Defensive play: how the steel market is reacting to the EC’s proposal

On October 7, the European Commission (EC) presented a proposal to protect the EU steel industry – new protective measures to replace the current ones, which expire in June 2026. The steps, which were announced in advance, were supported by European steelmakers, but they are causing concern among the bloc’s trading partners.

What is being proposed

The EC has proposed:

• limiting duty-free imports to 18.3 million tons per year, a 47% reduction compared to the 2024 steel quotas;
• to double the duty rate on products outside the quota to 50% (compared to 25% under the current safeguard measure);
• to strengthen the traceability of steel markets by introducing a rule to take into account the volume of steel by the country where it was produced.

Exports from Norway, Iceland, and Liechtenstein will not be subject to tariff quotas or duties, in accordance with the European Economic Area Agreement. Ukraine, which faces an exceptional security situation and whose interests must be taken into account when deciding on the allocation of quotas without compromising the effectiveness of the measure, is also mentioned separately.

Commenting on the proposal, European Commissioner for Industrial Strategy Stéphane Séjourné noted that this first step will accelerate efforts in four other areas of the action plan: CBAM and public procurement reforms, defining the concept of “low-carbon steel,” and supporting demand. In addition, the EU must ensure sufficient supply of clean energy at predictable prices and new infrastructure, and introduce requirements for the use of European-made components where appropriate.

European Commissioner for Trade Maroš Šefčovič added that these measures comply with WTO requirements and are permitted under current rules. He noted that, unlike others, the EU will interact transparently with its partners in accordance with Article XXVIII of the GATT.

Relief for the industry

Representatives of the European steel industry generally welcomed this decision.

The European Steel Association (EUROFER) noted that the provisions presented by the EC meet the needs of the industry.

The ultimate goal of reducing unfair imports flooding the EU market is to allow European steel mills to operate again at 80-85% capacity utilisation, compared to the current 65%, explained EUROFER Director General Axel Eggert. At the same time, one-third of steel demand in Europe is met by imports at below-cost prices and high carbon intensity.

The association believes that the European Parliament and the European Council should urgently adopt the proposed provisions to ensure that they enter into force at the beginning of 2026.

The EC’s proposal was welcomed by major European steel producers ArcelorMittal, Outokumpu, Aperam, and Thyssenkrupp. In particular, Aditya Mittal, CEO of ArcelorMittal, commented that the company is relieved and that the European steel industry and the broader manufacturing sector can look forward to a stronger future. Shares in EU steel companies rose on October 7 following the EC’s announcement.

JP Morgan analysts noted in a memo to investors that they interpret the EU’s new protective proposals as positive for all carbon steel producers in the bloc. The bank expects positive effects on steel prices in the EU until 2026.

Criticism

At the same time, the European Automobile Manufacturers’ Association (ACEA) criticized the EC’s new plan to sharply reduce steel import quotas, considering the proposed parameters too strict. They explain that these measures could have a negative impact on the industry’s competitiveness due to increased costs.

According to ACEA estimates, European car manufacturers purchase about 90% of the steel for their immediate needs within the EU. However, the sector still depends on imports of certain brands and grades of metal, especially specialized automotive ones, which are quickly exhausted under the current quota system. The new restrictions will only exacerbate this problem.

The association also cites the requirement for importers to identify themselves on a “melted and poured” basis as a problem for car manufacturers, as this will be too complicated for the sector’s supply chains.

The Italian Federacciai is concerned about the EC’s statements on cooperation with global partners, particularly at the WTO level. The association points out that this will mean, among other things, the need to discuss with China measures to counter its own trade practices. Therefore, this issue should be considered in the European Parliament.

Federacciai also emphasizes that the EC’s proposal should be backed up by other instruments, such as the “Buy European” strategy and a review of the CBAM.

Commenting on the issue, Eurometal President Alexander Julius drew attention to the need to include not only primary steel products but also more complex ones (“steel derivatives”) in protective measures, following the example of the US.

Spain’s Unesid calls for the scope to be expanded to protect products manufactured in further processing stages and the entire value chain in the sector.

Concerns of partners

The European Commission’s statement has already raised concerns among the bloc’s trading partners.

The UK has demanded urgent clarification on the announced quotas. At the same time, Prime Minister Keir Starmer said that the government is in talks with the bloc on this issue.

The British steel sector has warned of a potential existential crisis as a result of this move by Europe, as this market accounts for almost 80% of the country’s total steel exports. Even before the proposal was announced, steelmakers pointed out that the bloc’s quota cuts threatened them more than US tariffs. Industry organizations believe that the government should act quickly and use its trade relations with the EU.

South Korea points out that the EC’s proposal will negatively affect its steel exports if implemented as planned. The EU is the second-largest export market for South Korean steelmakers. The Ministry of Industry has stated that the country plans to protect its interests as much as possible through bilateral consultations.

The Swiss industrial association Swissmem has expressed concern about the reduction in quotas. It has stated that restrictions on free trade will harm the country’s manufacturers, who already face significantly higher tariffs than others in the US. According to a Swissmem spokesperson, if the EU does not grant Switzerland quotas on a scale similar to the current ones, its steel industry will face a serious problem. The group called for a negotiated solution.

At the same time, Swiss Steel said it was still analyzing the measures presented, but it was important that Switzerland be exempted from them.

The Chinese Chamber of Commerce to the EU (CCCEU) said the following about the EC’s proposal: the decision to coordinate actions with the unilateral tariff approaches of some countries carries the risk of further fragmenting global steel trade and undermining the stability of international supply chains.

According to the CCCEU, although the measure is presented as protective and preventive, it is in fact a protectionist step that could lead to significant and complex side effects in downstream industries, particularly in the automotive, engineering, and construction sectors.

“Non-American” approach

European officials, as well as industry organizations such as the German Steel Association (WVStahl), also point out that the EU’s approach differs significantly from the US position, where all imports are subject to a general tariff of 50%. EUROFER emphasized that the quota of over 18 million tons was set in accordance with market conditions in 2013, before the first wave of Chinese metal products flooded the market. This volume of duty-free steel is almost equivalent to the combined production of France, Belgium, and Luxembourg.

Gunnar Groebler, president of WVStahl, says that the proposed quota mechanism does not close the European market, but instead creates a fair balance – half of the previous import volumes remain duty-free. This protects European steel production without creating a disproportionate burden on the manufacturing industry.

Earlier, EU officials told the press that the new European protective measures could provide a basis for Brussels to work with Washington on the terms of a trade agreement between the parties, signed in July this year.

Despite positive feedback from European metallurgists on the EC’s proposal, the industry still has a number of questions, in particular, how quickly these decisions will be adopted and implemented. The bloc’s trading partners, on the other hand, are already talking about consultations and negotiations to secure the market for their countries’ steelmakers.