The steel industry is one of the most subsidised industrial sectors, benefiting in particular from preferential loan terms due to its reliance on debt for funding. Subsidies to steel firms have varied significantly over time, with their overall level rising sharply during crisis periods. Within the industry, larger steel firms have been more subsidised than smaller ones, and state-owned enterprises have received more subsidies than other firms. The People’s Republic of China’s (“China”) subsidisation rate is ten times that of OECD countries. Government support for the steel sector has become increasingly prominent in regions where steelmaking capacity is rapidly expanding, such as in the Middle East and North Africa, the Association of Southeast Asian Nations, and China. In addition to government grants and below-market borrowings, measures include subsidised energy prices and preferential tax treatment.
OECD Steel Outlook 2025
Abstract
Governments use support measures in the steel industry to influence or dictate the actions taken by firms in a variety of areas, as well as measures influencing competitive conditions in the market. The measures have in the past ranged from advisory guidance to mandatory controls over certain actions taken by firms. Specific interventions have included production and price controls, export restrictions, investment co‑ordination and a wide range of subsidies, including: 1) cash grants; 2) below-market borrowing costs; and 3) tax policies that favour the steel sector and/or individual steel firms (Mercier and Giua, 2023[1])
The key types of subsidies examined here are defined below:
Grants are cash infusions to improve the financial situation of companies or support specific investment projects.
Below-market borrowings (BMB) comprise loans that are provided at better conditions than what the market would offer absent government intervention or government implicit guarantees.
Tax concessions are special provisions for selected firms that lower the taxes that would otherwise be payable.
While the focus of this chapter is on these three categories, due to more readily available data for purposes of analysis and cross-sector comparisons, it should be noted that the steel sector benefits from many other types of subsidies, such as equity infusions inconsistent with market-based conditions, non-market-based equity swaps, government provision of goods and services for less than adequate remuneration, export subsidies, and input support at preferential or non-market rates, including the provision of land, energy and raw materials to steel companies at preferential rates (see Figure 3.1). Those subsidies do not exist in a vacuum but within important and very different national contexts (Mercier and Giua, 2023[1])
Subsidies can have significant effects on competitive conditions in the industry. On the one hand, subsidies received by steel firms can contribute to overinvestment in production capacity while generating significant market and trade distortions. Moreover, subsidies can provide support that would enable firms to maintain production at high levels even when markets weaken. Such subsidies can thus contribute to price declines, discourage the exit of inefficient firms from the market and otherwise disadvantage non-subsidised firms. Subsidies can, as indicated above, also lead to higher levels of investment and capacity expansion that is not in line with market conditions, thus exacerbating the problem of global excess capacity (OECD, 2024[2])
On the other hand, subsidies and government interventions can help to address market failures such as those stemming from high barriers to exit, environmental externalities and research and development (R&D) spillovers. Steel firms that want to shut down a plant may be discouraged from doing so if closure costs are high, which is often the case with respect to steel plants (Rimini et al., 2020[3])
Furthermore, subsidies to support investment and innovation in green technologies can counter the negative externalities arising from pollution and intensive energy consumption. There is, however, some evidence that green subsidies may have the opposite effect by enabling obsolete capacity to continue operating, thereby resulting in higher overall carbon dioxide (CO2) emissions (Garsous, Smith and Bourny, 2023[4])
Moreover, there is evidence that well-designed R&D tax credits and subsidies can be effective in stimulating R&D and innovation, and that skill and knowledge transfer policies are key complementary instruments (Criscuolo et al., 2022[5]). They can be distortive in some cases, however, particularly when they boost competitiveness and disadvantage foreign competitors.
Only the transfers in red, namely cash grants, BMB and income tax concessions (to some extent), are captured in the data used
Note: M&A denotes mergers and acquisitions.
Source: OECD steel secretariat desk reseach
Recent OECD analysis of subsidies reveals that the steel industry is a relatively large recipient of subsidies (OECD, 2025[6]). The sector is comparable in this regard to other heavy industries, such as aluminium, cement and shipbuilding (Figure 3.2). BMB is extensive in the steel industry, both as a share of steel subsidies and in comparison, to other industries. However, the evidence of subsidisation is not based only on OECD work but is confirmed by the numerous countervailing duty measures in place in the steel sector.
