OECD warns of deepening steel industry challenges amid trade tensions

The Organisation for Economic Co-operation and Development (OECD) has published its 2025 Steel Outlook, highlighting growing structural pressures in the global steel industry. The report warns that continued capacity expansion, particularly in Asia, threatens to worsen existing overcapacity, depress prices, and undermine investment in cleaner technologies.

Overcapacity and Sluggish Demand

Global steelmaking capacity is projected to increase by up to 6.7% (165 million metric tonnes) between 2025 and 2027, with China and India accounting for the majority of new additions. However, demand growth remains weak, with global consumption expected to rise only 0.7% annually through 2030. Demand is falling in China and stagnating in OECD economies, while ASEAN and MENA regions are seeing moderate growth.

As a result, global capacity utilisation could fall to around 70%, putting further pressure on profitability, which has already declined since peaking in 2021.

Trade Distortions and Export Surge

Subsidies—especially in China, where support is estimated at ten times the OECD average—continue to distort competition and fuel overcapacity. These subsidies, along with rising Chinese steel exports (which reached a record 118 million tonnes in 2024), have led to a sharp increase in global trade actions.

In 2024, 81 antidumping cases involving steel were launched by 19 governments, with China the target in over one-third of the cases. Concerns about circumvention practices, such as routing exports through third countries, are also on the rise.

Decarbonisation Efforts Hampered

Overcapacity is limiting the steel industry’s ability to invest in decarbonisation. While many producers aim to reduce emissions, 40% of new capacity planned through 2027 will use carbon-intensive blast furnace methods. Deployment of cleaner technologies like hydrogen-based reduction and carbon capture remains uneven due to cost, infrastructure, and resource limitations.

Need for Greater Global Cooperation

The OECD calls for stronger international collaboration to address structural imbalances, reduce trade tensions, and support the industry’s long-term sustainability. Without coordinated action, the report warns that market instability and environmental challenges in the steel sector are likely to intensify.

Source and Photo: OECD