There could be a significant risk to downstream steel demand in 2026-28, prior to the scheduled extension of the carbon border adjustment mechanism (CBAM) to downstream steel-consuming goods, European steel market participants said at the Eurometal & Assofermet Southern Europe meeting in Milan today.
Participants suggested that current CBAM costs are being underestimated across the supply chain.
Annual CBAM mark-ups on steel products effectively encourage the import of finished steel derivatives, Polish Union of Steel Distributors president Piotr Sikorski said. While CBAM is expected to expand to downstream products in 2028, the mark-ups on steel will by then be in their third year, potentially continuing to make derivative imports more competitive.
To mitigate the risk of the loss of demand, a list of key HS codes of EU-manufactured products with high steel content has been submitted to the EU by Eurofer, Argus understands. The proposal looks to establish a quota system for downstream products similar to existing steel safeguards.
Key product categories, which have been identified, include car parts and specialised vehicle components, certain home appliances and parts used in machinery and yellow goods. The objective is to implement these safeguards to protect EU manufacturing even before the 2028 CBAM downstream expansion.
Meanwhile, the new version of the steel safeguard measures is still expected to come into effect in July, but attendees warned that there are concerns about the World Trade Organisation compliance of those, at a time of ongoing negotiations on free-trade agreements with several countries on the basis of providing them with specific quotas.
The speed of EU manufacturing deindustrialisation and relocation of production remains a primary concern, market participants said at the event. In response, Eurometal is preparing an EU-wide initiative for joint action, president Alexander Julius said, calling for increased co-operation between national federations to present a unified front.
Market sentiment remains subdued, with service centres reporting a weak order intake in February — in some cases 10-20pc lower year on year. Several service centres expect their reliance on imported material to diminish over the course of the year. Imports could fall to about 20pc of their flat steel use, with the remaining 80pc sourced within the EU, according to some estimates. This marks a significant shift from previous years, when as much as 40pc of consumption was covered by imported steel, they said.
