2022

GFSEC PROGRESS
REPORT
PREPARED BY THE OECD
FACILITATOR
20 December 2022
2

2022 GFSEC Progress Report

20 December 2022

This report has been prepared by the OECD Facilitator. This document, as well as any data
and any map included herein, are without prejudice to the status of or sovereignty over any
territory, to the delimitation of international frontiers and boundaries and to the name of any
territory, city or area. The statistical data for Israel are supplied by and under the responsibility
of the relevant Israeli authorities. The use of such data by the OECD is without prejudice to
the status of the Golan Heights, East Jerusalem and Israeli settlements in the West Bank
under the terms of international law.

Acknowledgements: This summary report was funded through the financial contributions of
GFSEC members.

© OECD Facilitator 2022

 3

Table of contents

Executive summary........................................................................................ 4
1. Introduction ................................................................................................ 5
2. The global steel market situation .............................................................. 7
2.1. Global steel markets under significant pressure .................................... 7
2.2. Global excess steel capacity has increased .......................................... 10
2.3. Capacity trends in GFSEC member and non-member economies ...... 11
2.4. Steel decarbonisation progress in the context of excess capacity........ 17
3. The unique position of the GFSEC as a multilateral forum to tackle
steel excess capacity ..................................................................................... 19
3.1. Why do we need a multilateral forum on steel excess capacity? ........ 19
3.2. GFSEC members adopted several initiatives to achieve their main
objectives .................................................................................................... 20
4. Concluding remarks ................................................................................ 28
Annex A. Berlin principles and policy recommendations (2017) ............ 29

FIGURES
Figure 1. GFSEC members account for most of the world’s steel imports 11
Figure 2. Growth in capacity since 2016: active GFSEC members and other jurisdictions 13
Figure 3. New capacity projects (MMT) between 2022 and 2025 17

TABLES
Table 1. Crude steelmaking capacity in GFSEC member economies and other jurisdictions:
2014-2021 14

BOXES
Box 1. Macroeconomic conditions have deteriorated rapidly. 8
Box 2. Significant capacity growth, especially in Asia 16
Box 3. Six principles that guided the development of policy solutions to reduce excess
capacity 29
Box 4. Policy recommendations 30
 4

Executive summary

The steel industry provides essential inputs for modern economies to function and creates millions
of jobs throughout the steel supply chain. However, the global economic slowdown, geopolitical
tensions, high energy prices, and other factors are now leading to a sharp downturn in steel markets.
Excess capacity is now increasing globally, negatively impacting the health of the industry and its
ability to enable economic growth and prosperity. Excess capacity affects steel prices and steel
companies’ profitability, slows the needed green transition, and creates trade tensions around the
world. Moreover, it can force efficient steel plants to close and lay-off workers in the process.

To resolve the global excess capacity problem and to preserve the long-term viability of the industry,
the Global Forum on Steel Excess Capacity (GSFEC), created in 2016 under the auspices of the
G20, aims to enhance communication, information sharing and co-operation among members, and
to take effective steps to address the challenge of excess capacity.

A main achievement of the Forum was the agreement by all 33 founding members on six guiding
principles and specific policy recommendations, agreed to in Berlin in 2017, for governments to
reduce excess capacity and to contribute to a more stable and sustainable steel sector. The
transparency, co-operation and voluntary implementation of the Berlin principles and policy
recommendations contributed to capacity reductions and led to improvements in global steel market
conditions. In addition, the GSFEC attracts strong support from steel industry associations, which
have informed the debate and supported the process over the years.

This report outlines progress made by the GFSEC, underscoring the relevance of its work for
GSFEC members and stakeholders, and highlights key developments currently taking place in the
steel industry. Subsequently, it elaborates on the different work streams that took place in 2022. First
of all, the information sharing exercise highlighted the impact that excess capacity has on members’
steel sector and their consequent policy responses. The summary document on the information
sharing exercise emphasised a pressing need for the continuous sharing of information on capacity
figures and policies that tackle excess capacity. Next, the report on steel decarbonisation and excess
capacity points out that excess capacity is currently hindering a smooth and green transition of the
steel sector. Insufficient progress made in the steel sector will hamper countries’ trajectories to meet
the Paris Agreement objectives. Finally, the report refers to the main conclusions of the stakeholder
event on connecting the dots regarding steel decarbonisation. During this event, multiple
stakeholders voiced the negative impact of excess capacity on their business activities, ranging from
contributing to business uncertainty, creating barriers to investments as well as increasing trade
tensions.

GFSEC members maintain a strong interest to continue the multilateral dialogue on tackling steel
excess capacity, as well as adhering to their corresponding commitments pursuant to the Berlin
principles and policy recommendations. The GFSEC welcomes co-operation with steel-producing
economies from around the world to foster better conditions for their steel industries and
stakeholders. To facilitate these discussions, the report includes a section on the importance of
reaching out to non-actively participating jurisdictions.
 5

1. Introduction

1. The situation in global steel markets has deteriorated, with the budding
recovery that started in 2021 from the COVID-related recession of 2020
quickly reversing course in early 2022. The war in Ukraine, energy and
commodity price increases, the impacts of inflation and monetary
tightening on consumer and business spending on steel-intensive goods,
as well as growing economic uncertainties across a number of
economies are contributing to a significant downturn in global steel
demand. At the same time, disruptions to the availability of steelmaking
raw material supplies, in addition to surging energy costs, are depressing
production and profitability prospects for steel companies in many
economies.

2. With the gap between global steel capacity and demand now expected
to have surged to 550 million tonnes in 2022, from 475 million tonnes
in 2021, oversupply pressures are already emerging on international
markets as “too much capacity chases too little demand”. The problem
is being exacerbated by the estimated 29.5 million tonnes of net new
steelmaking capacity that came on stream in 2022. The result of these
oversupply pressures are seen in the sharp decline of steel prices
observed during 2022.

3. Excess capacity remains a significant challenge for the global steel

industry. The structural imbalance affects steel prices, steel companies’
profitability margins, as well as the global playing field. Excess capacity
also weighs on the prerequisites for an efficient low-carbon transition,
such as investments, innovation, or competition. Tackling excess
capacity is therefore crucial not only for more stable steel market
conditions, where steel companies operate on a fair and level playing
field, but also to foster the needed decarbonisation of the sector.

4. The work of the Global Forum on Steel Excess Capacity (GFSEC)

contributes to healthier market conditions for the steel industry.
Significant progress has been achieved by the GFSEC, not only in the
development and implementation of policy principles and
recommendations, but also in establishing a robust and rich exchange of
information by Forum members. The tools developed by the GFSEC
can help countries reduce their overcapacity, phase out support
measures that contribute to excess capacity, and ensure that their
framework conditions and institutional settings promote market forces
in the sector.

5. This progress report intends to inform the public about the global steel
market situation, particularly as it relates to excess capacity, and to
provide an update of the Forum’s activities during 2022. The next
section overviews the pressures facing global steel markets and presents
global steelmaking capacity trends based on the work of the GFSEC.
Section 3 illustrate the value that the GFSEC has brought to its members
since 2016. It also highlights the results of the information sharing and
6

other activities conducted in 2022 to further contribute to the GFSEC’s

objectives. The Berlin principles and policy recommendations are
summarised in Box 4 and Box 5 provided in the Annex.
 7

2. The global steel market situation

2.1. Global steel markets under significant pressure

6. The Hangzhou Declaration of 4-5 September 2016 states in paragraph

31 that ‘subsidies and other types of support from government or
government-sponsored institutions can cause market distortions and
contribute to global excess capacity.’ The Declaration notes that excess
capacity and other structural problems caused a negative impact on trade
and workers, and that these problems are exacerbated by a weak global
economic recovery and depressed market demand.

7. Steel industries around the world currently find themselves in a complex

economic situation, entering a period of weak steel demand conditions
comparable to those observed during the last steel crisis of 2015-16. The
market downturn has already begun, weakened by political instabilities,
energy and commodity price increases, the impacts of inflation and
monetary tightening on consumer and business spending on steel-
intensive goods. Global economic prospects are rapidly deteriorating
which will have direct effects on steel consumption (see Box 1).

