Excess capacity has weighed heavily on steel markets in recent years, resulting in capacity utilisation rates typically well below the benchmark for a healthy capacity utilisation rate of 80%. Substantial increases in capacity are planned worldwide in the next several years despite only modest global steel demand growth. Asian economies are projected to account for 60% of the new capacity, led by substantial increases in the People’s Republic of China (“China”), India and the Association of Southeast Asian Nations. In most regions, the new facilities will be electric furnaces; however, a significant number of new basic oxygen furnace facilities are planned in Asia. Cross-border investment is involved in about 16% of the total tonnage to be added from 2024 onward, with China playing a leading role in such investment. Over 90% of cross-border investments are concentrated in Asia, with the remainder directed towards Africa.
OECD Steel Outlook 2025
Abstract
Global steelmaking capacity has grown steadily since 2019, in contrast to the decline in world demand for steel during most of this period. Global capacity reached 2 472 million metric tonnes (mmt) in 2024 (Table 2.1). Since 2019, OECD countries have reduced capacity slightly by 0.2%, while partner economies have seen capacity increase by 3.4%. The Chinese steel industry has by far the largest capacity, accounting for 46% of the world’s total in 2024. In 2024, the People’s Republic of China (hereafter “China”) had a comparatively high-capacity utilisation rate as subsidies and exports helped it maintain a higher capacity utilisation rate than foreign competitors.
In mmt, % change and % share of total
Source: OECD desk research based on publicly available information.
The divergence between capacity and demand growth has led to significant market imbalances, which are putting downward pressure on steel prices and the industry’s profitability. Compounding these challenging market conditions is the surge in China’s steel exports, which jumped to their highest level of 118.2 mmt in 2024, surpassing their previous peak seen during the global steel crisis of 2015-16. The surge in Chinese exports, stemming from the country’s excess capacity and its deteriorating steel demand situation, has created significant problems for steel producers worldwide, depressing their utilisation rates and leading to some plant closures and capacity reductions of otherwise efficient steel production.
Regional developments during 2019-24 are presented in Table 2.2. The table shows that capacity increased by 59 mmt (2.5%) over the last six years. By region, Asia – particularly India – and the Middle East, notably Iran, have been key areas of capacity expansion. India alone increased its capacity by 37.3 mmt (26.2%) in the wake of strong domestic steel demand developments. Iran grew its capacity by 10.9 mmt (22.6%). The Association of Southeast Asian Nations (ASEAN) area, North America, and Türkiye have recorded capacity gains ranging from approximately 8‑9 mmt since 2019.
In contrast, developed Asian and European Union countries have seen significant capacity reductions since 2019. China has reduced its capacity by 6.7 mmt since 2019 but still adds significantly to excess capacity growth, with a demand decline estimated at 41 mmt during this period.
In mmt and change
Note: “Qty” denotes quantity in mmt.
Source: OECD desk research based on publicly available information.
Table 2.3 provides estimates of capacity additions through 2027 by region. Investment projects characterised as “underway” are those that are likely to be completed during the projection period; “planned” projects are less certain. Projects underway include 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 or have not yet received financial or state backing to the best of the OECD’s knowledge.
In mmt
Note: “e” denotes estimate. The capacity data reflect information up to December 2024. “Europe” includes both OECD countries and partner economies. Estimates regarding steelmaking capacity in 2027 and expected percentage changes are based on gross additions only; actual capacity levels will be lower if closures occur during the period.
Source: OECD desk research based on publicly available information.
Information on announced investment projects indicates that 63.5 mmt of gross capacity additions are currently underway worldwide and are therefore expected to come on stream during the next three-year period (2025-27). A further 101.7 mmt of capacity additions are currently in the planning stage for possible commissioning during the same period.
Figure 2.1 shows capacity growth by technology. Of the world total of 165.2 mmt of capacity currently underway or in the planning stages for completion over the next three years, basic oxygen furnace (BOF) projects, which rely largely on coking coal and iron ore to produce steel, account for 40.5% of the total. Electric arc furnace (EAF) projects, which rely on ferrous scrap metal, pig iron, and directly reduced iron to produce steel, account for nearly 60% of the total. The predominance of electric furnace capacity additions will change the profile of the industry, which in 2023 used electric furnaces to produce 28% of crude steel (World Steel Association, 2024[1]).
In mmt
Note: BOF: Basic oxygen furnace; EAF: Electric arc furnace. The capacity data contain both underway and planned projects and do not take into account possible closures that may occur during the period.
Source: OECD desk research based on publicly available information.
When viewed by region, there is a clear difference in the choice between BOF and EAF. BOF construction, which is generally associated with large-scale operations, is concentrated in Asia (China, India, Indonesia, the Philippines, and Viet Nam) and the Commonwealth of Independent States (CIS) (Kazakhstan); no new BOF projects are planned in other regions over the next three years. Factors influencing the choice of production processes include production objectives, the availability and cost of energy and raw materials and the regulatory climate. In this regard, the environmental challenges facing integrated steelmakers (i.e. those using BOFs) are far higher than those of electric furnace operators (OECD, 2023[2]).
