in North America, 52% in Türkiye, 60% in South America, and by as much as 77% in Oceania.
Source: OECD, based on COMTRADE and ISSB.
The trade-related challenges of excess capacity go beyond the direct effects in importing markets – where imports from sources of excess capacity can significantly displace domestic steel production and reduce opportunities for exporters from countries that are not the source of excess capacity – and can involve harmful indirect effects across many OECD countries. For example, exports from China also surge to third markets, some of which are also grappling with growing excess capacity, such as Northern Africa, the Middle East and Southeast Asia, which in turn increase their exports, particularly to OECD countries, because their domestic markets are saturated with surplus steel. These trade disruptions lead to increased trade actions that target not only the direct sources of excess capacity but also broader trade measures due to the harmful indirect effects occurring across markets.
Reflecting these challenges, trade actions have multiplied. In 2024, 81 antidumping investigations involving steel products were initiated by 19 governments, taking the level of trade actions to a level near that observed during the steel crisis of 2015-16. Almost 80% of the cases were filed against Asian producers, with China alone accounting for more than one-third of the total. The number of new cases was up sharply from 2023 when only 16 cases were initiated by five countries for the entire year. In addition to the product-specific dumping cases, a growing number of countries have introduced broader measures to protect their steel industries through sector-wide blanket increases in steel tariffs.
While trade actions are on the rise, the effectiveness of these measures may be limited as exporters circumvent those measures or transform the excess capacity of steel into downstream products containing steel. OECD research shows that indirect steel exports to OECD and other market-oriented economies are growing rapidly, sourced mainly from China, South Asia and the ASEAN region. Identifying the source of the steel excess capacity that is driving these trends can be complicated, however. For example, Chinese steel companies that have invested heavily in new steel plants in the ASEAN region may produce steel for local downstream manufacturing.3 ASEAN countries will then export the metal products, electrical equipment, machines, cars and domestic appliances made from that steel to trading partners in Asia and beyond.
Steel is a carbon-intensive industry with direct emissions accounting for approximately 8% of global carbon dioxide (CO2) emissions. On average, 1.9 tonnes of CO2 are emitted per tonne of steel produced. BF-BOF production, which relies largely on coking coal and iron ore to produce steel, emits 2.3 tonnes, while scrap-intensive electric arc furnace (EAF) production emits 0.7 tonnes on average. Reducing emissions is thus a fundamental structural challenge the industry needs to address. However, the transition of steelmaking assets towards low-carbon production methods is taking place in a context where the industry is affected by other major structural challenges linked to excess capacity and related market distortions.
Much of the current excess capacity and future capacity growth sits in countries that rely on integrated steel production processes that generate relatively high levels of carbon emissions. For example, over 90% of China’s steel production is based on the BF-BOF production route. Moreover, slightly more than 40% of the 165 mmt of new capacity entering the market during 2025-27 is expected to be based on the BF/BOF process (Figure 1.6). By extending the life of emission-intensive assets beyond what is dictated by market forces and stifling investment, the current surge of excess capacity creates a barrier to deploying breakthrough technologies, including hydrogen-based steel production solutions, that would help countries reach their climate goals.
Note: The capacity data contain both underway and planned projects and do not take into account possible closures that may occur during the period. BOF: Basic oxygen furnace; EAF: Electric arc furnace.
Source: Metal Expert, Platts, Kallanish, and steel company websites.
The magnitude and scope of decarbonisation efforts depend on the availability of capital and the impact of the decarbonisation efforts on costs. The ongoing excess-capacity-related market difficulties that reduce the steel industry’s profitability and capital available for investment create a barrier to costly decarbonisation efforts. Even if governments were to support the cost burden of the transition and thriving markets for low-carbon steel eventually emerge and expand, steelmakers cannot return to sustained, healthy levels of profitability until global excess capacity and its consequences are meaningfully addressed. Industries and governments need to be confident that the new, low-carbon steel plants invested in today will be economically viable over the very long term, given the lifetimes of steel plants that can span a generation or more.
Excess capacity and emissions also have an important export dimension. Market-distorting subsidies that boost excess capacity also encourage production to run at high levels, with the excess production being exported to foreign markets. So long as the excess capacity problem can be exported to other countries without implementing actual closures, it will be difficult to reduce emissions in the steel sector.
