European HRC prices on the rise: CBAM and new quota regime push prices higher

European hot-rolled coil (HRC) prices were flat on 20 January. The ex-works price in Northern Europe stood at €640.75/tonne, while in Italy it was €631.67/tonne. However, the market's attention was focused less on price indices and more on the new figures announced by ArcelorMittal.

Europe's largest steelmaker raised HRC prices by €30 for April. The company's delivered price now stands at €700/tonne. Following the March offer of €670, buyers are approaching this increase cautiously; actual transaction prices in the market have not yet reached these levels.

ArcelorMittal applied the increase across all flat steel products. The April price for hot-dip galvanised coil (HDG) was set at €820/tonne, up from €780 in March. Cold-rolled coil (CRC) prices rose to €830.

Regulations, not demand, are driving prices higher

There is no demand recovery behind this European price increase. The real force pushing prices up is the changing trade rules. The Carbon Border Adjustment Mechanism (CBAM), which came into force in January, has significantly increased costs for importers. Moreover, new safeguard measures are on the horizon.

The European Commission announced a stringent reform package for steel imports last October. Under the package, duty-free quotas will be reduced by 47 percent, with a 50 percent additional duty applied to every tonne of steel exceeding the quota. The new system is expected to launch on 1 July.

This timeline is cornering importers. Even those willing to bear the CBAM cost will face a new wave of duties unless they get material into Europe by the end of June.

European market becoming tougher for Turkish steel

The outlook is not bright for Turkish producers looking to sell steel to Europe. Turkish HRC is already subject to anti-dumping duties, and the price including these duties stands at around €520/tonne. When CBAM costs are added, the all-in delivered price rises to €630–640/tonne. This figure is nearly identical to European producers' prices; the price advantage of Turkish steel is disappearing.

The situation is even more challenging for cold-rolled coil. The EU has launched an anti-dumping investigation into CRC from five countries, including Türkiye. The countries under investigation account for 65 percent of Europe's total CRC imports. India, Japan, Taiwan, and Vietnam are also targeted.

The cost picture is even heavier for Indian-origin steel. Approximately €200 in CBAM costs are added to Indian HRC priced at €490–495/tonne including freight. The resulting price of close to €700 renders this material uncompetitive in the European market.

European producers prefer to wait

The decline in imports is benefiting major European steelmakers, but these companies are reluctant to increase production to fill the gap. The reason is simple: producing more steel requires purchasing more carbon permits, and the price of these permits keeps rising. For European producers, keeping supply tight and selling at high prices is a more profitable strategy.

There is no large-scale buying activity in the market either. Steel service centres stocked up in the last quarter of last year and are now waiting before making new purchases. Pipe manufacturers are more active; they have sat down at the negotiating table with European steel companies and have begun to partly accept rising prices.

Actual transaction prices in Germany and the Benelux region are in the €630–640/tonne range. In Italy, sales are taking place at around €635/tonne. There is still a gap of €60–70 between ArcelorMittal's €700 target and market reality. The coming weeks will show whether this gap will close.