Industry groups in the EU and UK are calling for urgent trade measures to tackle a “flood” of lower-cost imports from China, warning that current overcapacity is creating a looming crisis for the sector. 

Oversupply is largely driven by production in China, where state support for steelmaking and weak domestic demand have led to a dramatic rise in under-priced exports flooding international markets. 

The Global Forum on Steel Excess Capacity (GFSEC), which brings together policymakers and industry representatives from 28 steel-making economies, announced this week that excess steel capacity is now forecast to rise to 630 million metric tonnes by 2026 – around five times the level of EU production last year. 

In response to the GFSEC statement, which is endorsed by member state ministers, the European Steel Association (Eurofer) calls for “immediate, comprehensive trade actions”.  

It says overcapacity has created a “destructive dynamic” that is distorting the global steel market and threatening thousands of jobs across the continent. 

“The time for waiting for overcapacity to resolve itself through market forces is over,” says Eurofer director-general Axel Eggert. “We need a credible strategy focusing on concrete actions that GFSEC countries can take, including unilateral trade actions.”  

“Persisting in keeping markets open only benefits those countries that withdrew from the [GFSEC] and those that continue to export excess steel, either in reaction to disruptive import surges or in denial of their own overcapacity,” he says. 

Eggert adds that the association continues to support forum principles, which include a commitment to market-based outcomes, but notes that “a vast number of countries have already imposed tariffs on steel imports”. 

UK Steel says in a report published this week that Chinese steel exports rose 38% last year, and increased by a further 20% in the first half of 2024. The UK now imports more than two-thirds of steel from China, up from 55% two years ago, it says. 

“Rising global excess capacity driven and sustained by non-market forces is one of the biggest challenges of our time for the global steel industry,” says Gareth Stace, the association’s director-general.  

“It has the potential to redraw the map of global steelmaking as there is no longer fair competition.” 

The report notes that existing safeguards – which place a quota on steel imports that carry a 25% tariff – expire in 2026 due to World Trade Organization rules. 

“Action must be taken urgently ahead of existing protections lapsing in 21 months’ time,” it says. “Trade policy in the UK must go further than it has before if industry is to have a fair chance of competing for market share.” 

It adds: “It is clear that international trade rules and trade remedies tools were created in a different time and have now become outdated.” 

One issue is that targeting direct imports from China creates a “whack-a-mole” effect, UK Steel says. 

Chinese materials are already finding alternative export markets, which are then able to re-export steel while keeping prices suppressed. The report notes that Algeria, India, South Korea, Turkey and Vietnam have all significantly increased imports from China in the last two years. 

Existing trade remedy tools, such as anti-dumping measures, may also prove ineffective as prices are so low in oversupplied markets, UK Steel says. 

It suggests policymakers consider tariff rate quotas, in line with WTO exceptions and actions already taken by other members. They should also ensure close alignment with the EU and gather evidence of distortions and subsidies in key countries, it says. 

 

Decarbonisation under threat 

Another concern raised by both groups is that oversupply from China could harm decarbonisation efforts. 

Eurofer says billions of euros have been invested in decarbonising steel, but those efforts risk being nullified if domestic capacity is replaced by materials produced in more carbon-intensive ways. 

UK Steel adds that more than two-thirds of steelmaking capacity is in countries that have net-zero emissions targets later than 2060 or not at all, and that carbon-intensive blast furnaces make up nearly 75% of additional capacity in Asia. 

The iron and steel sector contributes as much as 8% of all global carbon emissions, the GFSEC ministerial statement notes. 

“The growth in global excess capacity has a negative impact on global carbon emissions and seriously reduces the financial capability of steel companies to invest in new and existing technologies needed in order to significantly reduce carbon emissions,” it says. 

China’s Ministry of Industry and Information Technology acknowledged in August that the industry is facing “new challenges”, announcing a halt to approvals for steel capacity swaps – a programme launched in 2018 to boost supply from advanced facilities while phasing out older production sites. 

However, a report published last month by US law firm Wiley Rein says China should show “a more effective alignment between policy rhetoric and industry practices”. 

“While China claims that it intends to reduce overcapacity, its policies to insulate the industry from market forces do the opposite,” it says. 

The UK steel report describes the overcapacity situation as “a massive challenge with no simple solutions”.  

“Increasingly it appears that we are entering a period which could be much worse for the steel sector than the 2008 and 2015 steel crises,” it says.