Global excess steelmaking capacity is projected to reach 745 million tonnes by 2028, as planned capacity growth of 5.7% continues to outpace demand growth of just 0.9% annually, according to the Organisation for Economic Co-operation and Development’s (OECD) Steel Outlook 2026, monitored by Kallanish.
The figure would exceed current OECD steel production by 319mt and approach the peak levels seen during the last global steel crisis.
Subsidies and other non-market policies continue to drive excess capacity and distort competition. In 2024, the median Chinese steel producer received support equivalent to 15 times that of producers elsewhere relative to asset size. Chinese steel exports reached a record 131mt in 2025, exceeding the European Union’s total steel production that year, as weak domestic demand pushed producers to seek export markets.
Following antidumping and countervailing duty actions against Chinese steel products, exports of the same products from China to Southeast Asia increased, while shipments of those products from Southeast Asian countries to OECD markets rose. The OECD says these trends point to growing concerns over trade diversion and the circumvention of trade measures.
China’s semi-finished steel exports to Southeast Asia surged 300% in 2025, suggesting that material may be processed in third countries before being re-exported to markets where trade restrictions are in place.
The OECD warns that excess capacity is eroding the competitiveness of market-oriented producers, depressing prices and keeping capacity utilisation rates at unsustainable levels. Global utilisation rates could fall from 76% in 2025 to 74% or lower by 2028, intensifying financial pressure across the industry. The organisation further cautions that excess capacity is delaying investment in lower-emission steelmaking technologies and has already contributed to the postponement of several decarbonisation projects worldwide.
Additional pressures stem from rising energy costs, supply chain disruptions, growing raw material constraints and expanding export restrictions. Scrap exports are now restricted by 42 countries, while controls on chromium and nickel ores are becoming common, adding further uncertainty for steelmakers.