The subsidies provided to steel have varied significantly over time, with their overall level rising sharply during crisis periods, spurred by increases in BMB (Figure 3.3). The two last major steel crises occurred during the 2008-09 global financial crisis and the 2015-16 steel crisis, when global excess capacity peaked, and market conditions deteriorated significantly. Both crises were characterised by sharp declines in global and domestic steel demand, leaving steel companies in financial distress. In both instances, BMB was used extensively to channel subsidies to steel firms. The reliance on BMB could reflect the speed at which the aid could be deployed by lending institutions, as these institutions usually already have established lending relationships with concerned steel firms, have an interest in avoiding their bankruptcy, and do not require any specific framework to provide BMB to their client steel firms.
Percentage of annual firm revenue
Note: Sector averages use weights based on annual firm revenue.
Source: OECD MAnufacturing Groups and Industrial Corporation (MAGIC) database
Source: OECD MAnufacturing Groups and Industrial Corporation (MAGIC) database.
The level of subsidisation also differs by country and country groups (Figure 3.4). China’s subsidisation rate is five times higher than the average for other partner economies, which, in turn, are double the rate of subsidisation in OECD countries.
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.
Moreover, the distribution of steel subsidies among firms is uneven. Larger firms receive more subsidies per unit of their crude steelmaking capacity than smaller firms. The level of subsidisation is also linked to state ownership in firms (Figure 3.5). Those firms with state ownership equal to or exceeding 25% received more than double the level of subsidies (as a share of assets) as compared to firms with smaller government stakes during 2006-22. When measured in terms of subsidies as a percentage of revenues, state-owned enterprises (SOEs) with 25% or more state ownership received four to six times the level given to firms with lower levels of state ownership.
An OECD econometric analysis of the factors that could be driving subsidisation found, in the case of partner economies, that the level of government ownership in a firm, its size and indebtedness are all positively correlated with grant and BMB subsidies. In the case of OECD countries, the level of government ownership in a firm was found to be positively correlated with BMB, while total revenues were positively correlated with grants.
The OECD analysis finds an overall positive relationship between grants and capacity expansion, with differences between OECD and partner economies. Grants significantly affect capacity expansions in partner economies: a grant worth USD 1 million (US dollars) annually sustained over a number of years1 is associated with an increase of about 5 000 to 10 000 metric tonnes in steel production capacity in partner economies.
Source: OECD MAnufacturing Groups and Industrial Corporation (MAGIC) database.
Government supports for the steel sector have become increasingly prominent in regions where steelmaking capacity is rapidly expanding, such as in the Middle East and North Africa (MENA) region, where Iran’s steel industry is expanding rapidly, and the ASEAN area and China. These areas are witnessing significant government involvement aimed at fostering industrial growth, safeguarding local producers and enhancing global competitiveness. Through subsidised energy prices, BMB and preferential tax treatment, governments are shaping the future of the steel industry, with implications for both domestic markets and international trade in steel products.
MENA
Algeria
Algeria is currently 30th in global crude steel production and is the 3rd largest producer in the MENA region, with 4.5 million metric tonnes (mmt) of production in 2024. Its rapid growth in crude steel production in recent years far surpasses that of Egypt, Saudi Arabia and the United Arab Emirates. From 2019 to 2023, Algeria’s crude steel production surged 83.3%, compared to Egypt’s 42.7%, Saudi Arabia’s 21.4%, and the United Arab Emirates’ 1.4%. Furthermore, Algeria’s direct reduced iron production, which is a key ingredient in electric furnace steelmaking, soared by 160.0% over the same period (World Steel Association, n.d.[7])
Support for Algeria’s steel industry has been significantly influenced by Decree No. 15-247, issued on 16 September 2015, which sets out specific procedures for the pricing of public utilities, such as water, gas and electricity (Republique Algerienne Democratique et Populaire, 2015[8]). The decree allows the government to offer these services to industries at prices well below even cost recovery levels, effectively providing a substantial subsidy. Under this framework, public contracts are designed to fix prices or establish mechanisms for setting prices for successive deliveries, creating an environment where steel producers can benefit from significantly reduced energy costs.
