OCDE - Subsidies and market share in the global steel industry

@) OECD OECD Science, Technology and Industry Policy Papers Subsidies and market share in the global steel industry No. 1912| Disclaimer This paper was approved and declassified by written procedure by the Steel Committee on 15 January 2026.

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use of the work Any dispute arising under this licence shall be settied by arbitration in accordance with the Permanent Court of Arbitration (PCA) Arbitration Rules 2012. The seat of arbitration shall be Paris (France). The number of arbitrators shall be one: SUBSIDIES AND MARKET SHARE IN THE GLOBAL STEEL INDUSTRY © OECD 2026Abstract This paper examines how subsidies affect competitive outcomes in the global steel industry. Using firm-level data from the OECD MAGIC database covering 2006-2022, the analysis assesses the relationship between government support and market-share developments across steel producers worldwide. Econometric results indicate that subsidies increase recipients’ global market share at the expense of less-subsidised competitors. Firms receiving larger support through cash grants and below-market borrowings tend to gain market share even when they exhibit weaker productivity, cost efficiency and financial performance: subsidies weaken the normal link between firm performance and market-share gains. The analysis also identifies negative spillovers on competing firms, implying that support granted to some producers can reduce rivals’ market shares and discourage investment by unsubsidised firms. The results are consistent across OECD Members and partner economies, although subsidisation levels are significantly higher in the latter and hence the dampening of market signals is even more pronounced there. Overall, the evidence suggests that subsidies contribute to resource misallocation, persistent steel excess capacity and shifts in global competitive positions. These findings highlight the importance of greater transparency in industrial support and stronger international cooperation to reduce distortions and support a more level playing field in the global steel sector.

Keywords: Steel industry; excess capacity; market share; industrial subsidies; cash grants; tax rebates; government ownership; distortions; below-market finance

JEL codes: H25 ; H32; L52 ; L61

Contact Fabien Mercier (2 fabien.mercier@oecd.org).

SUBSIDIES AND MARKET SHARE IN THE GLOBAL STEEL INDUSTRY © OECD 20264]

Acknowledgement

JEL codes: H25 ; H32; L52 ; L61

Contact Fabien Mercier (2 fabien.mercier@oecd.org). SUBSIDIES AND MARKET SHARE IN THE GLOBAL STEEL INDUSTRY © OECD 20264] Acknowledgement The Steel Committee’s Programme of Work and Budget (PWB) for 2025-2026 has prioritised robust analytical studies on the impact of subsidies on the steel firms’ capacity and on the competitiveness of international steel industries. Special thanks are thus extended to all Steel Committee members for their unwavering interest in the Secretariat's analysis of subsidies to the steel sector, and for their persistence in advancing this work despite the challenges posed by often opaque, incomplete, and hardto-obtain data. This project was executed in close collaboration with the OECD Trade and Agriculture Directorate (TAD) and benefited significantly from the development of the Manufacturing Groups and Industrial Corporations (MAGIC) database. The expertise of TAD colleagues in estimating below-market borrowings — loans provided to steel firms on more favorable terms than a competitive market would allow — was invaluable. We especially thank Jehan Sauvage and Yuki Matsumoto for those contributions, as well as for their estimations of each steel firm’'s global market share. The study was designed, conducted, and drafted by Fabien Mercier of the Directorate for Science, Technology and Innovation (STI). Additional colleagues who provided feedback on this study include Anthony de Carvalho, Stephan Raes, and Jerry Sheehan of STI. Their valuable comments and careful review of earlier versions of the paper, along with their sustained interest, were instrumental.

