Global Steel Saga Takes a Turn: 38% Overcapacity Expected in 2027, Western Countries Form Alliance to Build Trade Defenses

The Financial Times reports that the West is accelerating the establishment of a joint defense mechanism to counter the cheap, surplus steel from China.

According to OECD forecasts, global steel production capacity will exceed demand by 38% by 2027. Western countries are accelerating the formation of a joint defense system to protect their domestic steel companies and resist cheap Chinese steel.

The Financial Times reported that several Western countries reached a consensus on coordinated action at the OECD Steel Committee meeting, stating that the current rate of overcapacity growth is the fastest since the 2009 financial crisis, jeopardizing economic security.

Under pressure from the United States, countries are raising barriers:

The US imposed a 50% tariff on imported steel.

The EU plans to raise tariffs from 25% to **50%** and reduce quotas.

Canada and Mexico also imposed a 50% tariff plus strict quotas on non-free trade countries.

Western industry insiders believe that free trade in the steel sector is unsustainable, and many countries are joining forces to address the impact of so-called "Chinese subsidies and overcapacity" through trade restrictions, even forming a unified camp similar to the sanctions against Russia.

The US is pressuring its allies to take similar trade actions to enhance the effectiveness of restrictions on Chinese steel exports.

The Global Steel Overcapacity Forum (28 countries, established in 2016) announced in October 2025 that it will release a comprehensive framework for addressing overcapacity by June 2026. In 2024, Western anti-dumping measures against Chinese steel increased fivefold, but the United States remained dissatisfied with the力度 (intensity/strength) and demanded that its allies take trade actions with equivalent restrictive effects. The United States, which will chair the forum in 2026, is actively pressuring the European Union to coordinate restrictions on Chinese steel imports.

Previous attempts by the US-EU steel alliance have failed, and internal disagreements on strategy remain

China is the world's largest steel producer and exporter, and production cuts have become an industry consensus.

OECD data shows that global steel production capacity is projected to exceed demand by 38% by 2027, reaching 721 million metric tons. The oversupply is primarily attributed to China (accounting for over 50% of global supply), stemming from the continued downturn in China's real estate market since the second half of 2021.

Over the past four years, China's real estate sales and development investment have cumulatively fallen by 46% and 33%, respectively, indicating a significant contraction in domestic demand. The OECD states that China's subsidies to the steel industry are 10 times the average level among its member countries.

In 2024, China's crude steel output reached 1.005 billion tons, accounting for 53.3% of global capacity, making it the world's largest steel producer.

In the same year, steel exports reached 110.716 million tons, a year-on-year increase of 22.7%, accounting for 23.4% of global steel exports, firmly maintaining its position as the world's largest steel exporter.

From 2019 to 2024, China's steel exports increased from 64.293 million tons to 110.716 million tons, a growth of 72.2%; export value increased from US$53.76 billion to US$83.631 billion, a growth of 55.6%, while the average price decreased by 10%, accounting for 3.2% of the country's total commodity exports.

The US-led steel alliance may impose restrictions in 2026, which will exacerbate my country's steel overcapacity and the operational pressure on enterprises. China has refuted the "overcapacity" claim as a pretext for trade protectionism, and domestic steel companies have already responded to the call for production cuts and price stabilization.

Luo Tiejun, vice president of the China Iron and Steel Association, stated that China's crude steel production has reached its peak, and with weakening demand, production cuts have become an industry consensus, but unified action has not yet been taken.

First-quarter data this year shows a slight increase in crude steel production, a decrease in consumption, an increase in exports, and a decrease in imports. This supply-demand imbalance led to a 13.66% year-on-year decline in the steel price index.