EU and UK Steel Prices Set to Soar Amidst New Tariffs and Carbon Regulations

Steel prices in the European Union and the United Kingdom are anticipated to rise significantly as new tariffs and the Carbon Border Adjustment Mechanism (CBAM) are implemented. This forecast, originating from British steel supplier All Steels, suggests a substantial impact on import costs and domestic market dynamics.

Key Takeaways

The EU’s CBAM, effective January 1, 2026, could add £30 to £130 per ton to UK import costs.
Revised EU safeguard measures will halve duty-free imports to 18.3 million tons annually.
Anticipation of coordinated UK measures with the EU to restrict non-EU imports.
Potential for domestic demand to reach 18-20 million tons, aiding sector profitability and decarbonisation investment.
Short-term price increases of up to £80 per tonne, potentially exceeding £200 per tonne by late 2026.

Impact of CBAM and Tariffs

The forthcoming CBAM is expected to directly increase the cost of steel imports into the UK, with estimates ranging from £30 to £130 per ton, contingent on the origin and carbon intensity of the steel. This mechanism aims to level the playing field by imposing a carbon cost on imported goods equivalent to that produced within the EU.

Revised EU Safeguard System

Simultaneously, the EU is revising its safeguard system, which will cap total duty-free imports at 18.3 million tons per year. This represents a substantial reduction, approximately half of the current quota, thereby tightening the market for imported steel.

UK’s Potential Response

While the UK government has not yet finalised its stance, All Steels anticipates that the UK will introduce measures similar to or coordinated with the EU. This could involve restrictions on imports from non-EU countries, mirroring the EU’s protective approach.

Market Dynamics and Price Projections

Negotiations with European manufacturers and distributors indicate an early shift, with buyers looking to pre-empt CBAM-related costs by returning to the market. Traders are reportedly scaling back imports from Asian markets due to extended lead times and tariff uncertainties, favouring local producers. All Steels forecasts a short-term price increase of up to £80 per tonne (€92.05). However, following the full implementation of protective measures in 2026, prices could surge beyond £200 per tonne (€230.1).

The company draws parallels with recent price movements in the United States subsequent to the introduction of trade measures there. Despite potential seasonal price declines in the near term, market sentiment among steel mills is improving as buyers increasingly turn to domestic supply chains.

EU’s Rationale for Protection

The European Commission’s proposal, presented in October, aims to shield the EU steel industry from the adverse effects of global overcapacity. The proposed measures include limiting duty-free imports and doubling the duty rate on products exceeding the quota to 50%.