SUBSIDIES AND MARKET SHARE IN THE GLOBAL STEEL INDUSTRY © OECD 2026Table of contents

Disclaimer Abstract Acknowledgement Executive Summary 1 Introduction 2 Subsidies weaken the relationship between market share and its drivers 2.1. Subsidy intensities: definition and salient facts 2.2. Higher subsidy intensities erode market function 2.3. The level of subsidisation explains that dynamics differ between OECD Member countries

Executive Summary 1 Introduction 2 Subsidies weaken the relationship between market share and its drivers 2.1. Subsidy intensities: definition and salient facts 2.2. Higher subsidy intensities erode market function 2.3. The level of subsidisation explains that dynamics differ between OECD Member countries and partner economies 3 Econometric estimations of the impact on subsidies on market share 3.1. Econometric specifications 3.2. Results 4 Discussion of the findings and policy considerations Annex A. Indicative OECD matrix of support measures, with illustrative examples Annex B. The OECD MAGIC database Annex C. Estimating below market borrowing References Notes FIGURES Figure 1. Subsidies impact both quantity and prices, reducing margins of unsubsidised firms Figure 2. Partner economies subsidise 10 times more than OECD Member countries Figure 3. Less-subsidised steel fims are losing market share to more heavily subsidised competitors, despite having stronger financial performance SUBSIDIES AND MARKET SHARE IN THE GLOBAL STEEL INDUSTRY © OECD 20266] Figure 4. Average R&D expenditures to asset ratio, by subsidy intensity quartile 14 Figure 5. Most subsidised firms tend to have better yearly gains than least subsidised firms (with exceptions in 2021 and 2022) 15 Figure 6. The most subsidised firms over the study period gained market share at the expense of less subsidised ones 16 Figure 7. Higher subsidisation weakens the correlation between financial performance and market share gains 17 Figure 8. Higher subsidy intensity blurs the correlation between firms’ cost efficiency ratio and market share gains 18 Figure 9. Higher subsidy intensity blurs the link between capacity utilisation and market share gains 19 Figure 10. Higher subsidy intensity is associated with a blurring of the expected correlation between firms’ indebtedness and its market share gains 20 Figure 11. Most subsidised firms tend to have better yearly gains than least subsidised firms (with exceptions in 2021, 2022) 22

Figure 10. Higher subsidy intensity is associated with a blurring of the expected correlation between firms’ indebtedness and its market share gains 20 Figure 11. Most subsidised firms tend to have better yearly gains than least subsidised firms (with exceptions in 2021, 2022) 22 Figure 12. Most subsidised firms over the study period earned market share at the expense of less subsidised ones, or lost less market share than less subsidised ones 23 Figure 13. Higher subsidy intensity is associated with a decrease in the size of the positive correlation between firms’ performance and its market share gains 24 Figure 14. Higher subsidy intensity blurs the correlation between firms’ cost efficiency ratio and market share gains 25 Figure 15. Higher subsidy intensity is associated with a decrease in the size of the positive correlation between firms’ capacity utilisation and market share gains 25 Figure 16. Higher subsidy intensity is associated with a decrease in the size of the negative correlation between firms’ indebtedness and market share gains 26 Figure 17. Subsidies can enable recipient firms to increase their market share through price undercutting, market reservations, or both 31 Figure 18. In accounting there are two main categories of grants 38 Figure A C.1. Estimation of below market borrowings through the construction of a hypothetical market rate of interest 40 TABLES Table 1. Results from OLS regression for market share gains (using deviations from the mean, i.e. Equation 1) 28 Table 2. Results from OLS regression for market share gains (estimating separately effects from others’ subsidies from own, i.e. Equation 2) 29 Table A B.1. Sector coverage of the OECD MAGIC database (version 1.0) 35 BOXES Box 1. Grants amounts in the Profit and Loss statement 37

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Executive Summary Governments continue to support steel producers through grants and below-market borrowings (BMB).

BOXES Box 1. Grants amounts in the Profit and Loss statement 37

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Executive Summary Governments continue to support steel producers through grants and below-market borrowings (BMB). Such support, often provided in large and non-transparent amounts in some partner economies (OECD, 20251)), risks tilting competition and locking in inefficient capacity by keeping uneconomic plants operating or encouraging new capacity additions not aligned with market conditions. Previous analyses by the Steel Committee have shown that higher levels of subsidisation in partner economies contribute to capacity increases.

