96th Session of the Steel Committee: Statement by the Chair

Statement by Mr. Ulf Zumkley, Chair of the OECD Steel Committee
96th session, 12-13 November 2024, Paris

The OECD Steel Committee brought together 250 government and industry delegates from 40 major steel-producing economies to discuss the deteriorating steel market situation and call for action on all fronts. At its 96th session on 12-13 November in Paris, the Steel Committee reviewed market developments and the outlook, concluding that the underlying situation in the steel industry remains serious.

Factors that have signaled steel crises in the past are present today: global excess capacity is rising strongly, steel prices have been falling, exports of unfairly traded steel and steel-intensive products, including from sources of excess capacity, are flooding international markets, and trade actions are escalating.

Committee discussions indicated that world steel demand continues to decline for the third year in a row, with many firms continuing to struggle to maintain, or return to, profitability. Global excess capacity has reached crisis levels, leading to trade disturbances and market failures that are affecting most steel-producing countries, regardless of their size or level of development. China’s net exports have surged to nearly 100 million metric tonnes in 2024, on an annualised basis, causing significant market distortions. China’s steel subsidies are more than five times higher than other non-OECD economies, and more than 10 times higher than OECD countries. Steel subsidies in non-OECD countries are 42% higher in terms of cash grants and 11 times higher with respect to below-market borrowings than in OECD countries. Many delegations noted that steel import surges are impacting their economies, including dumped and subsidised steel across a range of steel and downstream steel products. The impacts of the unfair competition are considerable and tangible: across the OECD, efficient plants have had to scale back their production, reduce their capacity, and some have even shut down permanently as a result of the persistent market distortions. These impacts go far beyond the steel industry itself, affecting upstream and downstream manufacturing and even threatening climate mitigation efforts. Tens of thousands of steel jobs have been lost around the world in the past years across many members, and thousands more are currently on the line. Delegates raised concerns about the risk that unfair competition poses for deindustrialisation and workers, and the need to protect employment levels in the current situation.

In view of the unsustainable situation, the Steel Committee will accelerate its technical work, focusing on ways this work can support actions in multiple fora, notably the Global Forum on Steel Excess Capacity, to address the unsustainable situation. Key action points from the meeting include:

• Members called for greater co-operation to counter a growing trade circumvention trend, whereby dumped or subsidised steel exports circumvent legitimate trade measures to counter unfair trade. The Committee will develop new empirical tools for identifying suspicious patterns of trade, which will feed into the work of the Global Forum on Steel Excess Capacity and help countries develop tangible actions to address the distortions caused by excess capacity. 

• The Steel Committee will continue to work robustly on identifying market-distorting steel subsidies, calibrating this work to bring greater transparency about the underlying sources of the mounting trade and unfair competition problems that are now facing members’ steel producers and workers. 

• Members welcomed work on ways to promote decarbonisation of the steel industry, in neutral, non-distortive ways that would not lead to excess capacity or unfair competition. The Steel Committee will serve as a platform to discuss policy support measures, to share information about research, development, and innovation activities that will help accelerate the shift to low-carbon steel production, and to ensure that a level playing field and just transition remain  key pillars of the process.

• In view of the critical phase for the global steel industry, and the risks surrounding the outlook, members emphasised the need for the Secretariat to continue actively monitoring the market situation, the evolution of risks, and key changes in the steel policy landscape, and to report back to the Committee on these issues.

A major development in global steel markets has been the sustained and significant decline in steel demand this year. The real estate crisis and economic slowdown in China has contributed the most to the global steel demand decline, with Chinese steel demand falling by almost 5% in the first eight months of this year. In the rest of the world, steel demand is sluggish, reflecting challenging economic conditions, elevated costs for manufacturers, and the impacts of global excess capacity. Steel demand in India and several emerging markets is growing more rapidly.

The global steel demand outlook for 2025 might show moderate improvement on aggregate, but is surrounded by a number of downside risks, including macroeconomic and geopolitical uncertainties, the extent of the Chinese downturn, and the impacts of a worsening global excess capacity situation.

Despite declining steel demand around the world, crude steelmaking capacity continues to grow. In 2024, an additional 50 million metric tonnes (mmt) of new capacity will enter the market, marking the largest annual increase since 2013. This increase will boost global crude steelmaking capacity to a new high level of 2482 million tonnes in 2024, exceeding current world steel production by 573 million tonnes, based on available monthly production data on an annualised basis. This gap has been increasing steadily over the last three years. Capacity growth over the last five years has been particularly rapid in the ASEAN region, up by 29.6 million tonnes, the Middle East, where it has increased by 22.9 million tonnes, India, with a rise of 13.2 million tonnes, and in Northern Africa, where capacity increased by 15.5 million tonnes over the last five years. While steelmaking capacity within China has stabilised over the last five years at 1.14 billion tonnes, Chinese companies, including majority state-owned enterprises, have been investing heavily in new capacity abroad, particularly in Southeast Asia and Africa. 