This discriminatory pricing structure is, in practice, implemented by Sonatrach, the Algerian SOE that controls the majority of the country’s natural gas production and supply. Sonatrach’s dominance in the energy sector ensures that natural gas, which accounts for nearly all of the country’s electricity generation, is supplied at prices over 90% below cost recovery levels.2
This preferential pricing led to an average electricity cost for industrial users of USD 12.46/MWh in 2022, compared to the overall average for residential and commercial users of USD 27.54/MWh (BloomergNEF, 2023[9]). The low energy prices are believed to be an important factor in spurring Algeria’s steel production.
Egypt
Egypt is the largest steel producer in Africa and the second largest in the African and Middle East region, producing 10.7 mmt in 2024. In 2023, the country’s steel exports surged to USD 2.33 billion, a 65% increase compared to USD 1.41 billion in 2022. Meanwhile, iron and steel imports declined by 18%, dropping from USD 5.1 billion in 2022 to USD 4.2 billion in 2023. This reduction in imports is closely linked to the substantial increase in domestic production capacity, which helped spur a crude steel production rise of 60%, from 6.5 mmt in 2014 to 10.4 mmt in 2023 (Arab Iron and Steel Union, 2024[10]). Government subsidies and various forms of support to domestic producers seem to have been instrumental in this expansion. Energy subsidies, in particular, enabled domestic steel firms to benefit from energy prices well below their market value, thus enabling steel to be produced at a lower cost.
In 2013, the Egyptian government’s expenditure on energy subsidies reached 22% of the total government annual budget and 7% of gross domestic product (GDP) (ISSD-GSI, 2014[11]). To put this into perspective, the expenditure for energy subsidies exceeded the combined expenditure on education, health and infrastructure, three sectors that significantly improve a country’s sustainable growth prospects. In light of high government deficits, overvalued exchange rates and declining gross international reserves, which resulted in low economic growth, the government decided to gradually phase out the energy subsidies from 2014 until December 2025 (World Bank, 2020[12]). However, due to the coronavirus (COVID-19) pandemic and global and regional challenges, the government reconsidered its position on subsidy policies, deciding to extend the policy indefinitely (Egypt Oil & Gas, 2024[13]). Table 3.1 provides information on the impact of the subsidy for steel during 2019-21. A subsidy amount of EGP 154.5 billion (Egyptian pounds) was announced for 2024/25, the highest value since 2015/16.
Note: MMBtu: Metric Million British thermal unit.
Source: Arab Republic of Egypt (2019[14]); (UNIDO, 2020[15]), DOI available in bibliography.
ASEAN
The ASEAN area is witnessing a rapid expansion in steel production capacity. As of 2024, existing capacity stood at 82.9 mmt, but with new projects, an additional 14.8 mmt could come on line during 2025-27, raising concerns about worsening excess capacity in the region. Government support measures have made it financially attractive for companies to invest in large-scale projects while benefiting from low-cost financing, tax incentives and reduced energy prices. While these measures aim to bolster industrial growth and attract investment, they also contribute to a growing risk of unsustainable excess capacity.
Support for foreign investment in steel production capacity
The ASEAN-63 countries are generally optimistic about their future economic growth since their economies are expected to continue being driven by robust private consumption, infrastructure development, tourism recovery, and a rebound in the electronics sector. Declining inflation further supports this outlook. In this context, governments are promoting foreign investment in the steel industry through support measures (see Box 3.1 for further details).
Indonesia
Since 2018, the Indonesian government has exempted corporate income taxes ranging from 50% to 100% for a period ranging from 5 to 20 years for foreign firms that invest at least USD 33 million in the country. This policy supports foreign steel firms, including POSCO and Dexin, in expanding their steelmaking capacity in Java and Sulawesi (SEAISI, 2023[16]).
In addition to encouraging the expansion of steelmaking capacity, the government has implemented supportive fiscal policies to incentivise importing essential raw materials for export-oriented production since 2020. Through these measures, the government seeks to strengthen the industry’s resilience and capacity to meet both domestic and international demand. The policies exempt companies from raw materials’ import duties and value added tax collection when the finished products are destined for foreign markets while also providing for duty drawbacks when imported raw materials are used in exported products (Direktorat Jenderal Bea dan Cukai, 2023[17])
Support measures for the industry have also included preferential prices for natural gas (ESDM, 2023[18]). Under a 2016 plan, the government provides subsidies for natural gas to the fertiliser, petrochemical, oleochemical, steel, ceramics, glass and rubber gloves industries. The plant gate price for qualifying firms ranges from USD 6 to USD 6.5/MMBtu (Metric Million British thermal unit), while market gas prices range from USD 9.16 to USD 11.99/MMBtu.