We found: Subsidies increase recipients’ market share to the detriment of their competitors. Firms that receive the most support tend to win global market share' at the expense of fims that receive little or none. Econometric regressions found negative spill-over of the subsidies provided to other firms on a firm’s market share, and positive impact of cash grants, BMB and corporate tax rebates on a recipient’'s market share. Yet the productivity, cost efficiency and financial strength of subsidised firms do not improve, and are often lower than lesser subsidised firms to start with. Normal market signals are blurred. In healthy markets, higher profitability, higher capacity utilisation and a lower debt burden tend to be rewarded with larger sales volumes. When support increases or is larger (as in partner economies), these signals fade: highly subsidised firms gain ground even when they are less profitable, less cost-efficient and more indebted than their peers. The more a firm is subsidised, the lesser its market share gains correlate with its profitability, its cost-efficiency, its capacity utilisation and a lower debt burden. Spill-overs hurt rivals. When one firm is subsidised, competing firms lose ground: negative spill-overs (market share losses) to competitors are evidenced in our model estimations.

Furthermore, subsidies may crowd out private investment to the sector at large and discourage rivals from expanding. No broad efficiency gains. Earlier OECD work shows that subsidies fail to raise productivity

spill-overs (market share losses) to competitors are evidenced in our model estimations. Furthermore, subsidies may crowd out private investment to the sector at large and discourage rivals from expanding. No broad efficiency gains. Earlier OECD work shows that subsidies fail to raise productivity across sectors (OECD, 2025p2)). Combined with our new evidence on market-share shifts in the steel sector, this suggests that higher support, as is the case in partner economies, leads to lower overall welfare as resources are misallocated. Patterns are global. The blurring effect of subsidies on the normal correlations between market share outcomes and their market-drivers is visible in both OECD Member countries and partner economies. This is despite partner economies starting with much higher levels of subsidisation than OECD Member countries and hence much lower level of correlation between market share and its normal drivers. « Divergences in subsidisation levels play out consistently with those results: in OECD Member countries, firms tended to lose market share through most of the study period (20062022), with the least subsidised OECD Member countries’ firms losing the most. By contrast, in partner economies, the most subsidised firms gained the most market share in 2009: subsidies seem to aggressively increase market shares in partner economies, to the detriment of OECD Member countries. SUBSIDIES AND MARKET SHARE IN THE GLOBAL STEEL INDUSTRY © OECD 20268| How can subsidies boost market share without delivering better performance? Subsidies may: Undercut prices. Support may lower production costs, letting recipients sell below market prices and capture customers even when they are not more efficient. Deter investments from competitors. Persistent subsidisation may signal to competitors and potential entrants that future margins will be thin, reducing their incentive to modernise, expand capacity, or enter the market at all. Demand diversion. Subsidised firms may enjoy preferential access to public procurement or other demand-side measures, diverting orders their way regardless of their actual efficiency and performance.

Consequences may include: Resource misallocation and excess capacity. Capital, labour and innovation flow toward

capacity, or enter the market at all. Demand diversion. Subsidised firms may enjoy preferential access to public procurement or other demand-side measures, diverting orders their way regardless of their actual efficiency and performance.

Consequences may include: Resource misallocation and excess capacity. Capital, labour and innovation flow toward firms chosen as subsidy recipients rather than by performance, holding back sector-wide productivity and resulting in sub-optimal aggregate economic welfare. By keeping inefficient firms in the marketplace, subsidies also lead to excess capacity.

