The European Union (EU) steel industry is under tremendous pressure, and its long term survival is at risk. The recent decision by Tata Steel to close several operations and exit the UK1 underscores the severity of the situation. At around 166 million metric tons (MT), EU steel production in 2015 remains 20% below the levels achieved in 2006 and 2007.2 Weak regional demand has been coupled with a dramatic increase in global production capacity, primarily in China where overcapacity is around 350 MT.3 This has led to dramatic export increases from China, the destabilization of various geographic markets and a depression of steel prices worldwide. The EU’s Chinese steel imports surged in the last three years causing some products’ market prices to collapse by up to 40 percent.4
In the face of these market dynamics, four key challenges facing the EU steel industry are as follows:
Protecting markets: Like the US and many other countries, the EU Commission is applying trade defense instruments to support and ensure a level playing field. Currently, the EU has over 100 trade defense measures in place, 37 of them targeting unfair imports of steel products and 16 of which are from China.5 At the same time, the EU Commission is considering the proposal to grant Market Economy Status (MES) for China. Granting of MES to China would severely undermine the ability of key sectors concerned (steel being one of them) to effectively file anti-dumping cases. It implies that a level playing field between EU producers and Chinese exporters will no longer be ensured. Were this to occur, it would be much more difficult to bring trade defense cases against China, thereby increasing the threat to European steel producers and workers.
Achieving further industry restructuring: The continued low capacity utilization rates reinforce the need for further EU steel industry restructuring. However, efforts and plans by national governments to support weak, failing steel companies contravene EC rules, distort competition and delay inevitable industry restructuring. Examples include Italy’s €2bn loan to Ilva;6 Belgium’s aid to Duferco;7 and the UK’s potential plans to support a new buyer for the Tata Steel assets.8
Acceleration of Emissions Trading Scheme (ETS): The EU’s planned reorganization of ETS, which will be put in place in 2021, envisages an increase in the standard values for CO2 emissions and a reduction of the number of available industrial emissions rights. This could result in net carbon costs increasing from €10/metric ton (T) of crude steel in 2021 to €28/T in 2030.9 Thus, revised ETS would put the survival of the EU steel producers and workers at risk.
Circular economy and digital disruption: At the same time that the steel industry is fighting its day-to-day battle for survival, a fundamental shift in steel demand is underway due to a combination of the circular economy and digital disruption. These forces will profoundly change not only the steel products and services demanded by the market, but also the business models of both steel customers and steel producers themselves.
Given these long-term challenges, investment in breakthrough technologies is essential to the survival of the steel industry. Recognizing this, several EU funds are actively supporting the industry by facilitating investment and helping the development and deployment of innovation. Additionally, the EU Commission is supporting steel workers affected by restructuring. Its “New Skills Agenda” aims to build a shared commitment to invest in people at all stages of life.
Although welcome, financial support will not ensure industry survival, especially in the face of potentially adverse policies. Going forward, steel producers will need to remain actively engaged in the EU Commission’s deliberations and also seek out other sources of innovation and transformation at both the company and industry levels.Footnotes:
1 “Business Secretary confirms formal Tata Steel sale process,” UK Government Department for Business, Innovation & Skills, 6 April 2016,
2 Accenture Research analysis of World Steel Association 2006-2015 data.
3 “Steel: Preserving sustainable jobs and growth in Europe,” European Commission Fact Sheet, 16 March 2016,
6 “State aid: Commission opens in-depth investigation into Italian support for steel producer Ilva in Taranto, Italy,” European Commission, 20 January 2016, http://europa.eu/rapid/press-release_IP-16-115_en.htm.
7 “State aid: Commission orders Belgium to recover €211 million from several steel companies within the Duferco group,” European Commission, 20 January 2016, http://europa.eu/rapid/press-release_IP-16-113_en.htm.
8 “Business Secretary confirms formal Tata Steel sale process,” UK Government Department for Business, Innovation & Skills, 6 April 2016,
9 Borkent, Bram and Jeroen de Beer. “Carbon costs for the steel sector in Europe post-2020,” Ecofys, 25 November 2015,