Global steel production capacity faces a severe structural imbalance. Excess global capacity will expand from 601 million tonnes in 2024 to 721 million tonnes by 2027. This projection comes from a recent report by the OECD. This growing surplus threatens trade stability, mill profitability, and market discipline. Persistent oversupply also complicates the steel industry’s shift toward low-emission technology. Specifically, it dampens the price premiums needed for green steel products.
Subsidies and Relocation Threaten Green Steel Transition
Unilateral state subsidies in non-market economies drive expanding excess capacity. Foreign direct investment helps relocate carbon-intensive steelmaking facilities to new regions. It does not lead to orderly plant decommissioning. About 30.7 million tonnes of DRI-EAF capacity will come online by 2027. Localized raw material advantages drive this shift rather than climate strategy. Meanwhile, lower market prices for conventional steel continue to erode green steel investment returns.
Low-Carbon Investments Stalled by Structural Oversupply
Global overcapacity has directly halted sustainable technology adoption across primary steel hubs. Around 15.5 million tonnes of low-carbon steel projects face delays worldwide. Market oversupply, high energy tariffs, and regulatory uncertainty caused these halts. Conventional steel prices continue to fall. Consequently, commercial buyers hesitate to pay premiums for low-emission steel. This trend slows capital allocation into modern, sustainable production facilities.
Market Discipline and International Trade Implications
Persistent global overcapacity undermines market competition. It creates severe obstacles for steelmakers trying to modernize in regulated markets. Unaddressed oversupply causes market distortion and aggressive export flows. Industry groups like the AISI warn of rising global protectionism. Global steel capacity will continue outpacing actual demand through 2027. As a result, steelmakers face compressed margins, trade disputes, and delayed decarbonization schedules.
Market Impact
○ Impacted Metals: Crude steel, carbon steel, direct reduced iron, steel scrap
○ Direction: Bearish
○ Time Horizon: 2026–2027
○ Affected Industries: Manufacturing, construction, automotive, renewable energy infrastructure
○ Related Price Reports: Carbon Steel Weekly Price Report, Stainless Steel Weekly Price Report
○ Watch Item: Industry participants should monitor non-market capacity expansions and postponed low-carbon steel projects as oversupply weighs on green premiums.
SuperMetalPrice Commentary:
The OECD’s projections confirm that structural overcapacity remains the steel sector’s primary long-term headwind. Non-market subsidies are accelerating high-emission capacity additions faster than the market can absorb, neutralizing decarbonization targets and distorting international pricing.
For buyers and investors, this structural surplus implies sustained downward pressure on benchmark steel prices, alongside a widening gap between subsidized volume production and unsubsidized green steel initiatives. Until trade mechanisms address cross-border subsidy distortions, commercial viability for low-carbon steel will remain constrained.
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