8. Steel consumption in China, which accounted for almost 52% of world

steel consumption in 2021, contracted by 6.1% in the first half of 2022,
driven by a deep and prolonged property market crisis but also reflecting
COVID-related lockdowns. Steel consumption in the rest of the world
contracted by 3.2% in the wake of surging energy prices and weakening
output growth in downstream sectors. The latest forecasts by the World
Steel Association, released in October 2022, show world steel
consumption declining by 2.3% in 2022, before stabilising and rising
modestly by 1% in 2023.1

9. As a result, steel prices have fallen sharply during 2022, in spite of a

brief uptick right after the war in Ukraine began. Steel prices have fallen
sharply in the first half of 2022, more than steelmaking raw material
prices. This is squeezing profit margins which only experienced a year
of reprieve during the 2021 recovery from the pandemic. Global steel
production declined by 3.9% in the first ten months of 2022, but with
wide differences across regions. Some countries where steelmaking
capacity is increasing rapidly, for example in the Middle East and South
Asia, have recorded significant production growth during 2022.

10. With global steel excess capacity not yet fully addressed, and the
downturn in steel demand potentially accelerating as a result of a
worsening global macroeconomic environment, there is a significant
risk that economic weakness may trigger a crisis for the steel industry
in the near term. Indeed, similarities can be drawn between the current
phase and the crisis of 2015/16. At that time, steelmaking capacity had
been expanding rapidly for a number of years, driven mostly by China.
In 2014, following several years of positive steel demand growth, global
steel consumption began to stagnate, before falling by 3.1% in 2015.
8

China and other emerging economies also experienced demand

declines. With steelmaking capacity continuing to expand, while
demand conditions deteriorated sharply, the gap between global
capacity and demand widened to its highest level ever in 2015, i.e. 793
million metric tonnes. Trade tensions then increased, leading to a period
of falling steel trade from 2016 to 2020.

Box 1. Macroeconomic conditions have deteriorated rapidly.

Projections for world economic growth have been
downgraded significantly during the course of this year. The
ripple effects of the war in Ukraine on energy and other
commodity prices, high inflation and its negative impacts on
real incomes and spending, and shutdowns in China due to the
country’s zero-COVID policy are some factors contributing to
a global economic slowdown in 2022-23. Downside risks to
the outlook remain high; a protracted war in Ukraine would
have deeper global effects, including rising geopolitical
tensions, further interruptions in energy flows and commodity
supplies, yet higher inflation, and a need for more restrictive
monetary policy than currently expected, potentially
contributing to financial market instability.

In November 2022, the OECD forecast a sharp deceleration in

world GDP growth from 5.0% in 2021 to 3.1% in 2022,
slowing further to 2.2% in 2023 (OECD, 2022). The 2023
forecast was reduced by 0.6 of a percentage point compared to
the June forecast. More recently, in January 2023, the World
Bank lowered its global economic growth forecast to 1.7% for
2023, roughly half the rate of growth projected six months
earlier (World Bank, 2023).

Source: OECD (2022), OECD Economic Outlook, Volume 2022 Issue 2, No.
112, OECD Publishing, Paris, https://doi.org/10.1787/f6da2159-en.
Source: World Bank 2023. Global Economic Prospects, January 2023.
Washington, DC: World Bank. doi:10.1586/978-1-4648-1906-3.

11. The pattern of events following such market slowdowns is usually

similar from crisis to crisis. Inefficient steelmaking capacity that is
subsidised by governments is often only viable when steel demand and
prices are high. When market demand begins to slow, production should
be brought in line with demand to prevent prices from collapsing.
However, this would push up unit costs. To cover fixed costs the
inefficient steel company, whose fixed costs are higher than those of the
efficient producer, will have to maintain a level of production above
market demand, a reaction that runs counter to the interest of a healthy
industry. Instead of bringing production in line with demand, the gap
between demand and supply is widened and the surplus sold at
 9

conditions which accelerate the decline of prices and negatively

influences the financial health of steel producers.

12. With domestic markets saturated with steel, the incentive is to export
the surplus to foreign markets where prices may be higher. This, in turn,
can lead to a proliferation of trade-restrictive measures to shield
domestic producers, often leading to a diversion of steel shipments
towards third markets. As a result, steel prices fall worldwide,
profitability starts to deteriorate everywhere, trade actions escalate, and
the process culminates into a steel crisis.

13. When reaching this point, structural adjustment is necessary to break the
pattern. If markets worked properly, consistently loss-making,
inefficient plants would exit and excess capacity would diminish.
However, some governments intervene, either with further subsidisation
and/or market protecting measures, for various reasons such as
maintaining tax revenues, limiting the social impacts of closures, or for
strategic reasons related to maintaining a large or growing steel
production base. Even companies operating under market-based
conditions may keep on investing in anticipation of future demand
growth; such over-optimistic expectations have been prevalent during
many steel crises in the past.

14. The result, ultimately, is that much inefficient excess capacity is kept in
place, prolonging the financial hardships facing steel producers around
the world, and limiting their ability to invest in necessary maintenance
and efficiency improvements, research and development for better
innovation outcomes, and, importantly in the current context, to invest
in new technologies to lower carbon emissions from the production
process.

15. In short, capacity which is not viable without subsidies or other

government support that grants special advantages to the recipient
company should be allowed to exit the market and governments should
refrain from supporting new capacity additions that are not market-
driven. Doing so reduces excess capacity and helps prevent the re-
emergence of an excess capacity crisis in the future, providing long-
term stability to steel industries around the world.

16. By adhering to the Berlin principles and policy recommendations, steel

producers operating under market forces in many active GFSEC
economies continue to ensure that capacity developments do not
overshoot demand. In the period from 2016 until 2021, active GFSEC
members took almost 11 mmt of capacity out of the market, while steel
demand increased by 16 mmt despite the significant demand contraction
in 2019/2020, mostly related to the COVID pandemic. Capacity
additions have been for the most part offset by closures, and future
investments are largely focussed on replacement capacity as well as the
production of more environmentally friendly steel.

17. Economies that do not participate in the GFSEC often experience the
opposite capacity trends. In 2022, capacity in China is slightly above the
10 

level of 2019, when it left the GFSEC, and appears to now be stabilising
at a level of 1.15 billion tonnes (i.e. 47% of the world total). India and
several Southeast Asian economies are installing capacity at a very rapid
pace, often using technologies that are carbon intensive.

2.2. Global excess steel capacity has increased

18. With the gap between global steel capacity and demand now expected
to have risen to 550 million tonnes in 2022, from 475 million tonnes in
2021, oversupply pressures are already emerging on international
markets as “too much capacity chases too little demand”. The problem
is being exacerbated as 29.5 million tonnes of net new steelmaking
capacity comes on stream in 2022, mainly in the Middle East but some
also in other regions. The result of these oversupply pressures are seen
in the sharp decline of steel prices observed during 2022.

19. Depending on the extent of the global economic slowdown in 2023, and
possible recession, global steel consumption could perform worse than
expected, with a possible contraction as in 2015. Indeed, indicators of
underlying steel demand based on the so-called “steel weighted
industrial production” index are pointing to demand sluggishness in
2022-23 nearly as weak as that observed during 2015-16.2 The sharp
steel demand slowdown and/or potential contraction, combined with
sustained capacity growth over the next few years (see Box 2), would
lead to a significant increase in the gap between global steel capacity
and demand, raising questions about the possibility of another excess
capacity crisis similar to what the industry suffered in 2015/16.

20. For active members of the GFSEC, which together account for 58.2%
of global steel imports (Figure 1), the implications of a potential and
significant increase in excess capacity over the next year or two would
be felt mainly through the trade channel. Such a scenario could entail an
eventual glut of steel searching for demand in international markets,
trade disturbances, lower steel prices, employment losses, and weaker
profitability for the important steel sectors of GFSEC members, which
are already facing adjustment challenges to meet, e.g., climate change
goals and remain viable. In such a scenario, countries may be expected
to resort to trade actions in the form of countervailing duty, anti-
dumping and/or safeguard actions. While these measures will aim in
many instances to redress unfair trade, the market may remain
fundamentally distorted if corrective actions on excess capacity are not
taken.
  11

Figure 1. GFSEC members account for most of the world’s steel imports

Source: OECD based on data from ISSB.

