Exclusive Overestimates of actual steel production capacity hindered negotiations with trading partners

Overestimates of actual steel production capacity hindered negotiations with trading partners

The Organization for Economic Cooperation and Development (OECD) has significantly revised its estimate of Ukraine’s nominal steel production capacity, reducing it to 8 million tons per year. Olexander Kalenkov, president of the Ukrmetallurgprom Association, explains why this is important, even though the revision came rather late.

What is the OECD Steel Committee?

The OECD brings together the world’s leading nations and serves as a platform for high-level dialogue: members exchange analytical assessments, make forecasts, and discuss challenging issues in specific sectors, countries, and the global economy as a whole.

Given the particular importance of the steel industry, separate OECD Steel Committee was established in 1978, headquartered in Paris.

The Steel Committee’s meetings, held twice a year — in the spring and fall — are attended by more than 300 representatives from 40–50 steel-producing countries, including heads of relevant ministries and agencies, representatives of major companies, and experts. This makes the Steel Committee the leading global forum for government representatives in the steel industry.

Unlike industry conferences focused on associations and companies, the Steel Committee works not only with associations but also with government agencies and addresses issues within the purview of government bodies.

Excess capacity as a key challenge facing the industry

A key industry indicator is nominal steelmaking capacity: the volume of steel that all of the country’s facilities are capable of producing in a year at 100% capacity utilization. The global steel community has long been concerned about excess capacity, which creates imbalances in global production and fuels trade conflicts at the global and regional levels.

For 15 years, excess capacity has remained a key topic for the OECD Steel Committee. Excess capacity is the gap between the total production capacity of various countries and the actual volume of steel output.

About ten years ago, the GFSEC—the Global Forum on Steel Excess Capacity—was established to address this imbalance. Its objectives include reducing excess capacity, eliminating market-distorting subsidies, ensuring a level playing field, tightening international rules regarding subsidies and preferences for state-owned enterprises, increasing transparency, and establishing mechanisms for decommissioning capacity.

According to available data, excess capacity in 2026 is estimated at approximately 630 million tons, while the forecast for 2027 stands at 720 million tons. The growth in excess capacity is putting pressure on global prices and creates the risk of a sharp increase in production in certain countries, which could significantly impact international trade.

The issue of government subsidies is inextricably linked to this problem. A number of countries — notably China and Turkey — provide direct, systematic support to domestic producers. While this is justified from the perspective of their industrial policy, it is viewed as unfair competition in the international context.

The situation regarding Ukraine’s production capacity

As of 2013, Ukraine’s nominal steelmaking capacity stood at 42.5 million tons per year — this was the figure cited in reports by World Steel Association and OECD. The historical peak of actual production during the years of independence was approximately 42 million tons and was reached even before China entered global markets.

Following the first Russian invasion in 2014, Ukraine lost its plants in Yenakiieve, Alchevsk, and Donetsk, and by 2020, nominal capacity had fallen to 25.3 million tons. Although Ukraine reported this information to international organizations, the aforementioned reduction in nominal steelmaking capacity was not promptly reflected at the global level.

After February 2022, Ukraine lost four more steel enterprises, and nominal steelmaking capacity fell to 16.2 million tons per year. Of this volume, approximately 8.2 million tons have been decommissioned and cannot be restored without significant investment, which is practically impossible under conditions of ongoing hostilities.

Thus, Ukraine’s actual nominal steelmaking capacity currently stands at 8 million metric tons per year. With production volume projected at 7.4 million metric tons in 2025, capacity utilization reaches 92–93%, which is significantly higher than the global average of 76%.

Despite the actual reduction in capacity, Ukraine was still listed in OECD reports with a figure of 38.7 million tons. The delay in adjusting the data can be explained both by administrative errors and by the OECD’s lack of sufficient grounds to consider the capacity lost by Ukraine as permanently decommissioned. However, while the formal status of the occupied territories remained uncertain after 2014, the situation changed dramatically after 2022: the destruction of steel capacity in Mariupol, Kramatorsk, and Kurakhove became clear evidence of irreversible losses.

The importance of updating data

Overstating nominal steelmaking capacity has negative consequences for the country. For example, the EU’s trade defense measures are justified by the existence of global excess capacity and contain direct references to it. Citing the figure of 38.7 million tons while actual production stood at 7.4 million tons gave trading partners grounds to claim that Ukraine was capable of significantly increasing its steel output. During every bilateral meeting, the Ukrainian side had to explain separately that the recorded capacity figures did not reflect reality and that the situation had fundamentally changed.

In mid-March, the OECD Steel Committee, in an official letter to the Ministry of Economy, Ecology, and Agriculture, recognized Ukraine’s nominal steelmaking capacity at 8 million tons per year. We very much hope that the updated data will duly contribute to the success of negotiations with trading partners, including in the context of trade restrictions imposed on Ukraine by the European Commission.