“Europe has to stop being naive, own its industry, deal with international trade issues. There is a place in the future for the steel sector”.
– European Commission’s EVP for Prosperity and Industrial Strategy, Stéphane Séjourné, during the press conference for the new proposal to protect the EU steel sector from the impacts of global overcapacity.
Before diving into this proposal it is worth contextualising what steel means for the EU economy. As highlighted within the EU “competitiveness compass” steel forms part of the backbone of the European manufacturing system because it provides critical inputs vital for whole value chains of strategic importance. This ranges from but is not limited to renewable energy (particularly wind and solar), construction (e.g., pipes and tubes) and industrial manufacturing (incl. machinery, tools and equipment). Put simply, steel is a necessity for a competitive and thriving economy. It is an “industry of industries” that we cannot afford to see weakened further.
What do I mean by weakened further?
The EU steel industry currently has a capacity utilisation rate of only 67%, well below the 80% target to be considered profitable. This rate quantifies to what extent available resources are used or, in other words, how much steel could be produced if the mills ran at full capacity. As a result of this, between 9K and 100K jobs have been lost since 2007 (within the recent Emergency Steel Social Summit the 100K figure was used but it depends on which jobs you include). The main culprit (albeit not the only one) of this situation is the massive global overcapacity, creating surplus of steel and difficulty for EU based producers to compete with cheap imports. Other issues facing the industry include, for instance, high energy costs, lower internal demand, maintaining metal scraps within the EU and preventing carbon leakage.
Does this all sound familiar? The European Commission already presented a dedicated Steel and Metals Action Plan in March 2025, providing a strategic action plan to support the sector. This included a dedication to replace the existing steel safeguards (set to expire by 30 June 2026) by presenting a balanced approach accounting for security/resilience considerations while preserving a certain openness of the EU market.
This all brings us neatly back to the proposal at hand.
What is within the proposal?
In its objective to protect the sector, the European Commission proposes key interventions:
- Limiting tariff-free import volumes to 18.3 million tonnes a year (a reduction of 47% compared to 2024 steel quotas) and doubling the level of out-of-quota duty to 50% (compared to the 25% under the safeguard)
The headline measure is clear with regards to the overarching message but the exact measure of the steel quotas depends upon the product category. For instance, “Metallic Coated Sheets” has a quota of 1,620,886 tons. Through future secondary legislation, the European Commission would specify how exactly these EU-wide quota would be divided across countries. Unless a bilateral safeguard measure is found, it is important to underline that imports originating from countries that have a FTA with the EU would also be included. Exports from Norway, Iceland and Lichtenstein would be excluded due to their participation within the European Economic Area. With regards to Ukraine it is noted that the exceptional and immediate security situation should be reflected.
The proposed target aligns with the approach taken by the administration of Donald Trump with the clear difference being that the EU retains tariff-free quotas. Within the press conference, the European Commission underlined that the measure is fully WTO compliant and that the EU will engage with affected trade partners to offer allocations based on the country.
- Strengthening the traceability of steel markets by introducing a Melt and Pour requirement to prevent circumvention
The European Commission is proposing to introduce a “Melt and Pour” requirement to ensure a comprehensive approach is taken to address the overcapacity. The country of “melt and pour”, as indicated within the proposal, refers to the “original location in which raw steel and iron is initially produced in liquid form within a steelmaking or iron-making furnace and subsequently cast into its primary solid state”. This is aimed to increase transparency and avoid unwanted entry into the EU market by countries contributing to overcapacity by doing further “transformation” in another country. In practice, importers will have to provide a mill certificate to prove the country of origin.
The reaction of the steel industry?
Axel Eggert, the Director-General of The European Steel Association (EUROFER) “strongly welcomes the proposal” and calls on the European Parliament and the Council to “swiftly adopt the proposal without delay”. He goes on to say that “the ultimate objective is to allow our steel plants to operate again at a viable utilisation rate, to reverse the closures and layoffs of recent years, and to provide companies with the visibility needed to pursue their decarbonisation investments”. Eurofer has also called for an ambitious implementation of other pillars of the Steel and Metals Action Plan (e.g., addressing loopholes in the Carbon Border Adjustment Mechanism)
Next steps
The proposal will now be assessed within the European Parliament and the Council. Notably, Brando Benifei, S&D coordinator within the INTA committee, has already underlined that this is a good first step but that “it must be seen as the beginning of a real change of pace”. He also noted the need to protect all sectors affected by overcapacity, a reference which will be strongly welcomed by European Aluminium given they want to extend the proposal to their own industry. In other words, the concrete provisions may certainly still change until it is ultimately adopted. Nonetheless, the co-legislators will be pressured to find a deal that can be formally adopted and enter into force before the current safeguards end on 30 June 2026.
Beyond the formal legislative process, the proposal also carries implications for EU trade relations. It will likely be used as leverage to seek a better deal with the U.S and the U.K has already indicated that trade retaliation is on the table. The global forum on steel excess capacity on 10 October will provide an initial platform to exchange. This is all to say, dear reader, that there will be a lot of twists and turns to define the future of the EU steel sector. This proposal is merely the beginning of a longer journey.