New steelmaking capacity investments are being driven globally by government intervention and other non-market behaviour, despite existing overcapacity, which is translating into excessive demand for steelmaking raw materials. The green transition will meanwhile put further pressure on raw materials supply, OECD Steel Unit head Anthony de Carvalho said at Eurometal’s Central Europe regional meeting in Krakow on Thursday.

Steelmaking capacity additions are accelerating after some moderation a few years ago, with global capacity projected at 2.63 billion tonnes/year by 2025. The majority of new additions are occurring in Asia, while BOFs account for 55% of overall additions, meaning pressure on traditional raw materials. The energy transition-led switch to EAF steelmaking will meanwhile pile pressure on scrap supply.

Worryingly, capacity is being added in regions where demand is not growing as quickly or is, in fact, falling, such as in Algeria, Vietnam, Iran and Malaysia. This means excess capacity that will be exported onto world markets, thereby increasing existing imbalances and resulting in a “carbon-intensive glut”, de Carvalho observed at the event attended by Kallanish.

OECD estimates that the 166mt of capacity addition in 2023-2025 could mean an additional demand of 196mt of iron ore, 94mt of coking coal and 58mt of scrap.

Geographical concentration of raw materials exporters could also be an issue going forward. South Africa, for example, accounts for 70% of global chromium exports, with both the EU and US dependent on its supply. This could spell trouble in future if South Africa, or other countries with mineral reserves, decide to expand their steelmaking industries and keep these raw materials in their domestic markets. Any export restrictions they introduce will need to be monitored, said de Carvalho.

China is meanwhile shifting capacity for low value-added steel abroad while moving further up the value chain in its domestic production. This means increased interest in raw materials sourcing from Africa and Latin America, thereby raising demand for critical raw materials.

Policy dialogue and coordination is therefore essential to avoid unilateral protectionist measures and ensure the viability of steel supply chains in the future, de Carvalho concluded.