According to the Steel Outlook 2025 report published by the Organization for Economic Co-operation and Development (OECD), the world's steel industry is heading into a prolonged crisis as massive capacity expansion collides with weak demand, triggering a surge in trade disputes and hampering efforts to reduce carbon emissions.
Steel producers worldwide are bracing for deeper troubles as planned capacity increases of 165 million mt by 2027 threaten to push the industry's utilization rate down to 70 percent. Asian economies, led by China and India, will account for nearly 58 percent of new capacity, even as global demand is expected to grow by just 0.7 percent annually through 2030.
The capacity glut has already driven steel prices to four-year lows and squeezed profit margins across the industry. Chinese steel exports hit a record 118 million mt in 2024, flooding international markets with low-priced products and prompting governments to launch 81 new antidumping investigations - a five-fold increase from 2023.
Subsidies fuel unfair competition
Government subsidies continue to distort the global steel market, particularly in non-OECD countries where capacity is expanding fastest. China's subsidization rate runs ten times higher than OECD nations, with support including below-market loans, subsidized energy prices, and preferential tax treatment. These measures keep inefficient plants operating while encouraging commercially unjustified investments. According to the OECD, Chinese demand will decline appreciably due to the downturn in construction and structural shifts in China’s economy.
Trade wars intensify
The organization stated that the flood of Chinese exports has triggered a sharp escalation in trade protection measures. Nearly 80 percent of new antidumping cases target Asian producers, with China alone accounting for more than one-third of investigations. Countries are also implementing broader sectoral tariffs to shield domestic steel industries.
Steel producers are responding by rerouting trade through third countries to circumvent restrictions. OECD analysis found that suspicious trade flows totaled 21.5 million mt worth €13.3 billion between 2013-2020, representing nearly 18 percent of steel trade targeted by antidumping measures. Concern over circumvention has resulted in a growing number of countries developing mechanisms to discourage the practice.
Decarbonization goals at risk
On the other hand, the industry's financial struggles are undermining efforts to reduce carbon emissions. More than 40 percent of new capacity coming online through 2027 will use emission-intensive blast furnace technology rather than cleaner alternatives. The longevity of steel equipment means decarbonization investments require long-term market stability - conditions that excess capacity makes impossible.
Major producers are exploring various decarbonization strategies, with 74 percent planning carbon capture technologies in their integrated BF-BOF facilities to control emissions and 52 percent of EAF-based producers considering hydrogen-based processes. However, these technologies require significant capital investment and access to renewable energy sources that are unevenly distributed globally.
The OECD warns that, without enhanced international cooperation to address structural imbalances between capacity and demand, trade tensions will likely persist and the industry's longer-term prospects will remain dim.