The state-owned steel firm Krakatau Steel, the largest steel company in the country, has also benefited from firm-specific government support. Facing financial difficulties, the company restructured its USD 2 billion debt with various creditors in 2019 with the help of government-backed guarantees. State-owned banks held 70% of the debt (The Jakarta Post, 2020[19]). The restructuring cut interest payments to USD 466 million from USD 847 million and was expected to cut costs by around USD 685 million through 2027 (Krakatau Steel, 2024[20])
On 6 October 2020, the government agreed to invest USD 142 million in Krakatau as part of its investment programme (DJKN, 2020[21]). Krakatau issued mandatory convertible bonds with a maturity period of seven years. The company serves as the issuer, with the government as the investor and PT Sarana Multi Infrastructure (Persero) acting as the investment executor under the Ministry of Finance’s assignment. Persero manages all the investment processes and assesses the feasibility of projects from financial, legal and economic perspectives. This initiative was implemented to address the significant decline in operational and production activities in the steel sector and user industries.
Malaysia
In Malaysia, direct and indirect tax incentives are provided under the Promotion of Investments Act 1986, the Income Tax Act 1967, the Customs Act 1967, the Excise Act 1976, and the Free Zones Act 1990 (MIDA, 2021[22]). Two types of tax incentives are available (Pioneer Status [PS] and Investment Tax Allowance [ITA]), which are designed to encourage investment and job creation. PS offers a five-year 70% income tax exemption based on specific criteria, like technology use and local employment. ITA allows a 60% allowance on qualifying capital expenditures to be offset against 70% of their statutory income.
Viet Nam
In 2015, the Vietnamese government provided support to the steel industry through tax incentives, import duty exemptions, and land rental subsidies under its Investment Law decree.4 Steel companies benefit from reduced corporate income tax rates as low as 10%, tax holidays for up to four years and 50% tax reductions for the following nine years (Vietnam Briefing, 2024[23]). Additionally, companies importing machinery and raw materials not produced domestically benefit from import duty exemptions, and those located in special economic zones receive land rental fee exemptions for up to 15 years.
China
Since 2006, Chinese steel firms have been working at shifting their focus from the production of high-volume, commercial-quality products to higher-quality steel, a move supported by the central government and by provinces, in line with nationwide objectives. Financial incentives, including tax breaks, grants and research funding from both central and regional government bodies, have facilitated the transition. The Steel Industry Development Policy that was part of the country’s 11th Five-Year Plan (2006‑2010) highlighted the importance of technological advancement, innovation and sustainable development in the industry (Gov.cn, 2006[24]). This policy marked a decisive move from mass production towards a more quality-centric approach, reflecting a deepening commitment of the government to upgrading the industry’s technological base and product standards. In support of the policy, the government provided financial support to encourage the production of specialised steel types, such as military, bearing, gear, and corrosion-resistant steels, with a view to enhance the quality and technical standards of products and to foster innovation and research within the industry while supporting enterprises to develop R&D programmes.
Although progress was made, steel firms struggled to improve the quality and variety of their steel products. In 2011, only about 30% of the steel products met international advanced levels, and imports continued to play a key role in the supply of high-performance materials (Gov.cn, 2011[25]). The government stepped up its efforts, establishing financial funds to support technological upgrades, modernise production equipment and adopt advanced manufacturing processes. Additionally, the government implemented stricter regulations and quality control measures to ensure that steel products met domestic and international standards.
On the innovation front, the government urged companies to increase their R&D investment to at least 1.5% of their main business revenue, a significant increase from the previous level of 1.1%. This increase was in pursuit of reaching the levels of developed countries, which typically invest around 3% (Gov.cn, 2011[25]).
