OECD Steel Outlook 2026: Global Demand Stagnates While Excess Capacity Reaches New Heights
Overview
Global steel demand fell by an estimated 2.6 percent in 2025, marking the fourth straight year of contraction, according to the OECD Steel Outlook 2026. The report projects demand will rise by just 0.4 percent to 1.81 billion metric tonnes in 2026. While developing markets such as India and ASEAN continue to expand, demand in China is expected to decline for a fifth consecutive year.
At the same time, global steelmaking capacity reached a record 2.45 billion metric tonnes in 2025, the fifth consecutive annual increase. Excess capacity is projected to widen to 745 million metric tonnes by 2027. This imbalance continues to depress steel prices outside protected markets and drive an unprecedented wave of trade protection measures.
What Happened
China's steel demand dropped 6.9 percent in 2025 and is projected to decline another 0.6 percent in 2026. The prolonged real estate downturn remains the primary drag, and while the government abandoned its restrictive "three red lines" borrowing policy in January 2026, buyer confidence remains weak. China's crude steel production is expected to decrease gradually to 931 million metric tonnes by 2030.
India recorded the strongest demand growth among major economies, expanding 9.8 percent in 2025 and projected to grow 6.7 percent in 2026, driven by infrastructure spending and manufacturing expansion. ASEAN demand grew 4.3 percent in 2025 and is forecast to rise 3.5 percent in 2026, while Africa recorded 16.1 percent growth.
US steel demand rose 0.7 percent in 2025 and is projected to grow 0.6 percent in 2026. EU and UK demand contracted 1.2 percent in 2025, with a modest 1.4 percent recovery projected for 2026.
Steel prices have diverged sharply. US hot-rolled coil prices were more than double Chinese prices in early 2026, while EU prices stood roughly 50 percent above Chinese levels. Raw material costs continue rising, with iron ore up 9 percent and coking coal up 17 percent in 2025.
Trade actions surged to record levels with 395 antidumping and countervailing duty measures in place by 2025. China remains the primary target with 113 measures. The OECD documented growing evidence that exporters are circumventing trade measures by shipping semi-finished steel through ASEAN countries for limited processing before re-export to restricted markets.
Industry Background
The steel industry is grappling with a structural supply-demand imbalance that shows no signs of resolving quickly. Global excess capacity has risen for five consecutive years and is projected to reach 745 million metric tonnes by 2027—roughly 13 percent more than the total production capacity of all OECD member countries combined.
Export restrictions on steelmaking raw materials are also rising. Four major nickel ore suppliers maintain export controls, while chromium ore exports from South Africa and Zimbabwe—accounting for 88 percent of global trade—face restrictions that tighten supply for stainless steel production. Broader safeguard measures now cover seven major economies, with several requiring identification of the country where steel was originally melted and poured.
Market Impact
The widening price gap between protected Western markets and open Asian markets—with US hot-rolled coil at approximately USD 1,162 per metric ton compared to Chinese FOB prices around USD 482 per metric ton—is creating a two-tier pricing environment.
The record 395 trade measures in place means steel buyers face an increasingly fragmented compliance landscape, navigating complex rules of origin, quota allocations, and tariff classifications. Rising raw material costs further compress steelmaker margins in markets where finished steel prices remain low.
Implications for Steel Buyers
For steel importers, distributors, and manufacturers, the OECD data points to several strategic considerations:
First, India and ASEAN represent the strongest near-term demand growth markets. Buyers sourcing for projects in these regions should plan for robust competition as infrastructure spending accelerates.
Second, the price divergence between protected and open markets is likely to persist, meaning buyers with sourcing flexibility can achieve significant cost advantages.
Third, trade compliance complexity will continue to increase. New melt-and-pour reporting requirements and expanding downstream product coverage mean importers must invest in stronger compliance capabilities.
Fourth, raw material supply risks for stainless steel inputs such as chromium and nickel warrant attention, as export restrictions could disrupt supply chains and increase costs.
MESCO STEEL Perspective
The OECD Steel Outlook 2026 confirms a market defined by divergence: demand growing in developing economies while stagnating in developed ones, and steel prices elevated in protected markets while depressed elsewhere. For industrial buyers, this environment rewards supply chain diversification—maintaining relationships with suppliers across multiple regions, with access to a broad portfolio spanning carbon steel, stainless steel, coated products, and aluminum—to manage the risks created by trade fragmentation and regional price divergence.
Conclusion
The OECD Steel Outlook 2026 makes clear that the global steel industry is in a prolonged period of structural adjustment. With demand stagnating, excess capacity deepening, and trade barriers multiplying, the conditions that have defined the past four years are unlikely to change significantly in the near term. For industrial buyers, the data underscores the importance of forward-looking procurement strategies built on reliable supply partnerships.
Summary
The OECD Steel Outlook 2026 reports global steel demand will grow just 0.4 percent in 2026 following four years of contraction. Excess capacity is projected to reach 745 million metric tonnes by 2027, while a record 395 trade measures fragment global markets. Steel prices diverge sharply by region, raw material costs rise, and India and ASEAN lead demand growth. The report signals continued market volatility for steel buyers worldwide.
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