A group of countries has stepped up collaboration under the auspices of the Organisation for Economic Co-operation and Development to mitigate the impact of excess global steel capacity, which is increasingly impacting the overall health of the steel industry and eroding value chains, Anthony de Carvalho, OECD Steel Unit Head, said at the Latin America Steel Association (Alacero) annual conference.
“The number of like-minded countries is growing.… Coordinated action will have stronger impact,” de Carvalho said in a presentation to delegates at the event in Mexico City on Nov. 10.
The OECD’s Global Forum on Steel Excess Capacity (GFSEC) a G-20 initiative founded in 2016, is a policy body seeking solutions for overcapacity and now groups together 28 country members, including Mexico, Brazil and Argentina from Latin America, he noted.
In recent weeks, GFSEC met in Milwaukee, establishing a Milwaukee Framework to promote committed action by industry and government representatives willing to coordinate efforts to eliminate market-distorting subsidies and financing that contribute to excess steel capacity, and to enhance supply chain transparency. Prevention of trade circumvention is one of the actions envisaged, de Carvalho said.
The Framework will later report to ministers of the countries involved in a move to strengthen action against creation and utilization of excess capacity.
“At the OECD we’re really excited about this…. we’re on the cusp of a new era,” said de Carvalho, referring to the new atmosphere of industry and government collaboration.
OECD is also working specifically with Alacero on a regional study on Latin America’s absorption of global excess capacity, to be launched at an OECD meeting next week, de Carvalho noted.
Calls for international collaboration to combat global steel overcapacity and underpriced imports were made by speakers from various countries at the Alacero event.
“The global steel industry’s excess capacity situation is persisting and getting worse; it’s accelerating,” de Carvalho said.
In June, the OECD estimated global steel overcapacity would reach 745 million metric tons in 2028 in a “business as usual” scenario, with an additional 139 million mt of new steelmaking capacity set to come on stream between 2026 and 2028, with this increase amounting to more than the entire steelmaking capacity of Latin America, de Carvalho said. Global steel demand is projected to grow by just 34 million mt over the same period, he noted.
Total global steelmaking capacity is forecast to reach up to 2.58 billion mt in 2028, according to OECD figures.
Market-distorting subsidies for steel production, particularly in China, are the root cause of both excess production and capacity, de Carvalho said.
“How can we [in the rest of the world] protect ourselves from this? It’s difficult unless we see subsidy reform in China… where the steel subsidy rate has nearly doubled since 2019,” he said. “This excess capacity is structural in nature because market forces are not working effectively: Chinese steel will continue to flood into international markets.”
Steel exports from China soared to a record 131 million mt in 2025, up 153% since 2020 and exceeding the total steel production of the EU in 2025, de Carvalho said.
Direct and indirect steel imports into Latin America’s six biggest economies surged 47% since 2019 to reach 55.4 million mt in 2025 — virtually equivalent to the region’s entire crude steel production last year — with 39% of the total coming from China, “and we don’t see this stopping,” de Carvalho said. This surge has displaced Latin American steel production and brought about a collapse in intraregional trade, he said.
“Regional consumption is rising, but production is falling, with average capacity working rates in Latin America down to 60% last year… we’re seeing an erosion of value chains…. that could result in steel plant closures,” he said.
Decline in Chinese steel demand
Rafael Scott, partner at McKinsey & Company, said at the event that the consultancy expects a continuous decline in Chinese steel demand over the next decade as economic development in China becomes less steel-intensive, with less construction as the economy matures.
Mainland China’s finished steel demand should fall from 2020’s 1.009 billion mt to 769 million mt in 2035, also contributing to an ongoing squeeze in mills’ margins, encouraging exports to nations where prices may be higher, according to McKinsey’s data.
Altagracia Gomez Sierra, coordinator of the Mexican government’s Advisory Council for Regional Economic Development and Relocation, spoke at the Alacero conference Nov. 11 of the need to speed development of the so-called “Mexico Plan” to boost national content, increase domestic added value and take measures to further protect Mexican industries including steel, described as “strategic.”
The Mexico Plan has been under development in Mexico since 2024. Maximo Vedoya, CEO of Latin American steelmaker Ternium, said that other countries in the region might also benefit from developing similar national plans.
Gomez Sierra emphasized the need for Latin American nations to collaborate to protect their domestic markets. “Regionalism is essential,” she said.
The Mexican economy ministry’s undersecretary of foreign trade, Luis Rosendo Gutierrez Romano, told the congress that a recent strengthening of trade defense actions in Mexico has resulted in about 90% of the country’s steel product types having some form of trade defense, helping to protect domestic steel industry investments.
Author: Diana Kinch
