What is the outlook for EU steel prices for 2025?
Investing.com -- Protectionism and decarbonization are set to bolster European steel prices, according to Bank of America’s commodity strategists.
In a note released Thursday, strategists said that a demand rebound might offer some relief to European steel mills by 2025.
The industry faced a challenging period last year due to a combination of weak demand, high energy costs, and competition from cost-effective imports. The construction and automotive sectors, which are sensitive to interest rates, experienced declines in steel consumption by 1.5% and 6% year-over-year, respectively.
The European Central Bank's (ECB) rate cuts are gradually taking effect, which could lead to a recovery in steel-intensive activities. While BofA anticipates the overall growth rate to stay below 1%, the rebound, along with potential restocking, might help stabilize European steel prices.
“Will it on its own stop the structural headwinds blowing through Europe’s steel industry? Unlikely, in our view,” strategists led by Danica Averion added.
The lack of competitiveness continues to be a pressing issue for European steel producers. The industry has called for support through a proposed European Steel Action (WA: ACT ) Plan, which includes trade defense measures, implementation of the Carbon Border Adjustment Mechanism (CBAM), promotion of clean energy, and retention of steel scrap within Europe.
The European Union (EU) is reassessing trade regulations, which may lead to substantial reductions in import quotas, potentially by 20%. Moreover, there is a push to revise the existing 25% duties, with the European Steel Association (EUROFER) recommending an increase to safeguard tariffs ranging from 32-41%.
According to BofA, decarbonization remains a critical factor shaping the market. The CBAM is evolving, and rising carbon costs are pushing steel mills toward greener technologies. But this transition comes at a cost.
The report estimates that “steel prices may have to trade at +€800/t sustained, compared to €590/t currently, to justify some of those investments.” The economic viability of green steel production is closely tied to carbon pricing.
“From a different angle, those outlays might only make sense if producing green steel is cheaper than polluting,” strategists wrote.
They note that “carbon needs to rise to +€130/t by 2030” to make green steel competitive, and even higher prices of “€160/t by 2030” may be necessary to protect European producers from competition with high-carbon imports.
Trade policies and protectionist measures are also expected to play a crucial role. Chinese and other non-European producers currently benefit from lower production costs, leading to cheaper imports.
“China’s HRC and galvanized steel prices have on average traded €166/t and €199/t lower than Europe’s quotations in 2024” This gap has fueled calls for stronger trade barriers, with potential reductions in import quotas and higher duties aimed at shielding European steelmakers.
Still, the effectiveness of these measures will depend on how aggressively policymakers act and whether demand recovery materializes as expected.
If trade restrictions tighten and decarbonization incentives are implemented effectively, European mills could regain pricing power. However, persistent cost pressures and competition from lower-cost producers may continue to challenge profitability.