Examining capacity developments by region, 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 29.8 mmt (+1.8%) of capacity additions underway for commissioning in 2025-27, with an additional 66.8 mmt (+5.8%) in the planning stage. China and India are projected to account for 80.4% of Asia’s steelmaking capacity additions.
China’s capacity replacement policy has encountered challenges, raising questions about achieving planned capacity reductions. Despite efforts since 2018, there have been instances of non-compliance, leading to temporary suspensions of new project approvals, most recently in August 2024. These developments suggest that further efforts may be needed to effectively address capacity reductions in China. With steel demand having already peaked, the potential for continued growth in the gap between domestic demand and capacity could continue to influence the international market.
In other regions, steelmaking capacity additions are projected to increase over the next three years as follows: an increase of 4.5 mmt (+9.5%) in Africa; 6.6 mmt (+4.6%) in the CIS and Ukraine; 12.1 mmt (+5.9%) in the European Union; 21.7 mmt (+22.9%) in the Middle East; 12.5 mmt (+7.7%) in North America; and 1.5 mmt (+23.5%) in Oceania. In Latin America, there are currently no specific ongoing projects to start capacity investments in 2025-27. Some of this growth, particularly across the OECD, reflects a transition to lower-carbon steelmaking and capacity replacements from BOF to EAF steelmaking.
Cross-border investment
Cross-border investment in steelmaking capacity is occurring worldwide, accounting for about 16% of the total tonnage to be added from 2025 onward. China is leading in such investment, accounting for half of the cross-border total, either as a sole investor or through joint ventures (Figure 2.2). More than 90% of the cross-border investment will occur in Asia, with the remainder in Africa. Almost three-quarters of the cross-border investment is being directed towards BOF steelmaking. Among global cross-border investments involving Chinese companies, 65% include at least one state-owned enterprise (SOE). Most of the Chinese cross-border investments to the ASEAN region are associated with government support from the host country (Box 2.1). Furthermore, the average capacity per project for SOE-involved investments is 3.5 mmt, significantly higher than the 1.8 mmt average for private-owned enterprises (POEs), indicating a tendency for larger-scale investments by SOEs.
Source: OECD desk research based on publicly available information.
Global excess capacity has risen over the last three years, reaching over 600 mmt in 2024, representing 24% of total capacity. This gap exceeds the steel production of all OECD countries combined by 170 mmt and creates significant risks for the viability of market-oriented steel industries worldwide.
The projected global capacity expansion of 6.7% over the next three years is faster than growth in global steel demand (see Chapter 4). If this capacity expansion is realised, global excess capacity could increase to 721 mmt by 2027. The widening excess capacity gap would put significant downward pressure on the industry’s capacity utilisation rate (Figure 2.3) to 73% by 2027
Given the economies of scale in steel production, utilisation rates this low raise unit production costs. Combined with price pressures stemming from the growing excess capacity levels, this trend would depress steel industry profitability even further from the currently difficult levels.
Note: “e” denotes estimation. Capacity data reflect information up to 2024. All production data are from the World Steel Association.
Source: OECD for crude steelmaking capacity and World Steel Association for crude steel production.
Southeast Asia is a region that has attracted significant foreign investment in new steel plants in recent years, with more capacity coming on stream in the future.
Table 2.4 summarises the foreign investment in capacity expansions, most of which are driven by Chinese companies. In 2013, China launched its “Belt and Road Initiative” (BRI), accompanied by a strategy encouraging Chinese enterprises to “go global” as part of their development and foreign policy agenda (Belt and Road Initiative, 2013[3]). This approach aimed to address China’s domestic overcapacity by utilising it to fill production gaps in other countries, presenting itself as a “win-win” solution. The BRI and the “going global” strategy have significantly boosted Chinese investment in ASEAN member states, a trend that intensified with the onset of the US-China trade conflict in 2018. Chapter 3 further details government support measures for capacity expansions in the region.
In mmt and USD billions
Notes: (1) Not available. (2) In 2015, Hiap teck (Malaysian POEs) owned 55%, and Shougang (Chinese SOEs) owned 40%. In early 2018, Shougang sold its stake in Eastern Steel to Beijing Jianlong, a private Chinese steelmaking company. (3) In 2013, POSCO (Korean POEs) owned 70%, and Krakatau Steel (Indonesian SOEs) owned 30%. In 2022, Krakatau Steel increased its share ownership to 50%. BOF: Basic oxygen furnace.
Source: OECD desk research based on publicly available information.
References
[3] Belt and Road Initiative (2013), 什么是一带一路, https://www.yidaiyilu.gov.cn/z/221226-1/index.shtml (accessed on 3 October 2024).
[2] OECD (2023), The Heterogeneity of Steel Decarbonisation Pathways, OECD Publishing, Paris, https://doi.org/10.1787/fab00709-en.
[1] 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.