The worldwide oversupply of steel is expected to grow over coming years as excess product from China continues to flood world markets, a new report says.

And local steel makers in Australia are calling for protection from unfair subsidies.

The Organization for Economic Corporation and Development (OECD) has released the 2026 edition of its OECD Steel Outlook Report.

According to the report, the world had an excess steel production capacity of 640 million tonnes (MT) in 2025.

This exceeds the entire capacity of steel production in OECD countries by more than 200 MT.

By 2028, the global excess capacity is forecast to reach 745 Mt.

This will occur as producers add 137 million tonnes or 5.7 percent to their capacity at the same time as soft conditions see worldwide demand increase by only 0.9 percent per year.

As a result, capacity utilisation rates will fall from 76 percent in 2025 to just 74 percent in 2028.

Largely speaking, the glut in supply is occurring as excess stock from China (which accounted for 52 percent of global steel production last year) is being pushed onto global markets.

Whilst China has refrained from expanding steel making capacity over recent years, weak domestic demand has meant that the country pushed 131 MT worth of product onto foreign markets in 2025.

This equates to 14 percent of the county’s production.

What’s more, the country’s steel industry is expanding again and expects to add a whopping 38.8 MT of new planned capacity between 2025 and 2028.

This is several million tonnes more than the entire output of Italy – the second larges steel manufacturer in the EU.

At the same time, other Asian countries continue to beef up their own production.

India added 41.4 Mt of capacity across the five years through to 2025 and is set to add 31.8 Mt more by 2028 – albeit with continued strong domestic demand meaning that it remains a modest net importer.

Meanwhile capacity growth in Southeast Asia is set to continue through to 2028.

Structural steel shortage worsening

Huge subsidies, unfair competition

Meanwhile, concern in rich countries that massive Chinese subsidies are distorting markets remains.

All up, the OECD estimates that the average Chinse firm now receives annual subsidies worth around 2 percent of their overall asset base (though a lack of transparency means that getting an accurate estimate is challenging).

This is around 15 times the level of support that is received by the average steel maker in the OECD (see chart).

Many of these subsidies are granted at the local or provincial level.

Indeed, OECD research has identified 59 specific steel-related support programs which are being implemented by local governments. Many of these are non-transparent, with only a tiny number disclosing amounts received by individual enterprises.

In response, governments around the world are increasingly looking at trade measures to protect their local steel makers from unfair competition.

Common trade measures include:

• Anti-dumping duties, which are applied against foreign companies who export products at prices which are lower than fair market value.
• Counterveiling duties, which can be applied against products that are made overseas to cancel out any unfair advantage which the overseas producer has gained as a result of overseas government assistance such as grants, tax breaks and cheap loans.
• Safeguard measures, which involve temporary tariffs or quotas that can be applied for a limited time only in response to a sudden and unexpected surge in import volumes (these provide temporary relief in order to afford local producers time to adjust to the new market conditions).

All up, almost 400 active anti-dumping/counterviewing (AD/CVD) measures which have been initiated since 2016 relating to steel products remained in place as at 2025.

Last year alone, as many as 75 AD/CVD investigations were launched.

Brazil, Canada, India, Mexico and the United States have all raised tariffs on many basic steel products.

Meanwhile, the European Union and the United Kingdom have announced a range of measures to support their steel industries and better address the negative impacts of structural world steelmaking excess capacity.

However, the report suggests that Chinese steel markets may be bypassing trade measures by exporting semi-finished steel to Southeast Asian countries for processing on its way to OECD destinations.

This includes hot rolled plates which are used for heavy duty structural and industrial applications and hot-rolled wide coils which are used as feedstock for further procession or directly fabricated into structural beams, automotive chassis, welded pipes, agricultural equipment and storage tanks.

In 2025 alone, there was a 300 percent increase in Chinese exports of semi-finished steel to Southeast Asia. This has coincided with a ramping up of exports of similar products from Southeast Asia to OECD destinations.

(The average steel maker in China receives annual subsidies worth around 2 percent of their asset base. This is 15 times the level of subsidy received by average steel makers in OECD countries.)

Level playing field needed

Not surprisingly, the combination of oversupply and unfair subsidies are driving concern about the viability of steel making in wealthy nations.

This is particularly concerning in light of the importance of steel to national security (military hardware and defence-critical materials) as well as critical infrastructure such as bridges, rail networks and pipelines.

Commenting on the report at the OECD Ministerial Council Meeting, OECD Secretary-General Mathias Cormann said that the importance of a level playing field should not be underestimated.

“Excess steel capacity creates problems for everyone,” Mathias said.

“It distorts global markets. It hurts economic security and resilience. And it discourages innovation and sustainability,

“We need to tackle the root causes – including harmful subsidies and other non-market practices. That means stronger international co-operation. A level playing field for steel producers everywhere.”

Australian steel makers seek emergency relief

In response to the current situation, Australian steel makers are seeking assistance to manage with the impact of a flood of steel onto the local market.

In addition to anti-dumping and countervailing duties, the Australian Steel Industry last December lodged an application with the Productivity Commission for emergency Safeguard measures to be applied.

An interim report is expected by September whilst a final report is expected in November.

ASI chief executive Mark Cain said that the OECD report reinforces the need for action.

“The OECD has now confirmed, in the clearest possible terms, that subsidised overcapacity is distorting global steel markets and causing real injury to market-based producers,” Cain said.

“Australian fabricators have been living this reality for years.

“The Productivity Commission inquiry is our opportunity to respond with the kind of targeted, proportionate measure the OECD itself says is justified. We respectfully urge the commission to consider the OECD report as part of the evidence being gathered.”

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