EU Steel Industry's Future at Risk: Immediate Action Plan to Tackle Trade and Economic Pressures
The European steel industry is at a critical juncture, with mounting challenges on the horizon that could destabilize the sector. On March 4, 2025, European Commission President Ursula von der Leyen hosted a debate with steel industry executives to explore solutions that could secure the future of the industry, which has been under increasing strain due to high energy prices, environmental regulations, and trade barriers. The action plan, set to be unveiled on March 19, is aimed at navigating these challenges and ensuring that the European steel industry remains competitive and resilient in the global market.
The steel industry is one of Europe’s key industrial sectors, with over 2.5 million jobs directly or indirectly tied to its operations. However, the sector has faced declining demand for the second consecutive year and is grappling with rising input costs, especially in energy, and the need to meet decarbonization goals under the European Green Deal. At the same time, global overcapacity, especially from countries like China, has intensified competition, and trade imbalances have pushed the EU to seek protective measures.
U.S. Tariffs Looming: Potential Surge of Steel Imports into the EU
One of the most pressing concerns discussed during the March 4th debate was the potential impact of U.S. President Donald Trump’s 25% steel tariffs. Due to be imposed on March 12, 2025, these tariffs are likely to redirect significant quantities of steel, particularly from China and other steel-producing nations, into the EU market. According to Axel Eggert, the General Director of Eurofer (the European Steel Association), the 18 million metric tons of steel currently being imported by the U.S. under tariff exemptions will now look for alternative markets—primarily the EU. This would flood the EU market with cheap steel, destabilizing prices and undermining the efforts of domestic steel producers.
As a result, the EU Commission faces the dilemma of how to protect its domestic producers from an influx of steel imports that could drive prices down and increase competition in the already fragile market. To address this, Stephane Sejourne, Commissioner for Industrial Strategy, will be tasked with presenting a new action plan on March 19, 2025. This plan will focus on managing the steel market more effectively, including possible measures to extend or replace the current trade safeguard measures that were originally implemented to protect European steel producers from cheap imports.
Trade Safeguards Expiring: Time to Reinforce the EU’s Steel Defenses
The EU’s trade safeguards, which include tariff-free quotas per quarter and per country for various types of steel, were first implemented in 2018 when the U.S. imposed tariffs on steel and aluminum imports. These safeguards have helped shield European producers from the impact of global overcapacity, particularly from China, which remains the world’s largest steel producer. However, these measures are set to expire in 2026, under the World Trade Organization (WTO) rules, leaving the EU vulnerable to increased steel imports from countries seeking alternative markets due to U.S. tariffs.
Given that WTO rules allow safeguards to remain in place for only eight years, the European Commission is looking at possible alternatives to extend the protection for the steel industry. These alternatives may involve tightening the current safeguard system or introducing new import regulations that can handle sudden surges in steel imports. Although the Commission cannot alter the total import quotas, it can implement stricter controls on surges in imports that could harm EU steel producers, ensuring the market remains balanced and competitive.
The EU Commission has also hinted at the possibility of creating new market mechanisms or using trade defense instruments to prevent the unfair flooding of the European market with cheap foreign steel. The goal is to ensure that European steel producers can compete fairly with their counterparts in other parts of the world, especially those benefiting from government subsidies or lower production costs.
High Energy Costs and Decarbonization Pressure: Dual Challenges for Steelmakers
Another significant challenge for the EU steel sector is the high cost of energy, which directly impacts the production costs of steel, a highly energy-intensive industry. Energy prices have been on the rise in recent years, exacerbated by the global energy crisis. This issue is compounded by the EU’s decarbonization goals, which mandate a reduction in greenhouse gas emissions to achieve net-zero emissions by 2050.
Steel production is one of the most carbon-intensive industries, accounting for a substantial portion of industrial emissions in Europe. To address this, the EU Commission is prioritizing the decarbonization of the steel sector, with a particular focus on the development of low-carbon hydrogen as an alternative fuel for steel production. Hydrogen-based steelmaking processes, still in the early stages of development, are viewed as crucial for meeting EU Green Deal goals. The Commission will likely use the upcoming action plan to explore how best to accelerate investment in such green technologies and incentivize steel producers to adopt them.
At the same time, steelmakers will need support in managing energy costs, especially in the face of global competition and rising electricity prices. The EU is expected to explore ways to provide financial incentives or create energy support programs to help steelmakers transition to more sustainable and cost-effective production methods.
Declining Steel Demand: Rebalancing the EU Market
The demand for steel in Europe has also been declining for two consecutive years, contributing to a further tightening of the market. In 2024, the EU steel demand is forecasted to fall by around 4-5% compared to the previous year, due to a slowdown in industrial activity and construction. This marks a significant shift from the steel boom periods of previous decades, when EU steel production was booming.
This decline in demand, coupled with the challenges of trade imbalances and high energy prices, has led to the scaling back of capacities in European steel plants. In 2024 alone, European steel companies reduced their production by 6%, leading to job cuts and further consolidation in the industry. In response, the EU must seek to rebalance the market by stimulating demand for steel in key sectors like construction and automotive, while simultaneously fostering the green steel market as a means to drive future growth.
Key Measures in the EU Action Plan: What to Expect
When the EU action plan is presented on March 19, it is expected to include the following key measures:
• Trade Safeguards: Explore options to extend or replace existing safeguards, including adjusting tariff-free quotas to manage steel imports.
• Energy Support: Identify solutions to mitigate high energy costs, particularly for energy-intensive steel production, and incentivize the shift to low-carbon energy sources.
• Decarbonization: Promote the use of low-carbon hydrogen and other sustainable technologies for green steel production, aligned with the EU’s green transition.
• Market Stimulus: Develop strategies to boost demand for low-carbon steel, especially in key sectors such as construction and automotive.
• Investments: Foster public-private partnerships to accelerate technological innovation in steelmaking processes, enhancing efficiency and environmental performance.
Key Takeaways:
• The EU Commission is set to present a detailed action plan on March 19, aimed at strengthening the EU steel industry amidst global challenges like U.S. tariffs and rising energy costs.
• U.S. tariffs on steel imports will likely lead to a surge in imports into the EU, which is already grappling with overcapacity and global trade imbalances.
• The EU’s safeguards on steel imports, implemented in 2018, will expire in mid-2026, prompting the Commission to consider alternative protective mechanisms for the sector.
• Rising energy prices and the pressure to decarbonize steel production are two major challenges the industry faces in the transition to sustainable production methods.
• The EU’s steel demand has been declining, with 2024 marking a second consecutive year of reduced demand, adding to the pressures faced by steelmakers in Europe.
• The action plan will likely include trade protection measures, energy price support, decarbonization strategies, and efforts to boost demand for green steel to secure the industry’s long-term viability.
