Posted on 30 May 2025
Amid weak growth in global steel demand, the excess of steel production capacity worldwide is projected to rise to 721 million tonnes by 2027, the Organization for Economic Co-operation and Development (OECD) noted in its latest Steel Outlook.
High levels of subsidies in regions where steelmaking capacity is growing the fastest, particularly in China, among Association of Southeast Asian Nations (ASEAN) countries and Middle East and North Africa (MENA) areas, driving this imbalance, posing risks to market stability, employment, supply chains and decarbonisation efforts, the organization warned.
Substantial increases of up to 165 million tonnes or 6.7% in global steelmaking capacity are planned from 2025 to 2027, which, if realised, will exacerbate global excess capacity, the OECD outlook predicted. Asian economies are expected to account for 58% of the new capacity, led by substantial increases in China and India.
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, the report observed. Already, steel prices and profitability have declined sharply from their strong 2021 levels.
During 2024, solid demand growth in many emerging markets was largely offset by a strong contraction in China and a decline in the OECD area, it noted, warning that through to 2030, world steel demand is expected to grow by only 0.7% per year.
Specifically, demand in the OECD area will remain generally constant, while Chinese demand will decline appreciably due to the downturn in construction and structural shifts in China's economy. In contrast, demand will grow strongly in the ASEAN and MENA areas.
Notably, a surge in Chinese exports is leading to a sharp increase in trade measures globally, the OECD pointed out. In 2024, Chinese steel exports surged to a record level of 118 million tonnes, while 19 governments had initiated 81 anti-dumping investigations involving steel products, a five-fold increase from the 2023 level, according to the report. Almost 80% of the cases were initiated against Asian producers, with China alone accounting for more than one-third of the total.
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, the Outlook added.
More than 40% of the 165 million tonnes 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 process, it calculated.
Source:Mysteel Global
