Price on Trade: Enough talk. It's time for action on excess steelmaking capacity

This is an opinion column. The views in this article are those of an experienced trade attorney on issues of relevance to the steel market. They do not necessarily reflect those of SMU. We welcome you to share your thoughts as well at smu@crugroup.com.

Government officials and industry participants met on March 25-26 in Paris for the Organization for Economic Co-Operation and Development (OECD) Steel Committee’s 99^th session. As it turns out, Paris in the spring is less idyllic when discussing the uncertain path forward for the global steel market.

Global excess capacity continues to overwhelm the global steel industry. Building on work by the OECD’s Global Forum on Steel Excess Capacity, the Steel Committee recorded 640 million metric tons (mt) of global excess capacity in 2025. With global capacity projected to increase by 138 million mt by 2028, the gap between capacity and demand will continue to grow over the next three years. And that assumes the conflict in Iran does not stifle global demand. Steel industries in India, Iran, the Middle East and North Africa (MENA), and Southeast Asia have forged ahead with massive amounts of new capacity—much of it built and financed by China to prevent downsizing of its steel-mill-building industry.

Making matters worse, China’s internal consumption is plummeting because it has matured into a developed country. In other words, the steel development cycle associated with urbanization, population growth, and wealth build out has ended. The result: a massive increase in Chinese steel exports (much of which are processed in in other countries to circumvent tariffs) and exports of goods containing steel. This shows that statements about reducing capacity—especially those coming out of China—were just lip service.

In fact, China’s steelmakers keep flooding global markets with steel exports as their own economy continues to slow down. Chinese steel demand fell 6.5% in 2025 and is expected to continue falling. The statement by Steel Committee Chair Sheryl Groeneweg highlights that China’s yearly exports have doubled in the past three years. (And they weren’t that small to begin with.) Unsurprisingly, these exports have devastating effects on steel industries in the rest of the world. Rather than downsize its industry, China continues to use steel as a weapon to undermine other economies.

China supports this economic warfare with expanding financial support to the steel industry. The total Chinese steel subsidization rate has doubled since 2019. The Steel Committee found that, in 2024, “the median Chinese firm received 15 times more subsidies relative to its asset size than a median firm elsewhere, compared to 10 times more in previous years.” The Steel Committee makes the excellent point that government subsidies to build or update a steel mill now sustains excess capacity for years to come. China promised the world it was making structural changes to prevent this type of distortion. But we’re all still waiting.

On a hopeful note, the chair recognized that more and more countries are responding to overcapacity and predatory exports with trade action. The United States was an early adopter of aggressive trade enforcement against surging excess capacity and exports. Now, everyone is getting in on the action. In total, there were 75 new trade remedy investigations initiated in 2025. Many of the same industries that accused the United States of “protectionism” now see the necessity of trade actions. Why? Because their steel industries have been gutted by a continuing crush of imports.

However, as trade actions have proliferated, so have attempts to get around them. The Steel Committee conducted its own analysis of more than 260 trade actions among OECD countries and found that “significant transhipment” was occurring between China and several Southeast Asian countries. (And, in truth, the authors of this article are aware of some OECD steel committee participants engage in transhipment, evasion, and circumvention.)

This circumvention takes many forms. It might be minor alterations. Maybe it’s rolling or processing steel melted and poured in China, Russia, Korea, Taiwan, Iran, and elsewhere in a third country to change the country of origin. It could be shifting production (and subsidies) to a third country. The Steel Committee also recognized that steel-intensive downstream articles serve as a passthrough for dumped and subsidized steel, an issue where the US Department of Commerce has been a leader.

If the 99^th Steel Committee meeting shows us anything, it’s that steel export platforms are more desperate than ever to keep exporting. OECD countries have built up more resilient defenses to these exports than in previous iterations. But exporters are finding new ways to gain market access without changing their distortive practices. Creative and evolving solutions will be paramount. They must adapt to the exporters, who are always one step ahead.

Finally, demand growth will not bail out the global steel industry. The chair’s statement recognizes that global steel demand has declined for four straight years, including a more than 2% decline in 2025. While many believe this trend will reverse minimally in 2026, even those optimistic projections seem increasingly unrealistic because of the conflict in the Middle East.

Iran’s obstruction of the Strait of Hormuz threatens raw material and energy supplies in the Persian Gulf that flow to steel industries in Europe and Asia. We shouldn’t be surprised if governments begin subsidizing raw materials and energy to keep their steel mills operational. This will just worsen the overcapacity situation.

So, while Paris is a beautiful city, the news coming from the OECD Steel Committee is unsightly. Action is needed quickly, not further negotiations. We look forward to the Global Forum on Steel Excess Capacity supporting quick, practical, and decisive actions consistent with each country’s legal capabilities. What we don’t need are endless negotiations over definitions of excess capacity and the like. The time for talking is over.