SteelOrbis talked to Alessandro Sciamarelli, EUROFER director of economic research and market analysis about the factors affecting EU steel market.
How would you describe the current steel demand trends in the EU steel market across major sectors (construction, automotive, machinery, etc.)?
The current trend in EU apparent steel consumption, despite two modest consecutive rebounds over the last two quarters - driven by comparison with very low volumes recorded a year earlier - continues to reflect weak demand conditions. These conditions originated in the second quarter of 2022 due to war-related disruptions, coupled with unprecedented increases in energy prices and production costs. This negative cycle has persisted until the third quarter of 2024, mainly as a result of growing global economic uncertainty, higher interest rates - before eight policy rate cuts were implemented, overall manufacturing weakness and growing uncertainty surrounding US tariffs.
The consequences of the conflict in Ukraine and the energy shock on steel-using industries, along with the worsened overall economic outlook, triggered a severe recession (-8%) already in 2022. These protracted downside factors further impacted apparent steel consumption, resulting in two other consecutive annual drops in 2023 and 2024 (-6% and -1.1%, respectively). In 2025, contrary to earlier expectations of a more favourable industrial outlook and improving steel demand, apparent steel consumption is set to decline again, albeit more moderately than previously foreseen (-0.2%, compared to -0.9% formerly). This will be driven by the expected - albeit difficult to quantify - impact of US tariffs and the resulting uncertainty and trade-related disruptions. In 2026, apparent steel consumption is projected to finally recover (+3.1%, previously set at +3.4%), conditional on a positive evolution of the industrial outlook and an easing of global tensions, both of which remain unpredictable at this stage.
In the first quarter of 2025, apparent steel consumption increased year on year (+2.2%) for the second time in a row (+0.5% in the preceding quarter, after three consecutive quarters of declines). The total consumption volume in the first quarter of 2025 stood at 33.8 million metric tons.
Domestic deliveries mirrored the evolution in demand and increased year on year in the first quarter of 2025 (+1.4%, after -2% in the preceding quarter). In 2024, they decreased overall (-2.8%), reflecting persistently weak steel demand.
Imports into the EU - including semi-finished products - decreased slightly (-0.6%) in the first quarter of 2025, after a marked rise in the preceding quarter (+6.3%). It is worth noting that in absolute volumes the share of total imports in apparent consumption remained considerably high in historical terms up to the first quarter of 2025, standing at 25 percent (27% in the preceding quarter). In the full year of 2024, the share of imports stood at 27 percent. In the second quarter of 2025, total imports continued to decrease (-3%).
Apparent steel consumption is set to indicate another drop (-0.2%, more moderate than the previous forecast of -0.9%). In 2026, apparent steel consumption is finally projected to rebound (+3.1%, formerly +3.4%), conditional on a positive evolution of the industrial outlook and easing trade and global geopolitical tensions, which are all unpredictable at the moment. The overall evolution of steel demand remains subject to very high uncertainty. Apparent steel consumption is not expected to improve substantially before the first quarter of 2026, and consumption volumes are expected to remain far below pre-pandemic levels.
In the first quarter of 2025, the Steel Weighted Industrial Production index (SWIP) dropped sharply for the fifth consecutive quarter (-3.2%, after -4.6% in the preceding quarter). Until the end of 2023, EU steel-using sectors’ outputs continued to show resilience and grow, albeit at a slower pace, despite the prolonged impact of Russia’s invasion of Ukraine, overall manufacturing weakness, and global geopolitical tensions - with trade-related issues emerging more recently, weighing on industrial confidence and business investment.
The positive trend of the overall SWIP started after the pandemic, continued up to the fourth quarter of 2023, in spite of soaring energy prices impacting production costs, component shortages and lower output that began to take their toll on total production activity in steel-using sectors in the second half of 2022. The deterioration of the economic and industrial outlook in the EU - particularly due to high inflation and the subsequent interest rate hikes by the European Central Bank (ECB) - had only a limited impact on steel-using sectors’ outputs up to the end of 2023, with the exception of the construction sector. As the industrial and economic landscape in the EU turned even gloomier throughout 2024, the evolution of the SWIP index reflected the continued downturn in the construction, mechanical engineering, domestic appliances and metalware sectors - and particularly in the automotive industry, which is most exposed to volatility in global trade and to supply chain disruptions.