Trade tensions. Uneven subsidisation stirs disputes and retaliation, undermining efforts to create a level playing field for trade and complicating co-operation on broader policy goals such as decarbonisation. Fiscal risks. Propping up weaker firms can become an open-ended commitment, diverting public funds from more productive uses, with possible dire reckoning further down the road. Policy considerations for governments: International cooperation that strengthens subsidy disciplines, enhances business certainty and reduces trade frictions would be preferable to unilateral action and can be expected to curb the use of such measures - a main conclusion from the earlier joint work of the International Monetary Fund (IMF), the World Bank (WB), the World Trade Organization (WTO) and the OECD (IMF et al., 2022g). Make a concerted effort to reduce subsidies to the steel sector in a coordinated manner - including with partner economies. A rapid and uncoordinated phase-out in jurisdictions that are not among the most subsidy-intensive could unintentionally strengthen the market share of more heavily subsidised firms, even without an increase in their own support. Make current subsidies more transparent and targeted to meet the intended policy goal: poorly targeted support is more likely to weaken the link between firm performance and market outcomes. Greater transparency and alignment with clearly defined and publicly accepted policy goals can reduce distortions. Subsidies that lower the marginal costs of production may distort price competition even more, allowing recipient firms to undercut rivals and expand unfairly. This does notimply that other subsidies are more desirable, but subsidies that reduce steel prices act in a very

policy goals can reduce distortions. Subsidies that lower the marginal costs of production may distort price competition even more, allowing recipient firms to undercut rivals and expand unfairly. This does notimply that other subsidies are more desirable, but subsidies that reduce steel prices act in a very direct way through trade and the global price channel and would explain a large part of the loss of market shares for non-recipients.

Be aware of overlapping support: steel firms receiving grants, below-market finance or tax breaks often benefit from additional instruments like public procurement access. These effects are cumulative and must be assessed jointly by policy makers and analysts.

Preserve competitive neutrality: subsidies should not weaken market signals that reward efficiency. Soft budget constraints - like persistent bailouts or countercyclical BMB - risk locking in inefficient capacity and deterring needed restructuring.

SUBSIDIES AND MARKET SHARE IN THE GLOBAL STEEL INDUSTRY © OECD 2026Introduction Robust and data-driven empirical analysis is vital to inform policy debates on the impacts of subsidies and their policy implications. Building on established OECD analytical frameworks and the expertise developed under the Steel Committee’s current Programme of Work and Budget (PWB), this report investigates how subsidies influence the international competitiveness of steel firms, with particular attention to their relationship with market share. Policy concerns around subsidies, as well as financial and non-financial government support more broadly (hereafter "subsidies”), typically focus on their potential to distort market outcomes. Subsidies are likely to exacerbate global excess capacity across several strategically important sectors, including steel, shipbuilding, solar panels, and aluminium. By enabling selected firms to sustain production and capacity levels that would not be viable under normal market conditions, subsidies undermine a level playing field (OECD, 2025}4). Over the years, there has been a strong and sustained call for greater transparency in the provision of subsidies (IMF et al., 20223). A significant milestone in that respect was the establishment of the OECD MAGIC (MAnufacturing Groups and Industrial Corporations) database, which enabled firmlevel studies across a number of sectors (Annex B).

the provision of subsidies (IMF et al., 20223). A significant milestone in that respect was the establishment of the OECD MAGIC (MAnufacturing Groups and Industrial Corporations) database, which enabled firmlevel studies across a number of sectors (Annex B). In the steel industry, excess capacity remains a particularly acute problem (OECD, 2025;1). Both subsidies and excess capacity can depress global steel prices and heighten competitive pressures on unsubsidised firms, eroding fair competition. Furthermore, subsidies are unevenly distributed across jurisdictions: for example, a typical Chinese steel firm receives 5 times more subsidies in the form of grants and belowmarket borrowings than a steel firm located in another partner economy, and 10 times more than a steel firm located in an OECD Member country (Mercier and Giua, 2023s5). Consequently, subsidies risk increasing non-market driven exports and aggravating international trade tensions. Concerns over subsidies typically fall into two categories. The first category is structural: subsidies can keep uneconomic plants operating or encourage new capacity additions not in line with market considerations, thereby sustaining global excess capacity (OECD, 2025(1)) (Mercier, 2024(). Such dynamics depress prices over the long term and threaten the viability of unsubsidised firms. Previous analyses by the Steel Committee found that grants and below-market financing have had a large and statistically significant impact in supporting both capacity maintenance and expansion. In partner economies, a grant worth USD 1 million annually, sustained over a number of years, was found to be associated with a capacity increase from anywhere between 5 000 to 15 000 metric tonnes. Moreover, a USD 1 million in subsidies through below-market borrowings (BMB) was found to increase capacity by about 1 000 metric tonnes outside of steel crises, while strong anecdotal evidence suggested it had a powerful counter-cyclical effect in impeding capacity closures during steel crises (OECD, 2025[7). Hence, the effect of subsidies on capacity expansion and maintenance is an established fact, and its impact would

