Question Period Note: STEEL AND ALUMINUM SECTORS – IMPACT OF EXCESS PRODUCTION CAPACITY

What is the Government of Canada doing to protect the domestic steel and aluminium industries from the impacts of excess production capacity?

• Steel and aluminium are the base of Canada’s construction and manufacturing economy. They are also essential for securing Canada’s energy future and generate high-quality, high paying Canadian jobs.
• Excess production capacity is a global problem that needs a global solution and Canada is working with other market-based economies to address the issue.
• Domestically, Canada has taken steps to even the playing field through the imposition of a 25% surtax on steel and aluminum products imported from China.

• The Government of Canada sees excess capacity as a global trade problem in which non-market economies subsidize products to compete unfairly against market-based economies.

• The excess steel capacity problem is expected to rise from 601 million tonnes in 2024 to 721 million tonnes by 2027, reaching its highest level in a decade.

• The problem of excess capacity and subsidized metal production is made worse through the production of higher-carbon metal production in non-market jurisdictions.

• Canadian investments in high-cost technology to support low-carbon metal production are challenged to compete with cheap, carbon-intensive production subsidized by non-market economies.

• In 2025, Canada took existing measures a step further to address risks associated with non-market policies and practices by implementing measures to limiting the access of Chinese steel and aluminium to the Canadian market.

Global excess production capacity

Excess capacity is the surplus of potential steel production that exceeds actual steel demand – the total capacity to produce steel and the actual output, with higher levels of excess capacity leading to depressed prices, reduced profitability for producers, and market distortions. Countries with significant excess capacity are typically non-market nations supported by government policies and practices that shield them from market conditions. When their production outstrips that of their domestic demand, they off-load product onto other markets, displacing the product of their domestic production, which is then sold off to other countries. Policies that continue the build-up of inefficient steel are being used by China and its proxy countries (those in which they subsidize steel production or stand up steel mills) to take market share and realize market dependence on them as suppliers to gain further global market dominance. Producers in market economies, meanwhile, subject to the discipline of market cycles and price signals, are hard-pressed to compete against nationally backed, deep-pocketed, state-owned enterprises who do not need to concern themselves with profitability.

While many countries are contributing to the problem, China’s steel production capacity accounts for approximately half of global capacity, while their share of global aluminum production capacity has grown to 57 percent as of 2023. The problem worsens as China’s domestic demand decreases as their economy slows down.

It is notable that, countries who are subsidizing steel capacity for which there is insufficient demand are also subsidizing high carbon steel production as the inefficient steel mills are the mills that require the most subsidies to keep in production. These high carbon steel products are eroding the competitive position and profitability of domestic producers making it harder for them to have sufficient capital to invest in decarbonization initiatives.

Canadian surtaxes on steel and aluminum

On October 22, 2024, Canada imposed a 25 percent surtax, under section 53 of the Customs Tariff Act, to certain steel and aluminum products imported from China. Measures will be reviewed within a period of one year from their entry into force, and FIN also implemented a remission framework for firms to request surtax relief.

To be effective, Canada needs other nations to work together on solving these market distortions. As the problem worsens, the need for a global solution becomes more urgent.

China Country of Melt and Pour / Smelt and Cast Import Measure

On July 31, 2025, the Government implemented a 25 percent surtax on imports of steel melted and poured and aluminum smelt and cast in China to address risks associated with non-market policies and practices in the sectors, which are exacerbated by U.S. actions. The details of this measure include:

• All countries, except for the U.S. and China are covered by the measure, as there are existing surtaxes on their steel and aluminum imports into Canada.
• Product scope aligns with the surtax on steel and aluminum from China (October 2024).
• After September 22, 2025 (end of the winddown period), only certificates demonstrating that the goods do not contain steel melted and poured or aluminum smelt and cast in China will be accepted, with more details on documentation to be provided in the Customs Notice.
• If an importer fails to provide the required documentation, the steel or aluminum goods will be deemed to contain steel melted and poured in China or aluminum smelted and cast in China.
• The surtax applies to the entire value of the imported product if it contains Chinese melted and poured or smelt and cast steel or aluminum.
• For applicable steel products, the surtax will apply to covered products that are within the quota levels of the TRQ, however, it will not stack with the TRQ for out of quota imports (i.e., the maximum applicable rate applying to over-quota imports will be 50%). The surtax will apply in addition to any relevant anti-dumping or countervailing duties.