2.3. Capacity trends in GFSEC member and non-member economies

21. Governments participating actively in the Forum are, by and large,

adhering to the policy recommendations of the GFSEC, creating
opportunities for reducing global overcapacity. Capacity developments
in their economies have been very modest, with many members
experiencing stable or significant downward adjustments in the period
since 2014, while several others have recorded moderate increases in
response to growing demand and other market-driven developments in
their economies. However, declines in GFSEC capacity have been more
than offset by surging capacity growth in non-participating
jurisdictions, notably since the years 2018-2019.
22. Indeed, the work of the Forum in 2022 has consequently highlighted
growing concerns about developments taking place in non-participating
jurisdictions. Government aids to traditional steel production especially
in parts of Asia and the Middle East, regions that are driving global
capacity expansions at rates that exceed current and future demand
developments, are creating further structural imbalances in an industry
whose survival is already at risk. This underscores the need for
enhanced cooperation with all steel-producing jurisdictions to address a
common problem that affects all segments of the steel industry
regardless of the industry’s location or stage of production.
23. The total combined capacity reported by the 29 active GFSEC members
has been on a downward trend since the start of the GFSEC (see Table
12 

1). In 2021, the aggregate capacity of active GFSEC members stood at

an estimated 809.6 mmt, with four members experiencing increases in
capacity that were partially offset by declines or stable capacity in the
other member economies. Since 2016, active GFSEC members have
taken out almost 11 mmt of capacity from the market, and, by adhering
to the Berlin principles and policy recommendations, many are
contributing to greater market balance during difficult years of global
steel excess capacity.
24. At the same time, steelmaking capacity in other jurisdictions continues
to increase rapidly. India, for example, has embarked on a very strong
capacity growth trajectory, recording an increase of more than 13 mmt
of capacity over the last five years, i.e. growth of 11.1%. Last year alone,
Indian capacity increased by 5.1 mmt, the largest increase of any steel-
producing jurisdiction that year, bringing its capacity to a level of 133.9
mmt in 2021.
25. Indonesia is experiencing the fastest capacity growth rate, though from
a lower level than India (see Figure 2). Indonesian capacity grew by
64.4%, or 8.4 mmt, during the last five years. In 2021, Indonesian
capacity rose by 1.8 mmt to a level of 21.3 mmt. Other economies in the
region are posting similar, if not faster, growth. Viet Nam’s capacity
nearly doubled over the last five years, bringing the level to 26 mmt in
2021, a trend that will likely bring the country into the ranks of the top
ten steel producers in the near term. Malaysian steelmaking capacity
increased by 5 mmt over the last five years to a level of 19.2 mmt, close
to that of Indonesia.
26. China’s steelmaking capacity has stabilised recently at a high level of
approximately 1.15 billion tonnes (47% of the world’s total), following
a period of decline during the years it participated in the GFSEC and
implemented some supply-side reforms. Chinese capacity will increase
in 2022 to a level higher compared to 2019, when it left the GFSEC.
Changes in capacity may reflect the timing of new additions and the
associated closures governed by the replacement policy can take place
in different years. Overall, however, the general trend in China seems
to be one of stabilisation of capacity.
27. In the “rest of the world”, capacity has been trending upwards in a
continuous fashion, growing at an average annual rate of around 3.5%
over the past five years. Economies such as Iran, Viet Nam, and
Malaysia account for most of the expansion. In 2021, capacity in the
“rest of the world” accounted for 12% of the global aggregate.
  13

Figure 2. Growth in capacity since 2016: active GFSEC members and other
jurisdictions
170

Indonesia

160

150

140

130
Ind. 2016=100

120

Rest of the world

India
110

GFSEC-29
100

China

90

80
2016 2017 2018 2019 2020 2021

Source: Information sharing exercise in 2022 for active GFSEC members, and
OECD figures for other jurisdictions. For the latest OECD figures, see
https://www.oecd.org/sti/ind/latest-developments-in-steelmaking-capacity-
2022.pdf .
14 

Table 1. Crude steelmaking capacity in GFSEC member economies and other

jurisdictions: 2014-2021
(1000s metric tonnes)

By GFSEC 2016 2017 2018 2019 2020 2021 Change Change

member (mmt) (%)
2016- 2016-
2021 2021

GFSEC-29
820,310 817,360 814,955 810,491 809,213 809,580 -10,730 -1.3%
(active members)

European Union, of
213,659 212,104 211,692 209,192 206,592 206,612 -7,047 -3.3%
which*:

Germany 50,081 49,921 50,041 50,041 50,041 50,061 -20 0.0%

Italy 36,206 36,456 36,456 36,456 36,456 36,456 250 0.7%

Spain 19,610 18,860 18,860 18,860 18,860 18,860 -750 -3.8%

France 20,986 20,511 20,711 18,211 18,211 18,211 -2,775 -13.2%

Poland 12,260 12,560 12,710 12,710 10,110 10,110 -2,150 -17.5%

Belgium 8,900 8,900 8,900 8,900 8,900 8,900 0 0.0%

Netherlands 7,000 7,000 6,813 6,813 6,813 6,813 -187 -2.7%

Austria 8,595 8,595 8,595 8,595 8,595 8,595 0 0.0%

Sweden 5,950 5,950 5,950 5,950 5,950 5,950 0 0.0%

Slovak Republic 5,520 4,860 4,860 4,860 4,860 4,860 -660 -12.0%

Greece 4,760 4,760 4,760 4,760 4,760 4,760 0 0.0%

Finland 4,530 4,530 4,530 4,530 4,530 4,530 0 0.0%

Luxembourg 2,400 2,400 2,400 2,400 2,400 2,400 0 0.0%

Hungary 2,050 2,050 2,050 2,050 2,050 2,050 0 0.0%

United States 120,624 120,624 120,184 119,934 121,374 127,217 6,593 5.5%
  15

Japan 134,447 132,411 131,055 131,205 129,685 123,795 -10,652 -7.9%

Russian Federation 85,755 85,855 85,395 86,897 87,207 87,707 1,952 2.3%

Korea 80,775 80,775 80,175 78,345 78,345 77,612 -3,163 -3.9%

Türkiye 51,506 51,181 51,884 50,698 53,358 53,985 2,479 4.8%

Brazil 51,450 51,450 51,450 51,450 50,950 50,950 -500 -1.0%

Mexico 29,505 29,505 29,505 29,155 29,155 29,155 -350 -1.2%

Canada 17,467 17,467 17,467 17,467 17,739 17,739 272 1.6%

United Kingdom 11,202 11,202 11,202 11,202 11,202 11,202 0 0.0%

South Africa 9,530 9,746 9,906 9,906 8,566 8,566** -964 -10.1%

Argentina 6,650 7,300 7,300 7,300 7,300 7,300 650 9.8%

Australia 5,570 5,570 5,570 5,570 5,570 5,570 0 0.0%

Switzerland 1,370 1,370 1,370 1,370 1,370 1,370 0 0.0%

Norway 800 800 800 800 800 800 0 0.0%

China 1,187,371 1,158,811 1,122,921 1,148,262 1,147,857 1,146,492 -40,879 -3.4%

India 120,527 124,190 127,019 128,719 128,719 133,866 13,339 11.1%

Indonesia 12,962 14,962 15,962 17,812 19,562 21,312 8,350 64.4%

Saudi Arabia 11,565 11,565 11,603 11,603 11,603 11,603 38 0.3%

Rest of the world 259,468 272,168 283,218 293,438 301,638 306,628 47,160 18.2%

Grand total 2,412,202 2,399,055 2,375,677 2,410,324 2,418,591 2,429,480 17,278 0.7%

Notes: * The European Union’s figure refers to the total capacity of all the European
Union Member States. ** Based on OECD data indicating no additions or closures
in 2021. Please note that the capacity data for GFSEC members in this table come
from submissions by the members in the context of the GFSEC information sharing
exercise. The capacity data for non-participating G20 economies are the latest
OECD steelmaking capacity figures (as of December 2022) based on the OECD’s
plant-level database.