about 1 000 metric tonnes outside of steel crises, while strong anecdotal evidence suggested it had a powerful counter-cyclical effect in impeding capacity closures during steel crises (OECD, 2025[7). Hence, the effect of subsidies on capacity expansion and maintenance is an established fact, and its impact would be felt both in terms of higher production volumes and lower international prices (Figure 1). The second category of concerns relates to the more general distortive effects of subsidies. Even in the absence of subsidy-induced capacity expansions, subsidies can distort competitive conditions both domestically and internationally. OECD analysis shows that subsidies generally flow toward firms that are larger, more indebted, and that have greater state ownership (Mercier, 2024g). This finding was further validated by broader OECD sectoral studies (OECD, 2024g)), (OECD, 2025(z).

SUBSIDIES AND MARKET SHARE IN THE GLOBAL STEEL INDUSTRY © OECD 202610

Because subsidies of both categories may disrupt market outcomes and intemational competition, they can fuel trade tensions and result in retaliatory measures across sectors. Furthermore, if subsidies weaken market signals, then they can enable less efficient firms to maintain or even expand their market share to the detriment of less subsidised competitors, domestic or abroad, which would result in a clear sub-optimal allocation of resources and a net loss to aggregate welfare world-wide (Figure 1). This report investigates the potential for subsidies to weaken market signals, and to help recipients acquire market shares, irrespective of their potential capacity expansions. It focuses on the link between subsidies and firm-level market share dynamics. The analysis draws on the OECD’s MAGIC database, which combines information on government support to manufacturing firms with detailed financial data. Figure 1. Subsidies impact both quantity and prices, reducing margins of unsubsidised firms - TaF a Subsidy providers TN T, sess State-Cantrolled Enterprises cankommpende ~Balow market price input and energy prices “Land-use subsidies - Grants b s ~Dabt-to-equity swaps quity paricpation -

• TaF a Subsidy providers TN T, sess State-Cantrolled Enterprises cankommpende ~Balow market price input and energy prices “Land-use subsidies - Grants b s ~Dabt-to-equity swaps quity paricpation - fl Can produce cheapar -subsidisad frm Redunelnmnfl & ez producing steel ~Lower financial margins . -~ B A igherrisks of bankruptey lyfes? "lfi’ — - Unableto upgrade and innovate, i — ‘ncluding for grean tachnologies o producing Firma which Ineficient irm wouldnot have whichwould invested in have faled LOWER PRICED STEEL PRODUCTS capacity sbsent subsidies expansion stare Investin producing P New subsidised] stesl mills Note: Most common instruments used for each effect are listed in red near the red arrows representing the subsidisation incurred.

Source: OECD Secretariat.

Subsidies are often nested into more general industrial policies, which should embed continuous evaluation to minimise distortions (Criscuolo and Lalanne, 2022[9]). Hence, it is quite likely that subsidies operate through more numerous channels that the channels of quantities and prices depicted in Figure 1 above. The remainder of this report is organised as follows. Section 2 presents key stylised facts on the relationship between subsidies and market share. Section 3 applies econometric analysis to examine these dynamics while controlling for other relevant factors, building on methods used in previous Steel Committee work (OECD, 2025p)), but focusing exclusively on the steel sector. Section 4 concludes with a discussion of policy implications.