Under the current five-year plan (2021-2025), the Chinese government is providing financial incentives and support mechanisms focusing primarily on energy efficiency, emission reduction technologies and the development of advanced materials, aligning with the nation’s commitment to begin to slow carbon emissions before 2030, with a view to achieving carbon neutrality by 2060 (Gov.cn, 2022[26]). With respect to standards, guidelines have been released aimed at boosting intelligent manufacturing (Gov.cn, 2023[27]). The government also increased fiscal, taxation and financial support aimed at driving industrial value growth in the steel industry. These programmes focus on achieving a target growth of over 4% industrial value growth in 2024 by supporting high-end, intelligent and green manufacturing (MIIT, 2023[28]).
At the provincial level, governments are providing further support to the industry, tailoring this support to the specific needs in the region. For instance, the Yunnan government is focusing on tackling the issues of excess capacity of steel and high energy consumption (Yunnan Provincial Ecological and Environmental Protection Inspectorate, 2023[29]). In Jiangxi, among other priorities, officials are focusing on boosting the province’s R&D investment in the steel sector, as it is comparatively lower than in other provinces (Qingshan Lake District People’s Government, 2023[30]); (Department of Economy and Information Technology of Hubei Province, 2023[31]). In Shanxi, the government is trying to address its low steel industry concentration (Low Carbon China, 2023[32]). On the other hand, Jiangsu is confronting challenges related to slow progress in decarbonising the industry and is implementing policies to meet the growing demand for skilled professionals (Jiangsu Government, 2023[33])
The provinces are also paying attention to specific segments of the industry. Zhejiang province, for example, known for structural steel, is focusing on increasing the production capacity and quality in this market segment (Zhejiang Provincial Department of Housing and Urban-Rural Development, 2023[34]). Meanwhile, Hubei and Hunan provinces are advancing the production of steel used in automobiles and appliances, transportation, energy, offshore engineering and shipbuilding (Hubei Government, 2023[35]). In contrast, officials in Jiangxi mandated a reduction in structural steel production by less than 50% by 2026, shifting provincial firms’ focus to producing high-quality silicon steel and thick plates (Qingshan Lake District People’s Government, 2023[30]). Finally, the government in Anhui financed multiple projects focused on developing and producing high-end stainless-steel products (General Office of the People’s Government of Anhui Province, 2023[36])
Digitalisation and green transition
Chinese provinces are setting significant objectives for 2025 for digitalisation and transition to green technologies. Shanxi aims to achieve over 90% advanced process equipment in its steel production (Shanxi Provincial Department of Industry and Information Technology, 2023[37]). Hunan, Hebei and Jiangxi will upgrade smaller blast furnaces, converters and electric arc furnaces to obtain 80% automation in key processes and 55% digitalisation in production equipment (Hunan Provincial Department of Industry and Information Technology, 2023[38]); (Hebei Government, 2023[39]). Bridging these ambitious goals and their practical implementation, provincial programmes offer substantial support to drive this transformation. For instance, Shaanxi province provided grants of up to CNY 5 million (yuan renminbi) for steel firms that buy advanced equipment and rewarded smart factories, smart workshops, and smart production lines for their innovation (Baoji Hi-Tech Industrial Development Zone, 2023[40]). Steel firms undergoing technological upgrades in Fujian received government support provided in the form of differential electricity prices of up to CNY 20 million (Fujian Provincial Department of Industry and Information Technology, 2023[41])
Substantial reductions in energy and resource consumption are also underway. The government in Henan plans to cut total energy consumption by over 5%, decrease energy intensity by over 15%, lower water consumption intensity by 10%, and utilise 10 mmt of scrap steel annually (Henan Government, 2023[42]). Officials in Hunan are targeting a 14.5% reduction in value added energy consumption compared to 2020, a 57% utilisation rate of industrial solid waste, a 12% decrease in water consumption per unit of industrial added value, and aims to recycle 30 mmt of renewable resources (Hunan Provincial Department of Industry and Information Technology, 2023[38]).Jiangxi’s and Shandong’s major steel enterprises will ensure that over 30% of their steel production capacity meets energy efficiency benchmarks and adheres to ultra-low emission standards by 2025 (Qingshan Lake District People’s Government, 2023[30]); (Shandong Provincial Department of Industry and Information Technology, 2023[43])
Capacity replacement and capacity relocation
