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OECD: Global steelmaking excess capacity continues to rise, creating worrying outlook for coming years

Thursday, 11 January 2024 16:00:03 (GMT+3)   |   Istanbul

Global steelmaking excess capacity is on the rise again and is expected to be as high as in 2014, at the start of the last steel crisis, according to the January report of the Organization for Economic Co-operation and Development (OECD). Steelmaking capacity is forecast to increase to 2.49 billion mt by the end of 2023, despite increasingly challenging market conditions, marking the fifth consecutive year of growth. The global capacity increase this year by 57 million mt or 2.3 percent is the first time in 10 years that the annual increase in global capacity exceeded 50 million mt. Asia accounts for 53.3 percent of this year’s global increase.

The OECD stated that the problem of overcapacity is projected to increase significantly over the next three years (2024-2026), with 46 million mt of capacity additions underway and an additional 78 million mt in the planning stage. At the same time, noting that the global capacity utilization rate has deteriorated for two years in a row, the report said that the gap between the global steel capacity and production has widened, reaching 610 million mt in 2023.

Meanwhile, prospects for global steel demand growth are clouded by growing risks of a serious downturn in Chinese steel demand as a consequence of the real estate downturn and its ripple effects on the economy.

Excess capacity is also contributing significantly to emissions from the steel industry. According to the calculations, even a one-third reduction in global excess capacity would lead to a reduction in the emissions of the global steel sector by a range of 2-14 percent. The bleak outlook for steel demand and the increasing shift of steel capacity from China to other regions with new investments, especially in the ASEAN region and Africa, create a worrying outlook for the coming years. This is also a major obstacle to achieving steel decarbonization targets.