SUBSIDIES AND MARKET SHARE IN THE GLOBAL STEEL INDUSTRY © OECD 2026111

Z Subsidies weaken the relationship between market share and its drivers This section presents descriptive evidence on the interplay between market share, subsidies, and other variables typically associated with market share dynamics. The aim is both to illustrate the strength of these potential relationships under different subsidisation regimes and to guide the selection of relevant

Z Subsidies weaken the relationship between market share and its drivers This section presents descriptive evidence on the interplay between market share, subsidies, and other variables typically associated with market share dynamics. The aim is both to illustrate the strength of these potential relationships under different subsidisation regimes and to guide the selection of relevant explanatory variables for the “market share” variable in the econometric analysis of Section 3. 2.1. Subsidy intensities: definition and salient facts Two common instruments to provide subsidies to steel firms are grants and below-market borrowings (BMB), though many other instruments exist (Mercier and Giua, 2023;5)). Grants are direct cash transfers, with amounts typically available from corporate filings at the firm level or from government websites at the programme level. BMB are estimated by the OECD by comparing the actual interest rates paid by firms with a benchmark reflecting normal market conditions and the borrowers’ financial profiles, adjusted to exclude the effect of potential govemment guarantees that may artificially boost steel firms’ credit ratings. While many other subsidy instruments exist (Mercier and Giua, 2023[5]), this report focuses on grants, BMB, and, to a lesser extent, corporate income tax concessions, as support through other channels is far more difficult to quantify. To gauge the extent of subsidisation across firms of different sizes, the report uses the ratio of subsidies to total assets, referred to as “subsidy intensity”. For example, in Section 3 the analysis employs ratios of grants, BMB, their combined total, and tax concessions to assets as regressors for changes in market share. In this section, however, we focus specifically on the combined grant and BMB-to-asset ratio.? The results presented in this section remain valid even when the sample is restricted to firms in OECD member countries or to those in partner economies. This is notable given the significant differences in subsidy intensity between the two groups. Figure 2 illustrates these differences by showing the average and median subsidy intensities, by quartile, for each sub-sample. Notice how the vertical axes for OECD

member countries or to those in partner economies. This is notable given the significant differences in subsidy intensity between the two groups. Figure 2 illustrates these differences by showing the average and median subsidy intensities, by quartile, for each sub-sample. Notice how the vertical axes for OECD Member countries and partner economies are graduated (scale of subsidisation is 10 times less for OECD Member countries). SUBSIDIES AND MARKET SHARE IN THE GLOBAL STEEL INDUSTRY © OECD 202612| Figure 2. Partner economies subsidise 10 times more than OECD Member countries OECD Member countries 005 .004 003 002 001 || Q3 Q1 (lowest) Q2 Q4 (highest) Partner economies g 04 2 £ z 03

H § 02 K 3 E H 3 01 z 0

Q1 (lowest) Q2 [e Q4 (highest) average subsidy intensity B median subsidy intensity Note: This is an observation-level graph, meaning that a single firm may appear in different subsidy intensity quartiles across years, depending on its annual subsidy-to-asset ratio. Subsidy quartiles are defined based on the 26% quantiles of the combined grants and below-market borrowings (BMB) relative to total assets - i.e. (grants + BMB) / assets.

Source: OECD MAGIC database for steel firms.

As a consequence of these very different levels of subsidisation, when quartiles are calculated for the full sample, steel firms from OECD Member countries are largely concentrated in the first and second quartiles, with 95 and 90 observations respectively, compared with only 17 and 5 in the third and fourth quartiles. Each quartile contains 174 observations in total, though 109 were excluded from the figure because of missing data for certain variables. 2.1.1. Market share gains, profitability, indebtedness and subsidies (aggregate for the period) Figure 3 shows, by subsidy-intensity quartile, the total absolute market share gains of firms in each quartile,

missing data for certain variables. 2.1.1. Market shar