Impact of Global Steel Agreements on Market Competition

CBAM's now a key in every heavy-industry export model into Europe. From 2026, importers of steel, aluminium, cement, fertilizers, electricity and molecules must buy CBAM certificates to cover the gap between EU ETS prices and carbon costs in the exporting country. This would add around $15-$25 billion a year to in-scope import values over the next 10 years, mostly concentrated in metals, with upside to $34 billion if carbon prices rise faster. For investors, this is less about tariffs and more about where margin compression shows up first: high‑carbon iron and steel exporters in markets such as Brazil, Canada and Turkey now need to reprice product and capital plans against CBAM‑adjusted economics. The response is portfolio and contract design. Long‑term offtake, siting and hedging need to lean into CBAM‑aligned power pools and policy regimes, and reward producers that can certify and reduce carbon intensity over time. In heavy industry, the competitive advantage is shifting from lowest cost per tonne to optionality on carbon intensity, contract structure and route‑to‑market.

✋ EU ETS + CBAM Reshape Global Steel Competitiveness A Nature Communications paper examines how the revised EU Emissions Trading System (ETS) and the Carbon Border Adjustment Mechanism (CBAM) are transforming global steel markets. ⚙️ Key Highlights 1️⃣ The steel industry contributes 8–10% of global CO₂ emissions — deep decarbonisation is essential. 2️⃣ Hydrogen-based direct reduced iron (H₂-DRI) combined with electric arc furnaces (EAF) becomes cost-competitive in Europe from 2026, supported by EU ETS free allocations. 3️⃣ The phase-out of free emission allowances and phase-in of CBAM (2026–2034) shift competitiveness toward low-emission steel routes. 4️⃣ Locations like northern Scandinavia, Portugal, and Spain emerge as frontrunners due to access to cheap renewables. 5️⃣ Natural gas–based steelmaking is not competitive in the EU under rising carbon costs. 6️⃣ Imports of low-emission steel and relocation of ironmaking (via HBI trade) may be needed to sustain EU steel output. 7️⃣ CBAM could trigger a “global decarbonisation race” as exporters strive to stay competitive through green technologies. 8️⃣ Complementary policies and trade diplomacy are vital to prevent carbon leakage and support fair global transition. 💬 Will the EU’s carbon border rules accelerate global green steel investment — or simply shift emissions elsewhere? #GreenSteel #EUETS #CBAM #Hydrogen #Decarbonisation #ClimatePolicy #TradeAndClimate #NetZeroIndustry

Europe’s steel industry may be at a turning point.      As DER SPIEGEL’s latest article reports, the EU proposes to almost halve steel import quotas as of July 2026 and apply a 50 percent tariff on out of quota imports. This could lift plant utilization to profitable levels, according to BCG analysis.      The conditions that led to the introduction of EU steel safeguards have not improved. Global overcapacity continues to fuel export pressure and unsustainably low prices, while US trade restrictions keep redirecting steel flows toward Europe. On top of that, weak demand, high energy prices, and rising decarbonization costs persist.      Against this backdrop, the EU decided to tighten and make the trade defense instrument permanent. The aim is to ensure that the EU steel industry can compete on a level playing field and continue to support a strong industrial base in Europe.      It is no accident that the new 50 percent out of quota tariff matches that now imposed by the United States on steel imports. The EU will also introduce a new “melt and pour” requirement, preventing circumvention by ensuring that only steel actually produced in a given country can benefit from its import quota.      Like the existing steel safeguards, quotas will be divided among 30 product families, based on 2022 to 2024 import shares.      The goal is to ensure a more balanced market that keeps EU steel production viable and competitive, creating conditions for continued investment, including in low carbon technologies.      But the move could also raise input costs for Europe’s steel intensive industries. Those competing globally may see margins tighten. However, the medium-term price effect for steel users is unclear. The decline in imports may be offset by higher capacity utilization, a reduction in exports, and the reopening of idled plants.      In reality, both effects are likely: stronger protection for EU steel producers and rising challenges for steel using industries. The key question is how Europe manages this trade off while staying competitive and moving toward decarbonization.      Check the full Der Spiegel article “Hoffnung für Deutschlands Stahlwerke” here (German only): https://lnkd.in/e5fAcMdf       #SteelIndustry #EUTradePolicy #IndustrialStrategy #BCG 

