OECD Steel Outlook 2025

Executive summary

Steel industry woes will likely persist in 2025 and thereafter

Substantial increases in steelmaking capacity of up to 6.7% (165 million metric tonnes [mmt]) are planned worldwide from 2025 to 2027, which, if realised, will exacerbate global excess capacity. Asian economies are expected to account for 58% of the new capacity, led by substantial increases in the People’s Republic of China (hereafter “China”) and India. Cross-border investment is involved in about 16% of the total tonnage to be added from 2025 onward, with China playing a leading role in such investment.

With demand growth expected to be sluggish at best, capacity utilisation could once again decline towards 70%, putting enormous pressure on even highly competitive steelmakers. Already, steel prices have declined from their 2021 peak to historically low levels, although they appear now to be bottoming out. Profitability has experienced a similar trajectory, falling sharply from the relatively strong 2021 level.

Steel demand prospects vary across regions. Solid growth in many emerging markets during 2024 was largely offset by a strong contraction in demand in China and a decline in the OECD area. Through 2030, world demand is expected to grow by 0.7% per year. Demand in the OECD area will remain roughly constant, while Chinese demand will decline appreciably due to the downturn in construction and structural shifts in China’s economy. Prospects are brighter in the Association of Southeast Asian Nations (ASEAN) and Middle East and North Africa (MENA) areas, where demand will grow strongly.

Subsidies continue to distort competition and have contributed significantly to excess capacity in economies outside the OECD

Competition in the steel industry continues to suffer from a lack of a level playing field. Some governments intervene heavily with policies aimed at promoting industrialisation, strengthening and/or expanding the domestic steel industry, reducing steel import dependency and/or indirectly supporting downstream manufacturing in higher value added activities. Steel subsidies persist and have become increasingly prominent in regions where steelmaking capacity is growing the fastest, particularly in China and the MENA and ASEAN regions.

China’s subsidisation rate is ten times that of OECD countries. In addition to below-market borrowings, measures include subsidised energy prices, direct grants and preferential tax treatment. The support measures distort competition by providing: 1) aid to facilities that might otherwise be closed; and 2) incentives for investment that might otherwise be commercially unjustified.

A surge in Chinese exports is leading to a sharp increase in trade measures globally

Europe and the Commonwealth of Independent States/Ukraine area have experienced sharp declines in exports in recent years. Exports from the Asian and African/Middle East areas have increased significantly, led by a rapid increase in exports from China. Chinese steel exports surged to a record level of 118 million tonnes in 2024.

The pressures that low-priced exports have had on countries have led to a surge in new antidumping cases. During 2024,19 governments initiated 81 antidumping investigations involving steel products, a five-fold increase from the 2023 level and near the 2016 steel crisis level. Almost 80% of the cases were initiated against Asian producers, with China alone accounting for more than one-third of the total. 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. This increase in product-specific and broader trade actions reflects the direct and indirect effects that sources of excess capacity are having on international trade flows of steel.

Steel producers subject to trade measures often seek to ease the impact by shifting their exports to other markets with no or less restrictive trade measures or exploring ways to circumvent them. They do so by selling upstream or downstream products not subject to the trade measures in the country imposing the trade measures and/or by shipping products to intermediary countries for further processing/finishing and eventual export to the countries where the trade measures are in force.

OECD analysis indicates that during 2013-20, the amount of suspicious trade (including rerouting of steel trade) totalled 21.5 million metric tonnes (EUR 13.3 billion), representing 17.6% of total steel trade. Concern over circumvention has resulted in a growing number of countries developing mechanisms to discourage the practice.

There are challenges to achieving steel industry decarbonisation

The ongoing excess capacity problem is reducing the steel industry’s profitability and the capital available for investing in new technologies, hampering the industry’s efforts to decarbonise. Moreover, more than 40% of the 165 mmt of new steelmaking capacity entering the market during 2025-27 is expected to be based on the relatively emission-intensive blast furnace/basic oxygen furnace (BF/BOF) process. Reducing emissions in the steel industry requires profound and costly changes in steelmaking operations. The changes include: 1) improved performance through improved energy efficiency; 2) the switching of fuels away from gas and coal; 3) the development and deployment of new technologies to produce steel; and 4) expansion of carbon capture utilisation and storage efforts. Given the longevity of steelmaking equipment, investing in new production technologies requires confidence that the investments will be economically viable over the very long term, preconditions for which include healthy market conditions characterised by a level playing field and the absence of excess capacity.

The cost and methods to decarbonise steelmaking across and within countries will ultimately vary significantly depending on the steelmaking technologies employed and the condition of steelmaking facilities. A survey of major producers reveals that 74% of companies intend to use carbon capture, utilisation and storage technologies in their integrated (BF-BOF) facilities to control emissions, while 11% are exploring groundbreaking iron oxide technologies. With respect to electric furnaces, 52% of the companies intend to use hydrogen-based technologies to produce iron for electric furnace steel production.

Significant attention has recently been given to hydrogen-based processes for producing iron-intermediate products, such as direct-reduced iron and hot-briquetted iron. These technologies rely on high-grade iron ores and substantial renewable energy availability, both of which are unevenly distributed globally. As a result, steel production locations and international trade flows in iron and steel are likely to undergo significant shifts in the future.

Longer-term industry prospects would be improved by greater international co‑operation

The surge in exports of low-priced steel from China has disrupted international markets, resulting in growing trade tensions that seem likely to persist in the near term in light of sluggish market growth and increased capacity. Efforts to address the root causes and consequences of the structural imbalance between global capacity and demand need to intensify to avoid further deterioration of the situation over the longer term. In the meantime, affected countries will benefit from working together to share data, knowledge and experiences to help mitigate the devastating impacts of global steel excess capacity on their economies.

On all fronts, enhanced international co-operation between governments and the industry could play a significant role in easing trade tensions and improving the longer-term prospects for the industry. The participation of all major players is key in this regard.