Sources: GFSEC information sharing 2022 and OECD figures for other jurisdictions
(for the latest OECD figures, see https://www.oecd.org/sti/ind/latest-developments-
in-steelmaking-capacity-2022.pdf)

28. The results of the OECD’s monitoring of steel investment projects

indicate that a total of 43 planned investments, with a combined capacity
of 46.9 mmt, may take place in the medium to long term in active
GFSEC member economies. Most of these investments are replacement
projects, and nearly all involve EAF furnaces or, in some cases, green
steel projects.
29. An examination of investment project data for non-active GFSEC
economies points to several disconcerting trends, particularly in light of
uncertain steel demand prospects in many of these countries. For
example, India has 80 projects in the pipeline or planned, amounting to
an additional 198.5 mmt in the period until 2030 and in some cases
slightly beyond. These data are in line with the National Steel Policy
published by the Ministry of Steel in 2017, which envisioned India
reaching 300 mmt of capacity by 2030-31. Indonesia has nine projects
planned with a total capacity of 31.3 mmt, also heavily centered on the
emission-intensive BF/BOF route. China has 59.2 mmt of underway and
planned capacity investments, though many of these could be related to
the replacement policy, so the net additions realised over time may be
lower than this amount. Viet Nam plans to increase capacity by 17.3
mmt, the Philippines by 22.9 mmt and Malaysia by 13.9 mmt. The latter
includes a 10 mmt investment project currently underway by Sarawak
 16 

Iron and Steel with a completion date set for 2024. Such large projects
raise concerns about the lack of demand to meet such supply
expansions. For these reasons, it will be important for the GFSEC to
continue efforts to engage with countries that have left the Forum, as
well as others, to ensure a more viable long-run future for the steel
industry.

Box 2. Significant capacity growth, especially in Asia

While steel consumption prospects are weakening, around 174 million tonnes of new
capacity are already under construction or are planned, in particular in Asia, for the 2022-
25 period. If realized, capacity could grow by an additional 5.9% during 2022-25.

In the Middle East, there are a large number of new capacity projects taking place in Iran,
and several planned in Saudi Arabia and Oman.

In Southeast Asia, heavy investment activity is taking place in Malaysia, Indonesia and
Viet Nam, much of it driven by Chinese investments (e.g. Delong Steel – Dexin, Moralawi
Industrial Park and Malaysia-China Kuantan Industrial Park). Some of these investments
may be coupled with broader government plans, such as the Belt and Road Initiative. Such
an investment model could lead to further carbon-intensive capacity growth in Southeast
Asia.

In South Asia, there are many projects in India, and many underway in Pakistan. China
also continues to build capacity and its steel inventory despite its problematic overcapacity,
calling for further efforts to address the situation. Moreover, most of ongoing steelmaking
projects in China are carbon (coal) intensive.
  17

Figure 3. New capacity projects (MMT) between 2022 and 2025

NEW CAPACITY PROJECTS (MMT): 2022 TO 2025

CIS Africa
Latin America
6.5 6.1
Europe 7.8

13.1 mmt

North America 18.1 mmt

102.7 mmt
Asia
19.5 mmt
Middle East

Source: OECD

2.4. Steel decarbonisation progress in the context of excess capacity

30. Addressing structural global excess capacity is crucial for steel

companies to be able to sustain the green transformation. In view of the
steel industry’s decarbonisation challenge, it is thus important to
monitor steel capacity projects involving near-zero emissions. As of
mid-2022, there were around 40 innovative near-zero emission
steelmaking projects worldwide. This project pipeline covers
announced projects involving a facility plant based on an innovative
near zero emission production route (hydrogen-based direct reduced
iron/electric arc furnace, carbon capture utilisation and storage, or
others such as direct iron ore electrolysis).
31. GFSEC discussions have shown the importance of examining the link
between excess capacity and its impact on decarbonisation efforts. The
persisting situation of excess capacity and the resulting lower
profitability margins for steel companies hinder the creation of an eco-
system that is needed to facilitate the green transition. Excess capacity
implies more production of steel than is needed to satisfy demand,
which results in a waste of scarce natural resources and excess emissions
of CO2. These excess amounts of CO2 hamper countries’
decarbonisation targets. The IEA for instance calculated that, compared
18 

to 2020 levels, direct emissions from steel production must fall by at

least 30 percent by 2030, and 90 percent by 2050, to be on track to meet
the 2050 net-zero targets.3 Next, the structural imbalance caused by
global excess capacity affects steel prices, steel companies’ profitability
margins, as well as the global playing field. Excess capacity weighs on
various features needed for an efficient low-carbon transition, such as
investments, innovation, or competition.

32. In order to understand the magnitude and the impact of the global excess
capacity situation, having access to reliable data remains paramount.
Consequently, it will be of interest for the GFSEC members to continue
monitoring the progress the steel sector is making to decarbonise its
value chain.

33. A first step in that process has been taken by the Facilitator in 2022. Its
report on ‘assessing steel decarbonisation progress’ 4 maps different
indicators to keep record of the state of play on steel decarbonisation.
These indicators cover various dimensions, such as capacity,
production, technologies, industrial projects, trade or policy aspects.
The first results indicate that the steel sector is not yet on track to meet
the targets of the Paris Agreement. There is for instance a mismatch
between corporate commitments and country-level pledges. As of end-
2021, companies with net-zero targets accounted for 30% of global steel
production, but additional commitments are needed. Indeed, beyond
these pledges, near zero emission steel production has not yet taken off
sufficiently. While there is potential to ramp up steel decarbonisation
efforts through the use of new technologies, the report shows that the
level of industrial maturity remains fairly low. This would require
countries and companies to significantly scale up their decarbonisation
technologies by 2050. Further policy guidance will be quintessential to
provide for the right framework conditions that are needed to facilitate
the green transition.

34. However, countries cannot tackle the excess capacity situation and
climate change individually. Both relate to truly global challenges,
which call for a global response. Therefore, collaboration among
countries, as well as between public and private stakeholders, will be
pivotal to foster synergies and accelerate progress towards a net-zero
pathway.
  19

3. The unique position of the GFSEC as a multilateral forum

to tackle steel excess capacity

35. The GFSEC is the world’s unique multilateral forum to deal with steel
excess capacity. The current section starts with reiterating the rationale
for establishing the GFSEC, followed by the membership evolutions
since its inauguration. This introduction will be followed by an
overview of some of the GFSEC’s main achievements since its
inception, as well the key activities in the year 2022. These key activities
of the GFSEC in 2022 include: (1) the information sharing and review
process; (2) outreach to non-participating jurisdictions; (3) exploring the
nexus between steel excess capacity and decarbonisation; as well as (4)
the September 2022 GSFEC Stakeholder event on ‘contributing to an
open and inclusive dialogue on steel decarbonisation’.

36. The subsequent sections will illustrate the value that the GFSEC has
brought to its members since 2016. Its main achievements highlight the
GFSEC’s steady and continuous relevance to facilitate a multilateral
discussion on levelling the playing field in the international steel
markets. The GFSEC’s objectives and significant progress since 2016
need to be interpreted against the changing global economic context,
which has been referenced in the previous section.

3.1. Why do we need a multilateral forum on steel excess

capacity?

37. The steel industry fulfils an important function in the global economy,
as it serves as an essential input for various sectors, including
construction and infrastructure, automotive, as well as machinery and
equipment. Without this material, transport and infrastructure networks
would not work, renewable and other energy generation systems would
fail, and hospitals and other buildings could not be built. Furthermore,
the steel sector provides significant employment, both directly and
indirectly through the steel supply chain. The industry decarbonisation
pathway will also play a significant role in helping to meet climate
change ambitions. Numerous policies play an important role in the
sector, including in the areas of trade, investment, environment and
competition.

