At its 94th session held on September 25-26, 2023, the OECD Steel Committee voiced concerns about the deterioration in global steel market conditions that is currently being driven by growing overcapacity, softening demand for steel, and government interventions in some economies that continue to distort steel markets.
The committee stated that the gradual recovery in global steel market conditions that began earlier this year was short-lived and one of the reasons for this situation is overcapacity amid the weaker-than-expected steel demand. “Global excess capacity is on the rise and steel demand is starting to falter amidst growing concerns about China’s real estate crisis,” the committee chairman Ulf Zumkley said. According to Mr. Zumkley, five consecutive years of steelmaking capacity growth have led to over-investment in the industry and world steelmaking capacity is swelling to a record-high level of 2.5 billion mt in 2023. The OECD projects global capacity will surge by 56 million mt in 2023 alone, taking the gap between global capacity and steel production to 612 million mt. Regional developments reveal significant rates of capacity growth in Africa, the ASEAN region and the Middle East, while the world’s two largest steel-producing economies, China and India, are contributing significantly to the aggregate expansion given their larger size. The OECD said it expects that the problem of overcapacity is expected to worsen in the future and global steelmaking capacity is projected to increase significantly over the next three years, with 150 million mt of new capacity investments underway or in the planning stage over the 2024-26 period.
As for the decarbonization issue, the committee chairman stated that, while the steel industry is very advanced in this pathway compared to many other heavy industries, governments still need to improve the enabling conditions to accelerate this process. Also, market forces should work together to ensure that government policies ensure continued open access to critical minerals for this goal.
One of the issues that the chairman underlined was accelerating the committee’s work to build further transparency of market-distorting subsidies and their impacts on the steel industry. The committee will continue to focus on mitigating the harmful impacts of market-distorting subsidies on trading partners, Zumkley said.