The global steel industry faces its most severe crisis in recent years as excess capacity reaches an unprecedented 573 million metric tons in 2024, according to the latest OECD Steel Committee report. The committee, which gathered 250 delegates from 40 major steel-producing economies in Paris, highlighted deteriorating market conditions that threaten the industry's stability worldwide.
Global steel demand has declined for the third consecutive year, with China's real estate crisis playing a major role. Chinese steel demand fell by nearly 5% in the first eight months of 2024, while the rest of the world experiences sluggish demand due to challenging economic conditions and elevated manufacturing costs. Despite this weakening demand, global steelmaking capacity continues to expand, with an additional 50 million metric tons of new capacity entering the market in 2024 - the largest annual increase since 2013.
The crisis has been exacerbated by China's surging steel exports, which have reached nearly 100 million metric tons annually. Chinese steel exports have more than doubled since 2020, with particularly strong growth in shipments to ASEAN countries, which increased 20% compared to 2023. This export surge has created significant competitive pressures for steel producers in Europe, Japan, Korea, and the Americas.
Market distortions have become increasingly severe, with Chinese steel companies receiving 5-10 times more subsidies than firms in other countries through various mechanisms including cash grants, below-market loans, and tax rebates. The OECD found that for every additional $1 million in cash grants, steel production capacity increases by 7,500 to 9,500 metric tons, contributing to the overcapacity problem.
The industry's financial health continues to deteriorate, with steel prices falling significantly. Rebar and flat steel prices declined by 5.6% and 4.6% respectively in October 2024 compared to the previous year, representing total decreases of 30.1% and 50.1% from their July 2021 peaks. Many steel firms, particularly in countries with excess capacity, are struggling to maintain profitability.
Trade tensions have escalated in response to these market conditions. The first nine months of 2024 saw 67 new antidumping investigations launched globally - the highest number since the 2015-16 excess capacity crisis. The committee noted growing concerns about trade circumvention, where dumped or subsidized steel exports bypass legitimate trade measures.
Looking ahead, the situation appears likely to worsen, with projections showing an additional 146 million metric tons of new steelmaking capacity coming online between 2025-2027. Asia, particularly China and India, will account for 80% of these additions, with 40% using basic oxygen furnace technology, which has relatively high carbon emissions compared to alternative methods.