38. In 2015, one year before the establishment of the Global Forum on Steel
Excess Capacity (GFSEC), 5 global steelmaking capacity exceeded
demand for steel by 793 million tonnes, which represented roughly half
of the steel use in 2015. Excess capacity has undermined competition
and resulted in trade tensions. The steel crisis following the economic
downturn led governments at the multilateral level to address the
industry’s challenges. In 2016, the GFSEC was created to tackle the
problem, under the auspices of the G20. Considerable shifts have
occurred over the past twenty years, with production shares declining
among many GFSEC economies. The participation by and support of
large emerging markets, which co-founded the Forum, was seen as an
20 

important driver of the Forum’s legitimacy and illustrated its inclusive

character.

3.2. GFSEC members adopted several initiatives to achieve their

main objectives

39. The mandate of the GFSEC, under its Terms of Reference, has been
twofold: 1) to enhance communication, information sharing and co-
operation among members, and 2) to take effective steps to address the
challenge of excess capacity. The subsequent paragraphs elaborate on
some of the GFSEC’s main intermediate achievements to fulfil these
objectives and highlight the Global Forum’s relevance.

40. Next, an update is provided on the work that has been conducted in 2022
to further contribute to the GFSEC’s objectives.

3.2.1. The GFSEC already achieved important outcomes,

which highlight its relevance
41. The different bullet points below provide an indicative overview of the
GFSEC’s relevance and main achievements.

• Providing a platform to major steel producers and importers.

The GFSEC convenes major steel-producing and importing
economies on a regular basis and on an equal footing to discuss the
problem of global excess capacity and the policy solutions to
alleviate it. The GFSEC also maintains a dialogue with large steel
producing economies that decided to discontinue their GFSEC
engagements.

• Strong industry support. The GFSEC has attracted strong support

from the industry, which is reflected in the participation and
constructive dialogue with industry associations and other
stakeholders at GFSEC meetings.

• Achieved reductions in excess capacity. During the years of the

GFSEC, a number of countries have realized important capacity
reductions, resulting in a decreasing level of excess capacity at the
global level. The gap between capacity and demand reached its
peak in 2015 standing at 793 mmt. The gap declined between 2016
and 2019, falling to 530 mmt in 2019. While it increased in 2020,
in 2021 it stood at 475 mmt, which is however still large and
demonstrates the importance of continuing the Forum’s work.

• Reached agreement on the solutions to reduce excess capacity

and opened discussions on the implementation of these
principles. In 2017, the Forum achieved a major breakthrough
when consensus was reached on six guiding principles and specific
policy recommendations for governments to reduce excess
capacity and to contribute to a more stable and sustainable steel
sector (see paragraph 57 of the Berlin Ministerial Report).
  21

Members have praised the importance of these recommendations

and acknowledged time is needed to implement them.

• Boosting transparency about steelmaking capacity

developments. The Forum has succeeded in greatly improving
information on steelmaking capacity worldwide. Detailed
information is collected on installed capacities, new additions and
closures of capacity for steel plants, sites and companies, as well as
information on the characteristics of the plants, such as the
technologies used and the plants’ ownership (private versus state
owned). The result of this work has been the development of a
highly-valued government-validated, plant-level capacity database
that is not available anywhere else in the world.

• Established a robust policy review mechanism. In addition to

exchanging capacity data, GFSEC members have actively engaged
in providing information on government policies, practices and
measures, including subsidies and other support measures provided
to steel producers around the world. This has increased the
understanding of the policy situation in countries, and provided a
vehicle for sharing information on effective approaches to
addressing overcapacity. In addition, review sessions have been
organised where members can ask their counterparts about specific
policies, resulting in a rich and thorough discussion.

Kicked-off the work on decarbonisation. The GFSEC started to

explore the nexus between excess capacity and decarbonisation
efforts in the steel sector. The Facilitator kicked-off this new work
stream by the end of 2021 and started identifying various indicators
to map the state of play on decarbonising the steel sector. In
addition, the GFSEC members exchanged information in the
course of the information sharing exercise on the broader policy
conditions that are required to provide green government support.

3.2.2. The different workstreams in 2022 continue to sustain

the Forum’s relevance

Information sharing and review process in 2022

Rationale and questionnaire

42. One of the successes of the GFSEC has been to concisely and clearly
define the issue of excess capacity and its causes. Since its establishment
in 2016, considerable progress has been made in enhancing
transparency and in substantiating policies and recommendations to
facilitate restructuring and eliminate excess capacity. Importantly, the
Forum developed policy principles, recommendations and policy
actions to address excess capacity in the steel sector based on the Berlin
Ministerial recommendations agreed to in 2017 (i.e. the Berlin
Principles). These Principles act as a guiding instrument for the
development and implementation of policies in GFSEC jurisdictions.
22 

43. The Berlin Principles are incorporated in the information sharing

exercise. One of the objectives of this exercise is to track the progress
that GFSEC members made to align their policies with the Berlin
Principles and to share policy experiences. The information sharing
exercise has been described as one of the main pillars of the GFSEC. In
light of this exercise, members more specifically cooperate on a regular
basis by sharing detailed information on steelmaking capacity
developments in their economies, as well as on government policies and
measures that impact capacity. This activity is accompanied by a
rigorous review process whereby members assess the information
submitted by their counterparts. Based on the outcome of the
information sharing and review processes, members can undertake
action which they consider appropriate, in line with the principles and
policy recommendations of the GFSEC.
44. In September 2021, GFSEC members expressed their wish to revise the
information sharing questionnaire. The Facilitator presented its
discussion paper on the revision of the information sharing
questionnaire at the February 2022 GFSEC Working Level Meeting,
which received wide support from the membership.
45. The in-depth discussions at GFSEC meetings following the information
sharing exchange have provided opportunities for deepening the
understanding of government policies and measures that are
contributing to excess capacity and that members may wish to address,
as well as policies that are helping to alleviate the excess capacity
problem. The latter include policies used to facilitate steel industry
restructuring, as well as general framework conditions that encourage
competition and foster a level playing field in the steel sector. These
discussions offer insights of lessons learned, which can be translated
into voluntary policy actions to help the Forum members achieve the
objectives set out in the Berlin Ministerial recommendations.
46. The subsequent paragraphs of the report provide key insights from the
information sharing and review processes in 2022 covering key
steelmaking capacity developments, as well as government policies and
support measures in GFSEC member economies.

Key insights from the information sharing and review process

in 2022
47. In line with G20 Leaders' call for increased information sharing, the
GFSEC continued its work to developing an information-sharing
mechanism to exchange information on crude steel capacity
developments, government policies to address excess capacity, as well
as market distorting subsidies and other government support measures
that contribute to steel excess capacity.
48. The GFSEC now has an extensive database on capacity developments
at the disaggregated level, provided or verified by governments. It also
has collected information on government policies with a direct or
indirect bearing on excess capacity in the steel sector. Such data has
been provided at the central government level for all members and at
the regional or provincial levels for some members. This is the first time
that a policy inventory is being built that goes well beyond what is
  23

reported in other fora and whose emphasis is on policies relevant for

steel. This tangible process contributes to the collective trust and
confidence that are necessary to find collective solutions to the
challenge of excess capacity.

Capacity
49. During the two rounds of information sharing in 2022, GFSEC members
exchanged information and reviewed developments on steelmaking
capacity in their economies. Members also discussed capacity
developments taking place economies that are not members of the
GFSEC (see Table 1 in Section 2 of this report for the detailed results
of the data exchange on capacity).
50. In 2021, the aggregate capacity of active GFSEC members stood at an
estimated 809.6 mmt, with four members experiencing increases in
capacity that were partially offset by declines or stable capacity in the
other member economies. Since 2016, active GFSEC members have
taken out almost 11 mmt of capacity from the market, and, by adhering
to the Berlin principles and policy recommendations, many are
contributing to greater market balance during difficult years of global
steel excess capacity. See Section 2 of this report for further highlights
about capacity developments in GFSEC member and non-member
economies.

