- New import quotas, CBAM, high freights weaken competitiveness of imports
- ArcelorMittal’s European EBITDA margin rises to $98/t in Q2, highest in 3 years
As the European Union (EU) has significantly strengthened its trade defence measures against steel imports, the prices and profitability of intra-EU steelmakers have started gradually improving. As the price competitiveness of imported goods weakens, enquiries and purchases of European steel products are on the rise, and this positive impact is beginning to be reflected in the performance of steelmakers.
In MEPS’ latest survey of the European steel market, market participants stated that the new EU steel regulations, which came into force on 1 July, are contributing to an improvement in the operating environment for EU steelmakers. Under the new regulations, the EU has reduced the duty-free import quota for steel products to 18.3 million tonnes (mnt) per annum, a reduction of approximately 47% compared to 2024 levels, and set the tariff rate for volumes exceeding the quota at 50%, an increase from the previous rate.
ArcelorMittal sees stronger margins as EU trade measures take effect
The improvement in market conditions was also reflected in the results of ArcelorMittal’s European division. In the first half of this year, the European division’s revenue stood at $15.243 billion, a 2.5% increase compared with the same period last year. EBITDA rose by 20.2% y-o-y to $1.198 billion.
During the same period, ArcelorMittal’s crude steel production in Europe stood at 14.383 million tonnes (mnt), a 7.3% decrease y-o-y, while steel product shipments also fell by 4.0% to 14.246 mnt. Despite the decline in production and sales volumes, the increase in average selling prices and improved profitability drove the positive results.
The improvement in performance was particularly pronounced in the second quarter. ArcelorMittal’s crude steel production in Europe for the second quarter stood at 7,551,000 t, a 10.5% increase compared with the previous quarter. EBITDA stood at $697 million, a 39.3% increase compared with the previous quarter. The average steel selling price also rose by 3.9% q-o-q to $967/tonne (t).
The European division’s EBITDA margin for the second quarter stood at $98/t, an improvement of $28/t compared with the previous quarter. ArcelorMittal regards this as the highest level in the last three years and expects further improvements in profitability once the effects of the strengthened TRQ system, introduced in July, are fully reflected. The company anticipates that shipment volumes across all business divisions in the second half of this year will exceed those of the first half.
Demand recovery remains weaker than price gains
According to MEPS, since the implementation of the EU’s new trade defence measures, the combination of tariff burdens on imported goods, Carbon Border Adjustment Mechanism (CBAM) costs, and high sea freights has led to a growing preference for European steel products. An upward trend in European coil product prices has also been observed.
However, the pace of recovery in actual demand remains limited. Due to the summer holiday season and high inventory levels, purchasing activity has not expanded significantly since July, while prices of plate and long products have remained stable or shown a downward trend. According to MEPS, the key factors currently underpinning European steel prices are trade and environmental policies, such as import restrictions and the CBAM, rather than an actual increase in steel consumption.
Improved order intake supports ThyssenKrupp Steel Europe
Germany’s ThyssenKrupp is also seeing the benefits of improved order intake in its steel business. Between April and June this year, ThyssenKrupp Steel Europe’s order intake totalled EUR 2.28 billion, an increase of more than 8% y-o-y. Increased sales to industrial goods, distribution, and automotive customers contributed to this improvement in order intake.
The ThyssenKrupp Group’s net profit for the same period stood at EUR 34 million, marking a return to profit from a net loss of EUR 255 million in the same period last year. This figure also included a positive accounting effect of EUR 131 million arising from the sale of the stake in Huttenwerke Krupp Mannesmann (HKM) to Salzgitter. The company assessed that the EU’s strengthened steel trade defence measures, implemented in July, are helping to improve the competitive environment for the European steel industry.
Tata Steel benefits from higher prices despite lower shipments
Tata Steel’s European operations also saw the benefits of improved pricing. Tata Steel Netherlands recorded shipments of just 1.4 mnt, a decrease of around 7% y-o-y, due to the temporary shutdown of rolling mills between April and June; however, revenue rose by more than 8% y-o-y to EUR 1.445 billion.
The EBITDA loss at Tata Steel’s UK subsidiary also narrowed to GBP 27 million, down from GBP 48 million in the same period last year. Tata Steel assessed that new trade measures introduced by the EU and the UK had contributed to some extent to the improvement in steel prices.
ETS reforms could provide further support to EU steelmakers
Meanwhile, European steelmakers are calling for further reforms to the EU Emissions Trading Scheme (ETS), alongside trade defence measures. On 17 July, the European Commission proposed amendments to the ETS to support industrial competitiveness and decarbonisation investments.
The proposed amendments include slowing the pace at which free emission allowances are reduced for industries subject to the Carbon Border Adjustment Mechanism (CBAM). The plan involves increasing the proportion of free allocations compared to the current system, maintaining it at 27% in 2033, 15% from 2034 to 2037, and then reducing it to 0% from 2038 onwards.
A proposal has also been put forward requiring EU Member States to allocate at least 50% of ETS auction revenues to decarbonisation investments in ETS-covered industries, such as the steel sector. Furthermore, consideration is being given to linking the free emission allowances granted to steel producers in future to the condition that they invest an amount corresponding to the economic value of those allowances in decarbonisation projects. The EU aims to reach an agreement on the ETS reform package during the first quarter of 2027.
As such, the EU steel market appears to be supported by policy changes, such as stricter import regulations, the CBAM and the ETS reform, rather than an actual recovery in demand, with these factors underpinning prices and steelmakers’ profitability. Conversely, European service centres and distributors are facing increasing margin pressure as final demand has not recovered sufficiently despite rising steel purchase prices, indicating a widening gap in economic sentiment between steelmakers and distributors.
Note: This article is published in accordance with a content exchange agreement between SteelDaily and BigMint.
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