For many years now, countries have seen their steel industries impacted negatively by a distorted playing field, reflecting heavy subsidisation, non-market behaviour and state influence over the industry in some economies. These distortions have led to excess capacity, low steel prices, unfair trade practices such as dumping of steel products on international markets, and unsustainably weak profitability for an industry that needs market stability in order to make long-term investments.  

Governments from OECD and non-OECD economies need to come together to coordinate their policies in the steel sector to ensure a level playing field. Policies need to be formulated so that they promote a global operating environment that is free of market distortions and excess capacity, where there is sound competition and well-functioning markets, and where the steel industry’s prosperity is a function of the value it brings to steel consumers and society, not of the preferential treatment resulting from market-distorting government support measures.  

Excess capacity is a persistent and growing problem in the steel sector. Current trends suggest that it could increase to 644 million tonnes by 2025, a level that would exceed total OECD steel production. This would further depress business conditions, create market volatility, and contribute to climate concerns and trade frictions.  

The focus of recent OECD work has been to raise awareness of this growing problem and build co-operation amongst countries to address it. The time is now ripe to take forward concrete options that would alleviate excess capacity and prevent its re-emergence in the future.   

The steel sector accounts for 8% of global CO2 emissions. How fast and successfully the sector reduces its carbon footprint is therefore critical for the speed at which countries can reach their net-zero targets. New steelmaking technologies that emit significantly less carbon dioxide have been developed over the years and are starting to be implemented, but at the same time many countries are investing heavily in new steelmaking capacity that is still centered on high-emitting steel plants.  

While the technological pathways to decarbonise differ across countries, ensuring a stable business environment by reducing global steel excess capacity is a common goal that would enable companies to make the long-term investments necessary for low-carbon steel production. Policies to promote greater availability of the raw materials and inputs needed to lower emissions from steel production, such as high-grade iron ore and ferrous scrap, sharing best practices including on different technological solutions for the transition, and making sure that government support measures for decarbonisation do not contribute to excess capacity or provide undue competitive advantage will also encourage steel decarbonisation.