Government policies and measures

Results of the information sharing responses

51. Twenty-seven members updated their answers to Part 2 of the
questionnaire regarding government policies and measures.
52. There are several trends to observe with regard to steel related
government policies and support measures. First of all, the vast majority
of GFSEC members continues to express their concern regarding the
lingering state of global steel excess capacity, even if members
acknowledge that progress has been made by the Forum. Secondly, a
large share of members allocate a significant part of their resources to
encourage research and development activities. Thirdly, a growing
number of members adopts several measures to support greener forms
of steelmaking. From a practical point of view, the second and third
tendency tend to overlap, which can be illustrated by the
implementation of policies that are aimed at increasing energy
efficiency and/or reducing greenhouse gas emissions through the
adoption of new technologies. Fourthly, multiple members introduced
several measures to support displaced workers. Following the highly
cyclical nature of the steel industry, an economic downturn may quickly
result in curtailments of production volumes or worker lay-offs. To
anticipate such restructurings, and to absorb the impact when they
materialise, many members have administered holistic labour policies,
including for training or upskilling of the steel workforce.
53. To contribute to achieving policy objectives such as encouraging
innovation, decarbonising the steel sector, or sustaining steel workers,
multiple GFSEC members promulgated different forms of support
24 

measures. It is observed that the total number of support measures

implemented by GFSEC members does not seem to be on the rise. In
addition, it appears that most of the GFSEC members’ policies and
support measures take into account the long-term viability and
sustainability of the steel sector. The information sharing
questionnaire’s section on transparency in non-participating
jurisdictions seems to suggest that other economies in the world such as
Viet Nam are, by contrast, focusing on expanding their crude steel
production figures. An interesting point for the GFSEC to monitor going
forward will be whether China’s crude steel production is (close to)
peaking, as the country intends to shift some of its focus to more higher
value-added segments of steel production.

Outcome of the review process

54. The GFSEC review process, which was established in 2018 pursuant to
principle VI of the Berlin Ministerial Report, allows members to
provide necessary clarifications and to respond to questions raised by
other members regarding steelmaking capacity developments,
government policies, as well as subsidies and other types of support by
government and government-related entities.
55. Two new rounds of the review process occurred in 2022. The exchange
centred around issues related to subsidies and other types of support by
government and government-related entities, the decarbonisation of the
steel sector, as well as new capacity developments.

3.2.3. Outreach to non-actively participating jurisdictions

56. The GFSEC regrets the decision of certain former members to leave the
Forum. The Forum nonetheless continues to engage with several non-
participating jurisdictions and their corresponding steel associations. In
2022, the members of the Forum increased their outreach activities to
some of the former GSFEC members, as well as to potential new
partners:
• The Facilitator identified potential areas of interest for two non-
actively participating jurisdictions to better understand their
interest in joining the GSFEC discussions.
• The Facilitator engaged with steel industry associations of non-
actively participating jurisdictions, as well as potential new
members. Several of these industry associations participated in the
subsequent GFSEC Stakeholder Events and expressed an interest
to be involved in the subsequent discussions.
• The Facilitator liaised with government officials from certain non-
actively-participating jurisdictions to set-up a conversation. The
response rate of these invitations unfortunately remained low.
57. Some non-participating jurisdictions have clearly voiced their opinion
about the relevance of the GSFEC. Other non-participating
jurisdictions, by contrast, are still considering their official point of
view. The inaction of certain non-actively participating jurisdictions to
  25

engage in the discussions on excess capacity, makes it hard for GFSEC

members to take their interest into account. Non-participating
jurisdictions that have been approached and that are keenly interested in
multilateral talks are invited to share their insights about the relevance
of the GFSEC, as well as about potential areas of future work.
58. In the dialogues held with non-participating jurisdictions, the GFSEC
has recognised the right of emerging economies to develop infant
industries, such as the steel industry, contingent upon their stage of
development. This implies that emerging economies are warranted to
build capacity that is needed to satisfy domestic demand, provided that
market principles and international trade rules are respected. At the
same time, GFSEC members believe that building capacity to satisfy
domestic demand needs to be distinguished from production expansions
that are exported to third nations. The latter type of capacity expansions
has led to trade frictions with third nations, and in practice not seldomly
seem to have been coupled with industrial policies that are accompanied
with market distorting forms of government support.
59. In addition to the outreach activities, the information sharing
questionnaire introduced a new section on transparency, in which
GFSEC members could share information about recent capacity and
policy developments in non-participating jurisdictions.
60. By way of an illustration, the following paragraphs will describe recent
tendencies in non-active GFSEC jurisdictions. The focus will be on
India, China and the ASEAN region.
61. India is the second largest producer of crude steel in the world and is
projected to double its steel production to about 200 mmt by 2030.6
Whereas the Indian steel industry is currently highly dependent on coal,
India has the potential to become an important player of low-carbon
steel production in the future. India for instance acts as a frontrunner of
producing steel via the Direct Reduced Iron (DRI) route and has
released its National Hydrogen Mission in 2021, in line with the
objective to become energy independent by 2047.7 India intends to cut
its emissions to net-zero by 2070. However, a large share of the Indian
blast furnace capacity is relatively young and energy intensive.8 The
steel sector currently represents 23 percent of total energy inputs and 30
percent of CO2 emissions in the Indian industrial sector. 9 Therefore,
there may be an incentive for the Indian steel sector to ramp up its efforts
to decarbonise its steel industry.
62. It is noted that India will take the helm of the G20 in 2023. In that
capacity, India is assumed to chair the GFSEC discussions in 2023 as
well, provided that the Forum’s Terms of Reference gets renewed. In
such case, this would offer India an opportunity to highlight its priorities
for the GFSEC and to provide guidance as to the direction that it would
like the GFSEC to take in the future, in cooperation with the GFSEC
Co-Chairs, as well as all other GFSEC members. Chairing the GFSEC
discussions would equally present India with an opportunity to bolster
the inclusive character of the GFSEC and to articulate the interests of
emerging nations that intend to ramp up their steel capacity figures.
26 

63. China is by far the largest producer of crude steel globally and is
responsible for slightly more than half of the world’s production. Like
India, the vast majority of steel plants in China are fairly young.10 In
2020, the province of Hebei on its own accounted for 13 percent of
global steel production. The Chinese steel production decreased
significantly in 2021 and is expected to stay flat for the rest of 2022. 11
However, Chinese announcements in 2022 to support new infrastructure
spending might increase the Chinese domestic steel production in 2023
and beyond.12 Several Chinese steel producers pledged to decarbonise
their activities, in line with the Chinese government targets of reaching
carbon neutrality by 2060, and are starting to implement greener forms
of steel production. This might provide an opportunity for GFSEC
members and China to collaborate.
64. GFSEC members are closely following the capacity and investment
developments that are being observed in the ASEAN region, as
articulated in the GFSEC Ministerial Report of 2021. The South-East
Asian Steel Association (SEAISI) for instance points out that 90 mmt
of steel capacity expansions have been announced for the region by
2026. Most of the planned investments will occur via the blast-
furnace/basic oxygen furnace route.13
65. There may be several reasons for ASEAN countries to expand their
production of crude steel. However, there seem to be important
differences to observe within the ASEAN region as regards the impact
of (announced) capacity expansions. Indonesia introduced a large
infrastructure programme in 2019.14 According to the Indonesian Iron
and Steel Industry Association (IISIA), its steel consumption is
consequently projected to rise to 22.7 mmt in 2024, 40 percent and 38
percent of which can be accounted for by the infrastructure and
construction sector respectively.15 Indonesia has been expanding steel
capacity over the years to satisfy this domestic demand. Some of the
newly installed steel plants in Indonesia received funding from Chinese
investors under the Belt and Road Initiative. 16 Malaysia acts as a
medium-sized steel producing nation. Nonetheless, SEAISI announced
that around 30 mmt of new steel capacity will be added to the country’s
production figures. The vast majority of this production expansion is
projected to commence in 2024.17 Thailand does not seem to plan any
significant steel capacity expansions in the following years. As one of
the world’s biggest importers of steel, its domestic steel industry has
been impacted by dumping practices from third nations. Finally, it is
noted that Viet Nam is considering to draft a strategy to develop its steel
industry by 2030, with a vision to 2050.18 Viet Nam upholds its decision
to support domestic demand, which is to a large extent driven by
government-led infrastructure programmes as well as an expanding
manufacturing base. GFSEC members continue to engage with ASEAN
and the respective steel federations in the region to assess the impact of
capacity developments in the region on other nations within the ASEAN
bloc, as well as on third nations.
  27

3.2.4. Stakeholder event on contributing to a global and

inclusive dialogue on steel decarbonisation and excess
capacity
66. Discussions in the GFSEC have emphasised that global steel excess
capacity slows down the green transition, as it maintains business
uncertainty, creates barriers to investments and increases trade tensions.
This was also echoed in the GFSEC Stakeholder event on steel
decarbonisation held in September 2022.

