The Steel Committee of the Organization for Economic Co-operation and Development (OECD) has evaluated the current and future dynamics of the global steel industry and has shared its expectations.
Accordingly, global steel market conditions are deteriorating due to significant volatility, while inflation and weak economic growth are hampering steel demand. The committee expects that global steel demand will maintain its very sluggish trend in the years 2024 and 2025.
In 2023, global steelmaking capacity exceeded production by 552 million mt, which is more than the combined steel output of India, the Americas, EU, Japan, and Turkey. Excess capacity is expected to increase tremendously over the next three years. The committee stated that about 158 million mt of new capacity is likely to be online by 2026 and that current demand is increasing by only around 36 million mt per year. India, the Middle East, and Southeast Asia which is supported by significant Chinese investments, will host around 60 percent of the new capacity increase in the next three years.
In the meantime, China caused global steel exports to rise to 282 million mt last year and exports from several countries such as those in Southeast Asia have increased significantly due to domestic overcapacity. As a result, the committee warned that rise of steel excess capacity and the increase in exports could lead to more widespread application of trade safeguards and, even though they are important for carbon emission reductions, they may disintegrate the global steel market further. For this reason, the committee will make contact with members and try to find the best solutions to deal with the issue.
Also of note, the committee highlighted that current and past subsidies create global excess capacity, which has long-lasting negative effects on international steel markets. Therefore, the committee will increase dialogue and urgently seek solutions to create a more level playground.
Additionally, the transition to competitive low-carbon steel production can be accelerated if excess capacity and its root causes are addressed. This will also require that inputs for decarbonization are available and affordable to the steel industry, including steel scrap, renewable energy, high-grade iron ore, hydrogen, access to R&D, innovation, and capital for investments. The committee is actively co-operating especially on the scrap availability issue, due to heightened concerns about the availability of scrap for future low-carbon steel production. Also, steel produced from scrap in EAF is projected to reach 50 percent of world steel production by 2050.