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| European Steel Market |
Economic Uncertainty and Geopolitical Tensions Impact EU Steel Demand
The European steel market is experiencing an early slowdown this summer, driven by growing geopolitical uncertainty and a bleak economic outlook. Demand for steel has further declined following a disrupted May trading period. A growing concern among buyers revolves around the upcoming Carbon Border Adjustment Mechanism (CBAM), which will come into full effect on January 1, 2026. Coupled with the rising US Section 232 tariffs, the steel market has adopted a "wait and see" approach, leading to further market uncertainty.
In addition, the European Commission revised its forecast for Eurozone GDP growth to 0.6% for Q1, primarily due to front-loaded exports ahead of US tariffs. However, this temporary boost has been overshadowed by the international trade uncertainty, forcing a reduction in the 2025 growth forecast from 1.1% to 0.9%. The impact of these tariffs and trade disruptions has left steel buyers in Europe cautious, particularly regarding the future costs and logistics involved with CBAM compliance.
US Tariffs and the Shift in Global Steel Trade
The US Section 232 tariff hike, which increased the import tariff from 25% to 50% on June 4, has significantly disrupted the EU steel market. Many steel producers are now awaiting the outcome of EU-US trade negotiations, particularly regarding the implementation of “reciprocal tariffs” on downstream products. This uncertainty surrounding future tariffs has left many buyers hesitant to commit to new orders.
As the US dollar continues to decline, the cost of imports has become more competitive, leading to a shift in supply chains. Steel buyers in Europe have started receiving more offers from countries like Brazil, India, and even Iran, redirecting materials initially intended for the US market. Despite the increased volume of lower-cost imports, the introduction of CBAM-related emissions costs and the stagnant demand in Europe has somewhat limited the impact on EU steel prices.
ScrapInsight Commentary
The European steel market is navigating complex challenges posed by both regulatory changes and global trade disruptions. While the introduction of CBAM may eventually support domestic steel prices, the uncertainty it brings—along with the burden of US tariffs—is likely to suppress demand in the near term. Steel traders should prepare for fluctuating prices and supply chain disruptions until a clearer trade and policy landscape emerges in 2026.