67. With direct emissions accounting for more than a quarter of total
industrial emissions, the steel sector is of critical importance for
achieving the Paris Agreement’s climate goals. While the mission of
decarbonising steel is an urgent and compelling one, it remains a
challenging task to accomplish.

68. On the 21st of September 2022, the OECD facilitated the GFSEC’s
stakeholder event on steel decarbonisation. The objective of the event
was to bring together, and “connect the dots” between the different
initiatives that are promoting, supporting and implementing
decarbonised steelmaking practices, together with steel industry
associations and steel policymakers from GFSEC member countries.

69. The event highlighted that there are two particular fields where steel
decarbonisation efforts are increasing, but where further coordination
will be crucial:

1. Data: being instrumental to measure and monitor progress towards

steel decarbonisation targets, data is essential to foster
implementation. Moreover, data is the foundational building block
of definitions for near zero emission steel, standards and other
criteria shaping trade measures.

2. Trade: since steel is a highly traded material worldwide, trade is

an indispensable ally in the transition of the steel industry towards
decarbonisation. However, without a level playing field, trade can
also represent an obstacle to decarbonisation efforts, contributing to
carbon leakage and trade distortions. Finding an effective and
inclusive approach to the trade, emissions and excess capacity nexus
will be vital to ensure the implementation of steel decarbonisation.
28 

4. Concluding remarks

70. Since its initiation, the GFSEC has acted as a unique venue to take
multilateral and collective action to address the problem of global
excess capacity in the steel sector and tackle the government policies
and measures that contribute to it. In 2017, the GFSEC reached an
important milestone with the adoption of the Berlin Principles. These
six key principles lay out the policy solutions that the GFSEC members
commit to in order to reduce excess capacity (see Annex A).

71. The unique set of tools developed by the Forum can help countries limit
excessive build-up of capacity that overshoots demand, thereby
contributing to more stable global steel market conditions. This also
helps alleviate trade disturbances and trade tensions involving steel
products. The Forum also shares good practices on ways to promote
leaner, cleaner, more innovative and competitive steel industries, based
on the mutual experiences of steel industry stakeholders from around
the world.

72. The GFSEC maintains a strong interest to continue the multilateral

dialogue on tackling steel excess capacity, and welcomes co-operation
with steel-producing economies from around the world to foster better
conditions for their steel industries and stakeholders.
  29

Annex A. Berlin principles and policy recommendations (2017)

Box 3. Six principles that guided the development of policy solutions to reduce
excess capacity
1. Steel excess capacity is a global issue which requires attention in a global format
with broad participation of economies and effective policy solutions to enhance the
market function and reduce steel excess capacity. To support these, Forum members
may set and publish goals, if appropriate.
2. In order to ensure that the steel market operates under market principles,
governments and government-related entities should refrain from providing market-
distorting subsidies and other types of support measures to steel producers. These
include subsidies and other government support measures that sustain uneconomic
steel plants, encourage investment in new steelmaking capacity which otherwise
would not be built, facilitate exports of steel products, or otherwise distort
competition by contributing to excess capacity.
3. Irrespective of ownership all enterprises acting in the steel market (whether
privately-owned or directly or indirectly owned, fully or in part, by their
governments or by government-related entities) should not receive directly or
indirectly subsidies or other type of support that distort competition by contributing
to excess capacity, and should follow the same regulations with economic
implications and rules, including bankruptcy procedures. A level playing field
should be ensured among steel enterprises of all types of ownership. Global Forum
members should also continue to fight protectionism including all unfair trade
practices while recognising the role of legitimate trade defence instruments in this
regard.
4. Open and competitive markets and a market-driven approach to resource allocation
based on the competitive positions of steel enterprises should be the driving forces
of the steel sector. New investment, production and trade flows should reflect
market-based supply and demand conditions.
5. Wherever excess capacity exists, governments have a role in advancing policies that
facilitate the restructuring of the steel industry while minimizing the social costs to
workers and communities. Governments should ensure conditions exist for market
based adjustment, by facilitating the exit of consistently loss-making firms,
“zombie” firms, obsolete capacity facilities and firms not meeting environmental,
quality and safety standards. This would lead to a net reduction of capacity.
6. Recognizing that collective policy solutions and transparency are vital for market-
based responses by the industry to changing conditions in the steel market,
governments should on a reciprocal basis increase transparency through regular
information sharing, analysis, review, assessment and discussion as well as regular
exchanges about data and concrete policy solutions, among the members of the
Global Forum. Governments should ensure that any relevant information on
steelmaking capacity developments; supply and demand conditions as well as
policy responses including support measures by governments and government-
related entities is available on an on-going basis. Members should exchange
information on the nature and extent of export credit agency support for new steel
 30 

projects. The Global Forum will report to the G20 and to interested OECD countries
being member of the Global Forum on progress.
Source: Report of the Global Forum on Steel Excess Capacity approved on 30
November 2017 in Berlin

Box 4. Policy recommendations

a) Framework conditions
Members should consider the extent to which their framework conditions and
institutional settings ensure proper market functioning and policy objectives
consistent with the need for reducing global excess capacity.
Particular attention should be given to ensure that: i) competition law, trade and
investment policies, and other policies foster a level playing field for competition
among companies irrespective of ownership, both domestically and
internationally; ii) bankruptcy legislation is effective and procedures are expedited
efficiently; iii) the internal financial market is able to price risk and deal with non-
performing loans; iv) labour markets and social security systems adequately
support adjustment, v) different levels of government do not have conflicting
policy objectives and, vi) Procurement policies should not contribute to excess
capacity.

b) Market distorting subsidies and other support measures by government

or government-related entities
Members should remove and refrain from adopting market-distorting subsidies and
other support measures provided by governments and government-related entities
that encourage companies to undertake capacity expansion projects, maintain
consistently loss-making or uneconomic steel plants in the market, or which
otherwise distort the market.
All Members should expeditiously share data on market-distorting subsidies and
other support measures by government or other government related entities. The
proper implementation of subsidies and other support measures that facilitate
permanent closures of steel facilities should be carefully analysed and follow strict
guidelines.
Governments should remove and refrain from market-distorting subsidies and
other support measures by government or government-related entities that
contribute to excess capacity.
Governments may encourage innovations in the steel sector and implementation
of best available technologies among steel producers irrespective of ownership
insofar as this does not distort competition and contribute to excess capacity.

c) Fostering a level-playing field in the steel sector

Irrespective of ownership, all enterprises acting in the steel market (whether
privately-owned or directly or indirectly owned, fully or in part, by their
governments or by government- related entities) should not receive subsidies or
  31

any other types of support that distort competition by contributing to excess

capacity.
All enterprises acting in a country’s steel market should follow the same rules and
regulations with economic implications, including bankruptcy procedures.
A level playing field should be ensured among steel enterprises of all types of
ownership.

d) Fostering industry restructuring by assisting displaced workers

Governments should favour active labour market policies which maintain and
increase the employability of workers who are dismissed as a result of the
restructuring.
Employment adjustment measures are an important instrument for addressing the
social cost of restructuring. This should be provided as support to workers and
should not constitute subsidisation to companies, which could maintain existing
capacities in place.
The specific needs of older workers and other disadvantaged groups affected by
restructuring should be taken into account to facilitate their transitioning into
alternative occupations.
The effectiveness and efficiency of the measures should be evaluated.

e) Government targets
Steel excess capacity is a global issue which requires attention in a global format
with broad participation of economies. To support these, Global Forum members
may set and publish goals, as appropriate, to reduce excess capacity through legal
and market methods. Capacity reduction targets should be accompanied by actions
to eliminate policies that contribute to excess capacity, such as market-distorting
subsidies and other types of support by government or government-related entities
The criteria for capacity reductions should, irrespective of ownership, simulate the
process of market selection with consistently loss making or non-environmentally
compliant firms being forced to exit the market. Ex post assessments of whether
this is the case should be undertaken.
Government objectives to increase capacity should not be accompanied by market-
distorting subsidies or other types of support by government or government-related
entities that contribute to excess capacity, including input support to steel
production.
Government targets should take into consideration demand conditions.