Provincial programmes are also driving a transformative shift in steelmaking capacities to enhance efficiency and environmental sustainability. The government in Henan is targeting the phase-out of blast furnaces below 1 200 cubic metres and converters and electric arc furnaces below 100 tonnes by the end of 2024, transferring the capacity toward the coast (Henan Government, 2023[42]). Officials in Jiangxi aim to increase electric furnace steel output to over 15% of its crude steel production, optimising product structure (Qingshan Lake District People’s Government, 2023[30]). Similarly, in Shaanxi and Sichuan, the governments are implementing capacity replacement for smaller blast furnaces, converters and electric furnaces, in line with long-term goals set by the government (Baoji Hi-Tech Industrial Development Zone, 2023[40]); (Sichuan Provincial and Economic and Information Department, 2023[44])
Innovation
Chinese provinces are implementing measures to foster innovation in the steel industry. Officials in Henan are increasing the industry’s R&D investment intensity to over 1.5%, aiming for breakthroughs in more than 15 core technologies and enhancing the production of advanced materials (Henan Government, 2023[42]). SOEs in Hebei enjoy preferential policies and large deductions for R&D expenses, with the aim of achieving an annual R&D investment growth of over 10.5% by 2025 (Hebei Government, 2023[39]). Officials in Shaanxi required manufacturing enterprises, including steel firms, to increase their annual R&D investment by 5%, offering up to CNY 5 million in subsidies for acquiring domestic equipment (Baoji Hi-Tech Industrial Development Zone, 2023[40]).
Higher-grade products
Provincial programmes are intensifying their focus on the development of high-value steel products. Officials in Hebei are supporting the production of high--value--added products, such as special alloy steel, high-purity iron and rare earth corrosion-resistant steel, and high-quality plates for automobiles and appliances. They are also encouraging R&D in high-end wire rods and structural steel. To incentivise excellence in these areas, Hebei offers significant support, with national-level manufacturing champions receiving a one-time grant of CNY 2 million (Hebei Government, 2023[39]). Similarly, officials in Hubei are dedicated to optimising the province’s steel products structure, setting ambitious targets for special steel to comprise about 70% of the province’s total capacity. This includes specific production goals for silicon and bearing steels (Hubei Government, 2023[35]). In Henan, the government has a goal of achieving 50% of its steel production to be high-quality special steel, with over 15% coming from electric furnaces by the end of 2025 (Henan Government, 2023[42]).
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← 1. In accounting, a grant tied to an asset will often be reported in the profit and loss statement of the company at an amortised rate similar to the rate of amortisation of the asset. The OECD MAGIC (MAnufacturing Groups and Industrial Corporations) database is a confidential firm-level database combining basic financial and economic data and estimates of government support at the level of each industrial group covered. It is meant to help improve understanding of the scope and scale of government support in manufacturing and to enable analysis of how this support affects firms’ decisions and markets. The database covers more than 500 firms of the world’s largest manufacturing groups across 15 key industrial sectors (including steel) and over the period 2005-23. For each sector, the firm sample is selected starting from the top firms by revenue or capacity such that the resulting coverage accounts for a sizable, meaningful portion of global sales or capacity. The geographical origin of firms in each sector is therefore largely determined by which jurisdictions occupy relatively large shares of global production. As of 2024, the OECD MAGIC database includes estimates of government support taking the form of governments grants, corporate income-tax concessions, and below-market borrowings.
← 2. Based on the International Monetary Fund’s (IMF) estimates using the Climate Policy Assessment Tool (CPAT)4 developed jointly by the IMF and World Bank (IMF. Middle East and Central Asia Dept., 2024[45]).
← 3. The ASEAN+6 group comprises the ten countries of the Association of Southeast Asian Nations (ASEAN) and six other countries in the Asia-Pacific region: Australia, China, India, Japan, Korea and New Zealand.
← 4. Decree No. 118/2015/ND-CP of 12 November 2015. In Viet Nam, land is owned by the state. The government provides rent exemptions, and reductions apply to a number of investment projects that satisfy certain conditions, such as being directed towards the development of sectors or business areas encouraged by the government in specifically determined geographical locations. Foreign companies can enjoy land rent exemptions for at least three years, and up to the whole operation period.