Due to the US tariffs - both announced and implemented - ongoing economic uncertainty is likely to intensify, weighing on growth also in the coming quarters. This is expected despite the monetary easing by the ECB, which implemented eight consecutive 25 basis point policy rate cuts between 2024 and 2025, the effects of which will not be fully visible in the short term.
Despite persisting downside factors, steel-using sectors’ outputs continued to grow in 2023 (+1.7%, revised from +1.6%), albeit with wide differences across individual European economies and sectors. This was largely driven by the better-than-expected performance of the construction sector in some EU countries. However, SWIP resilience came to an end in 2024, and the growth of steel-using sectors’ outputs contracted year on year (-3.6%, revised from -3.7%). This was mainly due to drops in construction and automotive outputs (-2% and -9.8%, respectively). Due to growing uncertainty following US tariff announcements, another recession - albeit a more moderate one - is anticipated in 2025, (-0.7%, formerly -0.5%), before a moderate rebound (+1.8%) in 2026.
How are high energy prices affecting output, investment and competitiveness?
During 2025, energy prices have generally been cooling, particularly the Dutch TTF gas price index, which had reached a three-year peak in January, exceeding the threshold of €50 per MWh, before stabilizing at around €30 per MWh since April. This decline has largely reflected weak energy demand due to subdued manufacturing activity and overall economic uncertainty. Earlier rises in the gas price index were driven by higher demand expectations following a colder-than-expected winter, despite reduced industrial consumption amid the economic slowdown and lower electricity generation from wind power and other renewables. The ongoing transition from Russian pipeline gas to shipborne liquefied natural gas (LNG) from other suppliers, mainly the US, continues. The continuing war in Ukraine and the tensions in the Middle East, along with other global geopolitical downside factors, have so far not triggered increases in gas and oil prices, due to weak energy demand and subdued global economic activity. However, uncertainty remains regarding future developments in energy prices.
The EU is still, currently, an economic area whose manufacturing sectors face higher energy (and thus production) costs compared to other comparable economic regions. This has largely been contributing to the continued downturn in the outputs of the manufacturing and steel-using sectors, particularly in the output of the automotive industry, which is the most exposed to volatility in global trade and to supply chain disruptions.
What are the effects of geopolitical developments on trade routes?
As a result of the across-the-board tariffs (blanket 50% on steel and derivatives) imposed by the US, we expect two major effects in the shorter term:
- considerable deflection of steel products from third countries previously exported to the US to the EU market, which remains much more open;
- a further reduction in the trade surplus of the EU versus the US, which is already an ongoing trend we have seen for some years.
What are your expectations for steel demand and prices in the short to medium term?
On the steel demand outlook, we see the trade deflection mentioned in the first part of the answer to the previous question.
On price developments, we prefer not to make any forecast or assumption. We note, however, that during past rebounds in demand (i.e., the post-Covid period in 2021 to early 2022), prices rose everywhere globally and not only in the EU, and we broadly expect that, when demand will finally pick up, steel prices will react according to market dynamics, with no “overshooting”.
Are you optimistic or cautious about the EU steel sector’s medium-term competitiveness?
It largely depends on the effectiveness of the steel action plan and the extent to which the newly-proposed EU steel measure (replacing the safeguards from July 2026) will be implemented. Other key factors will be, as already set out, the level of energy prices, a pick-up in the industrial outlook and in steel demand (particularly from the automotive sector), and the level of investment towards decarbonization, which must not undermine the EU steel industry’s competitiveness.
Do you think current EU funding mechanisms are sufficient to support the green transition in steel?
We call for further support for green transition towards decarbonization as it requires massive investment.
How do you see the balance between environmental targets and global competitiveness?
This is indeed challenging. CBAM, which is very often seen as a trade measure but indeed is an environmental and climate change tool, has some loopholes which may not help preserve the competitiveness of the EU industry while pursuing the EU’s environmental goals. In this respect, tackling global excess capacity is a key issue. As the OECD has repeatedly pointed out, global excess capacity and environmental targets cannot coexist, as long as the EU - whose steel production is much less CO2 intensive - is flooded by steel with higher carbon content from third countries.