The perfect storm for EU steel: Five events worth paying attention to in 2026

The year 2025 was a turbulent one for the European steel sector, marked by uncertainty and a changing regulatory framework. As 2026 approaches, the situation is becoming more difficult than ever, as the introduction of the Carbon Emissions Regulation Mechanism (CBAM), the introduction of a new steel trade regime, and decarbonization measures are expected to pose serious challenges to the European steel market.

Implementation of CBAM to gradually change trade flows

CBAM has been preparing for full–scale implementation since January 1, and its implementation is expected to significantly change the trading structure in the European steel market - changes were noticeable as early as 2025.

The European Commission has now finalized the baseline and standard emission values that will determine how much importers will have to pay for carbon emissions once the CBAM becomes fully operational in January 2026.

These values, especially the default emission values assigned to each exporting country, vary greatly and create significant cost differences between countries of origin.

Consequently, trade flows are expected to change for a number of reasons.

The default values are extremely high for some major suppliers of flat rolled products and semi-finished products, namely for China, India and Indonesia, much higher than in the previously published draft from November 2025.

For example, the cost of slabs in China has been increased by default to 3.167 thousand tons/ton compared to 1.75 thousand tons/ton in November calculations, which is approximately 144 euros per ton according to CBAM tariffs, which makes imports much less competitive.

Indian and Indonesian hot-rolled coils can cost CBAM 200-600 euros ($234-703) per ton, which negates the advantage of low base prices.

Among other suppliers, very few, including Brazil, showed more moderate growth, which made their supplies "manageable" in accordance with CBAM requirements and, therefore, more or less attractive to EU buyers.

Annual surcharges, in particular 10% in 2026, 20% in 2027 and 30% from 2028, over time make countries with high default values even less viable unless they can provide confirmed actual emissions, which many of them cannot yet do. 

Since CBAM costs vary greatly by origin, buyers will change supplier sourcing strategies to avoid default penalties and favor countries with lower default values and/or confirmed emissions, or greener production routes, such as scrap recycling.