OECD Warns: Global Steel Overcapacity to Reach 745 Million Tonnes by 2028
Alina Collins
A new OECD report projects global excess steel capacity will swell to 745 million tonnes by 2028 — roughly 320 million tonnes more than all OECD members currently produce in a year. The steel industry is heading into a structural supply-demand mismatch that makes price wars and trade friction near-inevitable.
How big is the glut?
Global excess steel capacity sits at roughly 640 million tonnes in 2025 and is projected to reach 745 million tonnes by 2028.
This means → the surplus will grow by over 100 million tonnes in three years — roughly equal to Japan's entire annual steel output appearing out of nowhere.
Demand is barely moving: global steel demand is set to rise just 34 million tonnes between 2026 and 2028, while producers plan to add 139 million tonnes of new capacity — supply growth outpacing demand by more than four to one.
Who is adding the most?
China plans to add 38.6 million tonnes of capacity between 2026 and 2028, the largest single-country increase.
Chinese steel exports hit 131 million tonnes in 2025, up 153% from 2020 — exceeding the EU's total steel output that year.
In plain terms = China cannot absorb its own steel and is shipping the surplus to the world at record pace, even as it keeps expanding capacity.
What is the "detour export" route?
The OECD found that some exporters ship semi-finished steel to Southeast Asia for processing, then re-export it to OECD markets labelled as Southeast Asian product — bypassing tariffs and anti-dumping duties.
The evidence: China's semi-finished steel exports to Southeast Asia jumped 300%.
This reflects a deeper problem — existing trade barriers have not stopped low-cost steel from entering OECD markets; they have simply rerouted it.
What role do government subsidies play?
The OECD names government subsidies as the primary driver of overcapacity.
In 2024 the median subsidy received by Chinese steel firms was 15 times that of producers elsewhere.
This means → much of the new capacity is not market-driven but state-funded. If subsidies tighten, the viability of that capacity comes into question.
What other cost pressures are building?
Energy can account for 40% of total steelmaking costs; the energy-price spike tied to the Iran conflict is adding further strain.
42 countries now restrict steel-scrap exports. Scrap is the key feedstock for electric-arc-furnace steelmaking — a process that melts recycled steel rather than smelting iron ore — and tighter supply is pushing production costs higher.
European steelmakers face high labour costs, high energy costs, and stricter environmental standards simultaneously, leaving them most vulnerable in a low-price cycle.
What comes next?
OECD Secretary-General Mathias Cormann called for "tackling the problem at its roots," pointing directly at harmful subsidies and non-market practices.
In plain terms = without a coordinated set of international rules, the overcapacity problem will only compound — and eventually damage every country's steel industry.
The OECD's explicit warning: "If current trends continue, the long-term viability of the industry and the economic security of many countries will be undermined."
Content is for reference only, not financial advice.