Looking ahead, a potential increase of 146 mmt of new steelmaking capacity will come on stream over the next three-year period of 2025-2027. Significant growth is anticipated in Asia, especially in China and India, which will account for 80% of the region's capacity additions. New investments in basic oxygen furnaces (BOF) technology, which is relatively high in carbon emissions compared to other technologies, will account for 40% of the total increase in global steelmaking capacity between 2025 and 2027. The new BOF projects coming on stream will be concentrated in Asia (China, India, Indonesia, the Philippines, Viet Nam) and central Asia (Kazakhstan), while no new BOF projects are planned in other regions over the next three years. 

The overall trends discussed at the Steel Committee meeting suggest that global excess capacity will increase significantly in 2025 and 2026, which will add further pressure on oversupply conditions and deepen the economic challenges facing the steel industry. For example, prices of steel continue to fall, with rebar and flat steel prices down 5.6% and 4.6% in October 2024 relative to a year earlier, bringing the decline to 30.1% and 50.1%, respectively, from their July 2021 peaks. Profitability continues to remain below sustainable levels for many steel firms, especially in countries that are sources of excess capacity. 

Steel trade is undergoing significant disruption because of global excess capacity. Sources of global excess capacity are enjoying high and rising capacity utilisation rates, with the surplus steel being exported to other countries. China’s steel trade surplus has surged to nearly 100 mmt in 2024, on an annualised basis, a massive leap that is affecting competition across global steel markets. Chinese exports have more than doubled since 2020 and continued to grow substantially in 2023 and 2024, surging to 108 mmt in the first six months of 2024, on an annualised basis. Chinese exports to all regions have recorded two-digit increases, with shipments to ASEAN countries leading the surge, registering a 20% increase relative to 2023 in annualised terms. At the same time, Chinese steel imports continue to fall, by more than 75% since 2020. 

This surge in Chinese steel exports is creating significant competitive pressure for steel producers from other countries, in particular Committee members from Europe, Japan and Korea, and the Americas, who are struggling to maintain market share and profitability. Steel imports in these regions are rising strongly, as are imports of steel-containing goods, further compounding the difficulties for steel producing-economies and threatening the sustainability of their industries. 

In response to these developments, Committee members reviewed their trade policy actions to address the current situation. An increasing number of countries, especially those most affected by the influx of low-priced Chinese steel, have initiated a series of trade remedy investigations and adjusted their tariff profiles to address unfair imports from excess capacity countries. These investigations cover direct imports from China, as well as imports from other countries that have been displaced by Chinese imports. In the period January to September 2024, as many as 67 new antidumping investigations have been initiated globally, which represents the highest number of trade remedy actions observed since the excess capacity crisis of 2015-16. 

The Committee also discussed the growing challenge of trade circumvention, which is undermining the effectiveness of trade actions implemented to address unfair trade and the effects of global excess capacity. Members reviewed the anti-circumvention policies they have in place, or which are being developed, and welcomed greater co-operation and exchange of information in this area as an important step forward in addressing global excess capacity. They looked forward to future exchanges on best practices to address circumvention and other unfair practices, and the development of new empirical tools and analysis for identifying suspicious patterns of trade. These tools will be developed in early 2025, and will feed into the work of the Global Forum on Steel Excess Capacity and help countries develop tangible actions to address the distortions caused by excess capacity.

The Steel Committee is accelerating its work to build transparency of steel subsidies that exacerbate excess capacity, distort the level playing field, and ultimately lead to trade frictions. New Steel Committee work shows that a typical Chinese steel firm receives 5-10 times more subsidies than a steel firm located in another country, through a variety of cash grants, below market borrowings and corporate income tax rebates. Chinese subsidies are channeled primarily towards state-owned enterprises, and to larger and more heavily indebted firms. Many of these companies also invest in new capacity abroad. A key result shows that an additional USD 1 million in cash grants correlates with a 7,500 to 9,500 metric tonne increase in steel production capacity.

Without reforms to market-distorting subsidies in the relevant countries, there is a risk of further trade disturbances and an escalation of trade actions. In this context, members discussed the need to build further transparency and to continue analysing subsidies as a basis for exploring ways to bring greater accountability to those countries. Members agreed that enhanced collaboration with the Global Forum on Steel Excess Capacity will support these efforts. 

The Steel Committee discussed how addressing distortions in the level playing field would support efforts to decarbonise and lead to better emission outcomes for the steel industry worldwide. While many members are closing or retrofitting higher-emitting plants and are shifting to lower-carbon production methods, the import surges of dumped and subsidised steel make that transition much more difficult. Moreover, as these import surges displace local steel production, they can lead to overall higher emissions globally, because the exports of steel from sources of excess capacity tend to be produced in higher-emitting, coal-intensive steel plants.

Industry and government participants discussed ongoing efforts to decarbonise their steel industries. The Steel Committee discussed challenges and developments in hydrogen and green iron markets, as well as the role of government policies and the need to ensure that such policies do not contribute to global excess capacity and market distortions. Members discussed the nature and implications of such support measures and ways to make them most effective, while safeguarding a level playing field. They noted that support measures for green iron and hydrogen production require further transparency and global dialogue, and emphasised the need to account for labour implications, education and re-skilling policies for the green transition. The Committee also welcomed updates by international organisations and other initiatives that support decarbonisation of the steel industry, including the IEA, the WTO and the Climate Club.