f) Issues related to mergers and acquisitions

Mergers and acquisition should not contribute to excess capacity.
Any measures taken to encourage mergers and acquisitions need to be taken in
accordance with effective competition law and market principles.

g) Ensuring export credits do not contribute to excess capacity

Members should refrain from issuing officially supported export credits for steel
plants and equipment which contribute to the expansion of global steel capacity
that would not otherwise take place but for such subsidisation or not be in line with
global steel demand.
When such support is provided, the terms and conditions of officially supported
export credits for steel plant and equipment should be transparent, reflect market
 32 

pricing and practices, and take note of guidelines agreed among some members
and on-going international negotiations. This will minimise the subsidisation
associated with export credits, and thus avoid supporting the creation of additional
steelmaking capacity.
h) Enhance transparency
Members should regularly update the information on sectoral trends (incl. capacity
developments and production) and policy measures.
The Global Forum should regularly analyse, review, assess and discuss how the
provided information aligns with the agreed principles.
i) Continue the process of the Global Forum
The Global Forum will meet at least three times per year to further discuss, assess
and review this information, to ask questions and provide answers and share best
practices thereon. The Argentinian G20 presidency foresees to hold 3 meetings in
2018.
As the priority for 2018, the Global Forum members should swiftly and fully apply
the agreed principles and recommendations.
In the first half of 2018, members of the Global Forum will share information on
the steps taken to eliminate market-distorting subsidies and other types of support
by governments and related entities, as well as tangible and swift policy action for
their removal.
The Global Forum should share best practices of steel industry adjustment and
exchange experiences on new sources of steel demand.
The Global Forum will report on the process and concrete results in addressing
excess capacity to G20 and to interested OECD countries being member of the
Global Forum.

Source : Report of the Global Forum on Steel Excess Capacity approved on

30 November 2017 in Berlin
  33

ENDNOTES

1
See World Steel Association press release at:
https://worldsteel.org/media-centre/press-releases/2022/worldsteel-short-
range-outlook-october-2022/.
2
The indicator of real steel demand has been calculated using the output
(real value added) of steel using sectors (construction, metal goods,
mechanical machinery, domestic appliances, electrical engineering,
automotive, and other transport) weighted by their share in demand. The
forecasts for sectoral output are from Oxford Economics, released in August
2022. Unlike measures of apparent steel consumption, this indicator reflects
real underlying demand for steel as required by the steel-using industries
without taking into account the net increase in consumer and merchant
inventories of steel.
3
https://www.iea.org/reports/net-zero-by-2050
4
The publication can be found on the GFSEC official website,
https://www.steelforum.org/
5
More information about the Global Forum on Steel Excess Capacity can
be found on its website: https://www.steelforum.org/
6
The Economic Times (8 July 2022),
https://economictimes.indiatimes.com/industry/indl-goods/svs/steel/india-
to-double-steel-production-in-eight-years-to-240-mt-union-steel-minister-
jyotiraditya-scindia/articleshow/92756063.cms
7
Press Information Bureau of India, National Hydrogen Mission (21 March
2022),
https://static.pib.gov.in/WriteReadData/specificdocs/documents/2022/mar/
doc202232127201.pdf; Indian Prime Minister’s Office (15 August 2021),
https://pib.gov.in/PressReleasePage.aspx?PRID=1746062; Indian Ministry
of New and Renewable Energy (9 February 2021),
https://pib.gov.in/PressReleasePage.aspx?PRID=1696498
8
IEA (2020), Iron and steel technology roadmap,
https://www.iea.org/reports/iron-and-steel-technology-roadmap
9
Institute for Energy Economics and Financial Analysis (14 February
2022), https://ieefa.org/resources/ieefa-indias-technology-path-key-global-
steel-decarbonisation
10
IEA (2020), An energy sector roadmap to carbon neutrality in China,
https://iea.blob.core.windows.net/assets/9448bd6e-670e-4cfd-953c-
32e822a80f77/AnenergysectorroadmaptocarbonneutralityinChina.pdf, 14
and 33.
11
World Steel Association (2022), Short range outlook April 2022,
https://worldsteel.org/media-centre/press-releases/2022/worldsteel-short-
range-outlook-april-2022/
12
Notice of the State Council on Printing and Distributing a Package of
Policies and Measures for Solidly Stabilizing the Economy, No. 12 [2022]
of the State Council, http://www.gov.cn/zhengce/zhengceku/2022-
05/31/content_5693159.htm; Notice on Promoting Policy-Based
Development Finance to Support Agricultural and Rural Infrastructure
34 

Construction, Nongban Ji Cai [2022] No. 20,

http://www.gov.cn/zhengce/zhengceku/2022-07/23/content_5702485.htm;
13
SEASI (25 July 2022), https://www.seaisi.org/details/21251?type=news-
rooms; Steel Orbis (27 June 2022), https://www.steelorbis.com/steel-
news/latest-news/seaisi-webinar-malaysia-and-indonesia-to-drive-
capacity-expansion-in-asean-region-1250150.htm
14

https://drive.bappenas.go.id/owncloud/index.php/s/4q7Cb7FBxavq3lK#pd
fviewer
15
Asia Times (13 January 2022), https://asiatimes.com/2022/01/indonesia-
import-surge-signals-industrial-transformation/
16
ICLG (11 January 2021), https://iclg.com/ibr/articles/15395-indonesian-
steel-plant-attracts-bank-of-china-investment; South China Morning Post
(26 July 2022), https://www.scmp.com/economy/china-
economy/article/3186660/china-indonesia-trade-how-important-it-and-
what-are-main; S. Dharma Negara and L. Suryadinata (ISEAS), Indonesia
and China’s Belt and Road Initiatives: perspectives, issues and prospects,
Trends in Southeast Asia, 2018,
https://www.iseas.edu.sg/images/pdf/TRS11_18.pdf
17
SEAISI (25 July 2022),
https://www.seaisi.org/details/21251?type=news-
rooms#:~:text=There%20will%20be%20a%2030,Oriental%20Shield%20a
nd%20Eastern%20Steel.
18
Vietnamese Ministry of Industry and Trade (10 May 2022),
https://moit.gov.vn/tin-tuc/phat-trien-cong-nghiep/chien-luoc-phat-trien-
nganh-thep-viet-nam-den-nam-2030-tam-nhin-den-nam-2050.html
  35

Disclaimer

This report was prepared by the OECD Facilitator.

THE MATERIAL AS WELL AS ANY OTHER INFORMATION

PROVIDED BY THE OECD ON THE OECD WEBSITES OR ON
ANOTHER MEDIUM IS PROVIDED ON AN "AS IS" AND "AS
AVAILABLE" BASIS. The OECD Facilitator makes every effort to ensure,
but does not guarantee, the accuracy or completeness of the material
(including the data). If errors are brought to our attention, we will try to
correct them.

The use of this work, whether digital or print, is governed by the Terms and
Conditions to be found at http://www.oecd.org/termsandconditions

This report, as well as any data and any map included herein, are without
prejudice to the status of or sovereignty over any territory, to the delimitation
of international frontiers and boundaries and to the name of any territory, city
or area.

Note by Türkiye
The information in the documents with reference to “Cyprus” relates to the
southern part of the Island. There is no single authority representing both
Turkish and Greek Cypriot people on the Island. Türkiye recognizes the
Turkish Republic of Northern Cyprus (TRNC). Until a lasting and equitable
solution is found within the context of the United Nations, Türkiye shall
preserve its position concerning the “Cyprus issue”.

Note by all the European Union Member States of the OECD and the
European Union
The Republic of Cyprus is recognised by all members of the United Nations
with the exception of Türkiye. The information in the documents relates to
the area under the effective control of the Government of the Republic of
Cyprus.

Comments are welcome and can be sent to [email protected].

Cover page © Shutterstock - Stock Photo ID: 1813041493