The European Commission on Oct. 7 unveiled a sweeping new plan to regulate EU steel imports. It is a major change in the EU's approach to steel trade and is worth unpacking in some detail: 1. Assuming the proposal is adopted by relevant EU institutions, the proposal will cut the EU’s tariff free steel import quota by 47% to 18.3 million tons per year, while doubling the tariff on steel imports outside the quota to 50%. (A few non-EU European countries are exempt). 2. Substantively, the EU’s action is about both China and the U.S. The EU is responding to global overcapacity driven largely, though not exclusively, by China, including, as the EU’s report on the steel measures notes, by Chinese steel companies operating in third countries. The EU is also responding to Trump hike of US steel tariffs to 50%, which is driving more of that overcapacity into European markets. 3. Unlike existing EU steel tariffs, which, legally speaking, are temporary “safeguard” measures, the EU has now recognized it needs a permanent structural steel import regime if it wants to maintain substantial EU steel production. The EU is pledging a periodic tariff review, but there is no expiration date. This reflects the reality of a global steel market in which western producers are not low-cost, and, absent ongoing policy support, will keep declining. Of course, higher steel tariffs mean higher steel prices for steel consuming industries in these same western markets. 4. The EU plan isn’t consistent with the WTO! Simply hiking tariff rates and reducing quotas isn’t something the WTO rules allow. The EO plans to square this circle by invoking WTO Article 28, which allows countries to modify their WTO tariff commitments. Under Article 28, other countries are allowed to demand the EU make concessions to offset the EU’s increase in steel tariffs (e.g., cuts to some other EU tariff), or, if the EU doesn’t agree, to impose a penalty on the EU equivalent in value to the higher steel tariffs. It will be very interesting to see if the EU makes other concessions, succeeds in dissuading other countries from retaliating, or gets into a couple of little trade wars. 5. Both the Biden Administration and now the Trump Administration have talked with the EU and other advanced industrial economies about a collective arrangement to allow steel trade among themselves in exchange for a collective tariff wall against China, Turkey, the Middle East, and other low-cost steel producers. The new EU tariff regime might facilitate those discussion—but it isn’t clear to me how interested, really, the Trump Administration is in such a deal. 6. This is a big pivot in EU trade policy and is consistent with the U.S. and other advanced industrial economies deciding, as a policy matter, that it is necessary to maintain certain strategic industries despite the price and diplomatic costs. It’ll be interesting to see how willing the EU is to take this type of approach to other sectors. 

𝗦𝘁𝗲𝗲𝗹 𝘁𝗿𝗮𝗱𝗲 𝗮𝗻𝗱 𝘁𝗿𝗮𝗱𝗲 𝗽𝗼𝗹𝗶𝗰𝘆 𝗱𝗲𝘃𝗲𝗹𝗼𝗽𝗺𝗲𝗻𝘁𝘀 (𝗝𝗮𝗻. – 𝗢𝗰𝘁. 𝟮𝟬𝟮𝟰) by Gianpiero Mattera, Rodrigo Pazos, Yuto Takada; OECD - OCDE Directorate for Science, Technology and Innovation (#STI), OECD #SteelCommittee #Keymessages ✴️ China's steel exports surge, impacting global markets… People’s Republic of #China’s steel #trade surplus has surged to nearly 100 million metric tons in 2024, a massive leap over the past five years that is affecting competition across global steel markets. Chinese #exports have more than doubled since 2020 and continued to grow substantially in 2023, increasing from 95 million metric tonnes (mmt) in 2023 to 108 mmt in 2024 (first six months annualised). In the first half of this year, China's #steel exports rose by 20% compared to the already elevated levels of 2023. Chinese exports to all regions showed significant two-digit increases, with #shipments to #ASEAN #countries leading the surge, registering a 20% increase relative to 2023 in annualised terms. At the same time, #Chinese steel #imports continue to fall, by more than 75% since 2020. These #developments reflect growing steel #excesscapacity and cause massive turmoil in #global steel #markets. ✴️ …posing severe challenges for steel trade of other countries… Although globally steel trade has witnessed a pronounced expansion, growing by 6.5% in the first months of 2024, this is largely driven by Chinese exports, with most other countries facing severe #challenges. This surge in Chinese steel exports is creating significant #competitive pressure for #exporters from other #countries, in particular #Europe, #Japan and #Korea, who are struggling to maintain #marketshares. As a result, imports in these countries are rising strongly, further compounding the #difficulties for #domestic #producers and threatening the #sustainability of their steel #industries. Global steel #demand remains very weak this year, resulting in persistently low finished steel #prices and #steelmakers facing increased challenges to compete in #international markets. ✴️ …and leading to a strong intensification of trade policy response worldwide In response to these developments, trade #policy actions have intensified across the globe. An increasing number of countries, especially those most affected by the influx of #lowpriced Chinese #steel, have initiated a series of #antidumping investigations and adjusted their #tariff #profiles to protect domestic industries. Countries taking such #measures include not only #OECD #members but increasingly also #emerging and #developing #economies, broadening the #geographical scope of #tradepolicy actions. In the period January to September 2024, as many as 67 new antidumping #investigations have been initiated, which represents the highest number of #traderemedy #actions observed since the excess capacity #crisis of 2015-16. Stephan Raes