Global Steel Crisis Intensifies Amid Oversupply, OECD Warns
Global steel crisis deepens as oversupply – The OECD has raised alarms over the escalating global steel crisis, pointing to a critical overproduction issue that threatens market stability. With steelmaking capacities expanding faster than demand, the sector faces an oversupply that could drive prices down and create long-term challenges. The report highlights how this imbalance is particularly pronounced in non-OECD countries, where subsidies have fueled capacity growth. As a result, the global steel market is at a crossroads, with policymakers urging swift measures to prevent further destabilization.
Government Subsidies and Overcapacity Growth
Government support remains a key driver of the current oversupply crisis, with OECD data showing that state-backed incentives have enabled significant capacity expansion beyond member states. Over the past two decades, this trend has led to a surge in steel production, often outpacing domestic consumption. In 2024, Chinese steel firms received subsidies amounting to 15 times those given to producers in other regions, relative to their assets, exacerbating the global surplus. Such financial backing has allowed manufacturers to maintain lower costs and undercut international competitors, deepening the overcapacity challenge.
China’s Export Surge and Market Impacts
China’s steel industry continues to dominate global exports, with 131 million tonnes shipped in 2025—a 153% jump from 2020. This export surge reflects a broader trend of non-OECD nations increasing their production, while OECD countries struggle to keep up. The OECD warns that this oversupply is not only a domestic issue but a global one, with the combined output of the European Union in 2020 now dwarfed by China’s exports. As production outpaces demand, the steel market faces potential volatility, impacting industries reliant on the material.
By 2028, the OECD predicts the global steel oversupply will grow to 745 million tonnes, up from 640 million tonnes in 2025. This surge is driven by planned capacity expansions, with producers aiming to add up to 139 million tonnes of new steelmaking infrastructure. Meanwhile, demand is expected to increase by only 34 million tonnes during the same period, creating a stark imbalance. The report emphasizes that this oversupply could destabilize steel prices, complicate supply chains, and force firms to rely more heavily on imported materials to sustain operations.
Strategic Export Tactics and Rising Energy Costs
To bypass trade barriers, some steel exporters are adopting new strategies, such as shifting semi-finished products to Southeast Asia for further processing. This approach helps them avoid tariffs and anti-dumping measures while still meeting international demand. The OECD notes a 300% rise in Chinese semi-finished steel exports to the region, suggesting this could become a common practice. Simultaneously, energy costs have surged, driven by Middle Eastern conflicts, which now account for up to 40% of total production expenses. This financial pressure compounds the challenges posed by the ongoing oversupply.
The crisis underscores the fragility of the steel sector, which is vital for construction, defense, and energy infrastructure. Domestic producers, already grappling with higher operational costs, face a difficult landscape as overproduction intensifies. The OECD highlights that sustained oversupply may erode local competitiveness, pushing companies to seek cheaper alternatives abroad. These shifts could have ripple effects across industries dependent on steel, requiring coordinated global strategies to stabilize supply and demand.
Raw Material Shortages and Export Restrictions
Raw material constraints are further intensifying the global steel crisis, as the availability of iron ore and coking coal remains uncertain. With no country fully self-sufficient in these inputs, steelmakers face supply chain vulnerabilities that could worsen the oversupply situation. Additionally, 42 nations have imposed export restrictions on steel scrap, a critical component for electric arc furnaces. These measures, combined with the existing surplus, are creating a complex environment where production and consumption are increasingly out of sync.
