Global steel sector under strain from energy costs, excess capacity: OECD

The global steel industry faces mounting pressure from weak demand, rising costs and growing excess capacity, while subsidies in some major producing countries continue to distort competition, according to an OECD report released Thursday.

The Paris-based organization said in its OECD Steel Outlook 2026 that global steel excess capacity is projected to reach 745 million tons by 2028 – 319 million tons more than the OECD’s current steel production.

Planned capacity additions of up to 139 million tons through 2028 represent a 5.7% increase from 2025 levels, while demand growth is expected to remain subdued at around 0.9% per year, the report said.

The OECD said global excess capacity reached 640 million tons in 2025, more than one-third of last year’s total steel demand of around 1.8 billion tons.

OECD Secretary-General Mathias Cormann warned that excess capacity poses growing risks to producers and economies.

“Excess capacity distorts global markets, undermines economic security and resilience, and stands in the way of innovation and sustainability,” Cormann said.

Subsidies distort markets

Most new capacity is being added outside the OECD, often with government support, the report said.

In 2024, the median Chinese steel producer received 15 times more in subsidies relative to total assets than producers elsewhere, up from 10 times in 2023.

At the same time, China accounted for 54% of global excess steel capacity and weak domestic demand has pushed producers toward export markets, according to the report.

Chinese steelmakers exported a record 131 million tons in 2025, a 153% increase from 2020 and more than the European Union's total steel production last year.

“This rise in excess capacity is flooding international markets with dumped and subsidized exports,” the report said.

It added that efforts to restore fair competition are increasingly being weakened by circumvention of trade measures intended to level the playing field.

Raw material restrictions, energy costs add pressure

The report also warned of increasing pressure on raw material supplies, noting that no steel-producing country is fully self-sufficient in critical inputs.

Export restrictions on key steelmaking materials have expanded globally, with 42 countries now restricting scrap exports.

The OECD also said higher energy costs linked to conflicts in the Middle East have added pressure on producers, with energy accounting for up to 40% of steel production costs.

These factors have weighed on investment decisions and contributed to delays in low-emission steel projects, according to the report.

“We must address the root causes, including harmful subsidies and other non-market practices. This means stronger international cooperation and a level playing field for steel producers everywhere,” Cormann said.