Global steel excess capacity is projected to surge to 745 million metric tons by 2028, worsening an overcapacity crisis that threatens the viability of market-oriented producers worldwide, according to the OECD Steel Outlook 2026, released June 4.
The forecast comes as global steelmaking capacity reached a record 2.445 billion mt in 2025—its fifth consecutive year of expansion—even as steel demand contracted for the fourth straight year. Excess capacity climbed to 640 million mt in 2025, already exceeding total OECD steel production by more than 200 million mt.
The widening gap between capacity and demand will push utilization rates down to 74% or lower by 2028, from 76% in 2025, intensifying financial pressure across the industry. Planned capacity additions of up to 138.8 million mt through 2028 represent a 5.7% increase from 2025 levels, with most expansion occurring outside the OECD area.
Demand stagnation
The capacity buildup is colliding with persistently weak demand. Global steel consumption declined 2.6% in 2025 and is projected to remain nearly flat in 2026, with growth averaging just 0.9% annually through 2030, reaching 1.89 billion mt.
China, the world’s largest steel consumer, saw demand plunge 6.9% in 2025 as its property sector downturn deepened. Chinese demand is expected to contract by another 0.6% in 2026 and continue to decline through 2030, the OECD said.
The weakness in China has triggered a massive export surge, with Chinese steelmakers shipping a record 131.2 million mt to foreign markets in 2025, up 13.8%, in contrast to the 6.2% decline in worldsteel exports. China’s exports have more than doubled during 2019-2025, and the country’s share of world exports has soared to 41% in 2025 from 19% in 2019. Association of Southeast Asian Nations (ASEAN) exporters also saw their exports more than double during 2019-2025, reaching 20.8 million mt in 2025.
India and Southeast Asia showed stronger growth prospects, with Indian demand rising 9.8% in 2025 and projected to grow 5.1% annually through 2030. Both regions, however, are also adding significant capacity, with India planning up to 31.8 million mt of new capacity by 2028 after adding 41.4 million mt during 2021-2025.
Subsidy distortions
The OECD report highlighted growing distortions from government subsidies, particularly in China. The median Chinese steel company received 15 times more subsidies relative to asset size than producers elsewhere in 2024, the report said.
Less-subsidized steel firms are losing market share to more heavily subsidized competitors, despite stronger financial performance, the OECD said.
Trade actions have intensified in response to import surges, with antidumping and countervailing duty investigations increasing globally. The OECD, however, warned of growing evidence of trade remedy circumvention and diversion.
The report also flagged rising export restrictions on steelmaking materials, particularly ferrous scrap, which are compounding pressure on raw material prices and threatening industry viability.
Author: Annalisa Villa
