North European hot-rolled coil (HRC) prices are expected to increase later this year, as buyers move early to avoid anticipated supply-side constraints.
Europe's carbon border adjustment mechanism (CBAM) will increase the cost of imports from January 2026. There are unconfirmed reports that the commission will set the CBAM benchmark for blast furnace-based imports at 1.4t. If true, this would add nearly €53/t to the cost of importing HRC with a carbon intensity of 2.1t, assuming a carbon cost of €72.07/t.
The commission will also provide more clarity around its proposed melt-and-pour clause in the third quarter. Should this be imposed in the first half of 2026, it will increase the cost of importing cold-rolled coil (CRC) and hot-dip galvanised. Legal sources suggest that the commission could mandate payment of anti-dumping duties for those that continue to use Chinese substrate. For example, if a re-roller buys Chinese HRC, processes it into CRC and sells it in the EU, it may be liable for the dumping duties currently in place on Chinese HRC, the lowest of which is around 18.1pc.
This would not necessarily reduce EU imports of downstream products, and is hard to enforce, but could raise the floor price as re-rollers source more domestically.
There will also be changes made to the current steel safeguard, which lapses in June 2026. European steel association Eurofer wants the safeguard to be replaced as early as January 2026 to reduce import penetration, and given the risk of supposed trade diversion from the US where tariffs have now been increased to 50pc for most exporters. Eurofer has been outspoken in its demand for a 50pc cut in imports, to realign market share with historical norms. It is not clear if the commission will acquiesce to this request, but officials have already stated that the new measure will be stricter than the current mechanism.
However, some suggest a pre-emptive import surge — as traders race to clear customs before costs rise — could increase supply rapidly in a subdued demand environment. A number of traders have openly admitted to trying to import substantial quantities for fourth-quarter clearance to beat the CBAM and any other potential tariffs.
Whatever regulatory obstacles may appear, demand is still the major issue for the steel supply chain.
There is potential demand upside from German stimulus efforts, and should wider geopolitical uncertainty ease this year. EU industrial production has started to grow of late, after years of decline, and German manufacturing inventories and new orders are trending the right way too — stocks are falling from high levels, and new orders are contracting less than before.
But slower economic growth and rising trade uncertainty also pose downside demand risks — for example, automotive companies and their supply chains are currently grappling with production issues because of reduced Chinese rare earth exports. Should trade tension increase, there is a risk of further supply-side constraints impacting steel-using sectors.