Recent OECD Steel Committee work reviews China’s extensive support programs to encourage the shift to low-carbon steel production. Although China’s policies may encourage a significant shift towards lower-carbon steel production (as is the case for many other countries), subsidies may continue to promote non-market capacity increases and thus result in further excess capacity, which exacerbates the level playing field problems that have negatively impacted the global steel industry for several years already.
The latest OECD steel capacity and demand projections covered in this report suggest that global excess capacity is expected to continue rising in the coming years, highlighting the importance of accelerating national and international efforts to address the root causes of steel excess capacity and its consequences.
As steel demand has stopped growing in China, the country’s share in global steel demand is estimated to decline to around 45% by 2030 as demand continues to rise strongly in other emerging economies, notably in Asia, but also in Africa and the Middle East. Meanwhile, with steel production levels sustained by government policies in China, the country’s export volumes and dominant role on the world market are set to continue unabated towards 2030. Consequently, global excess capacity is set to remain a severe obstacle for a sustainable steel sector. Even with world steel demand estimated to rise by almost 70 mmt towards 2030, a number of new plants are now being constructed that are expected to add 165 mmt of capacity, keeping global excess capacity at high levels.
Without policy reforms in countries that are fuelling the excess capacity or disincentives for them to export their surplus steel either directly or indirectly (in the form of steel-intensive goods), global steel industry problems will intensify. Market imbalances would grow, steel prices and profitability would remain under pressure, and countries would continue to face problems in their steel industry. Without concrete action, this could, over time, further hollow out the steel and some downstream manufacturing sectors across the OECD, threatening economic resilience and security.
The challenges facing the steel industry have an international dimension that can be addressed by governments and the industry working together across borders. The OECD facilitates the Global Forum on Steel Excess Capacity (GFSEC) to consider collective solutions to the challenge of excess capacity and enhance market functioning in the steel sector. To this end, a set of principles (the “Berlin Principles”) to guide the development of policy responses was reaffirmed during the GFSEC Ministerial Meeting in October 2024. Following these principles ensures that government policies do not distort markets and contribute to excess capacity in the steel sector.
Enhancing international co-operation to address excess capacity and market distortions will improve the economic viability of the industry and facilitate its efforts to move forward on steel decarbonisation. Enhancing transparency and working towards a level playing field with key steel-producing countries that suffer from excess capacity and/or its consequences will support this process.
References
[2] de Carvalho, A. and N. Sekiguchi (2015), “The structure of steel exports: Changes in specialisation and the role of innovation”, OECD Science, Technology and Industry Working Papers, No. 2015/07, OECD Publishing, Paris, https://doi.org/10.1787/5jrxfmstf0xt-en.
[3] Shavit, J. (2024), Revolutionary ‘Super Steel’ produces green hydrogen directly from seawater, https://www.thebrighterside.news/post/revolutionary-super-steel-produces-green-hydrogen-directly-from-seawater/.
[4] World Steel Association (2024), 2024 World Steel in Figures, World Steel Association, Brussels, https://worldsteel.org/wp-content/uploads/World-Steel-in-Figures-2024.pdf.
[1] Worldsteel (2025), What is steel?, https://worldsteel.org/about-steel/what-is-steel/.
← 1. For example, SOEs with more than 50% state ownership receive more than three times the level of below-market borrowings compared to firms with less than 10% state ownership, after adjusting for size. See Chapter 3 for further details. Please note that the term “partner economies” is used for any group of countries/economies that are not members of the OECD.
← 2. For the full reports, see the spring and autumn 2024 Steel Market Developments. See DSTI/SC(2024)1/Final at https://one.oecd.org/document/DSTI/SC(2024)1/FINAL/en/pdf and DSTI/SC(2024)13/Final at https://one.oecd.org/document/DSTI/SC(2024)13/FINAL/en/pdf.
← 3. Some of these cross-border investments may be problematic from a level-playing-field perspective, as seen in countervailing duty cases involving transnational subsidisation. For a specific case involving Chinese preferential financing for stainless steel production capacity in Indonesia, see https://ec.europa.eu/commission/presscorner/detail/en/ip_22_1774.