EU steel crackdown: Coface says more protection for producers but higher costs for businesses

(Il Sole 24 Ore Radiocor) - The European Union’s new restrictions on steel imports may offer greater protection to European producers, but at the same time risk leading to higher prices for the sectors that make the most use of this raw material, from the automotive industry to construction. This is highlighted in an analysis by Coface, one of the world’s leading providers of credit insurance and commercial risk management. From July 2026, the EU has reduced duty-free import quotas by 47 per cent, bringing them down to 18.3 million tonnes, and has doubled the tariffs on volumes exceeding these quotas from 25 per cent to 50 per cent. The aim is to protect the European market from the effects of global overcapacity, which reached 640 million tonnes in 2025, equivalent to around 35 per cent of world production. China alone accounts for almost half of this, with around 305 million tonnes.

“The new measures can help to support the European steel industry at a particularly challenging time, characterised by global overcapacity, weak demand and significant investments required for the sector’s transition. At the same time, greater market protection may result inhigher prices for user industries, with a particular impact on sectors that rely most heavily on steel. The challenge will therefore be to strike a balance between safeguarding European production capacity and the competitiveness of the industries that rely on steel for their production,” comments Pietro Vargiu, Coface’s Country Manager for Italia. The measure – as noted in the analysis – comes at a delicate time for the European steel industry. Over the last decade, annual crude steel production in the EU has fallen by 18 per cent, whilst the sector has lost over 17,000 direct jobs. Key factors include weak domestic demand, higher energy and labour costs compared with many international competitors, and growing pressure from imports, which in 2025 accounted for around 22 per cent of European steel consumption. The new measures also form part of the wider European strategy to support the competitiveness and decarbonisation of the steel industry, alongside the Carbon Border Adjustment Mechanism (CBAM).

However, the greater protection afforded to producers could have a direct impact on prices. According to Coface, with quotas almost halved and higher tariffs, supply on the European market could become tighter. The benchmark price for hot-rolled steel in north-western Europe has already risen by more than 10 per cent since the new measures came into force, reaching around $840 per tonne at the end of August 2026. The most likely scenario is not one of an actual steel shortage, but rather an increase in costs for downstream businesses in the supply chain.

Among the sectors most affected are construction, which accounts for 38 per cent of European steel demand, the automotive sector (18 per cent), mechanical engineering (13 per cent) and metal products (12 per cent). The impact is expected to be most pronounced on flat steel products, which are used primarily by the automotive and household appliances industries. The European squeeze – as highlighted by Coface – could ultimately have consequences for international trade as well. By restricting access to the EU market, part of the excess production could be diverted to other countries, prompting them in turn to strengthen their own trade barriers. According to Coface, the risk is therefore that of a gradual fragmentation of the global steel market, with increasingly marked price differences between different geographical areas and greater complexity for companies operating along global value chains.