SOGAD: CBAM, inward processing changes, and import pressure will make 2026 tougher for flat steel

First noting that the world is not preparing for good things and that we are trying to navigate through a sea of uncertainty with very high wave amplitudes, Asuman Gürsoy told Demir Çelik Store: "The iron and steel sector had a difficult 2025, and 2026 will be even tougher."

"I want to begin by trying to answer the common question posed by all our sector publications at the end of every year: 'How was 2025 and what do you expect from 2026?'"

"First, I want to state that we are bidding farewell to a 2025 in which the world was not preparing for good things, wave amplitudes were extremely high, we were trying to navigate through a sea of uncertainty, easy gains had run out, dreams and reality were increasingly diverging, access to financing had become difficult, external resources had diminished, it was impossible to predict what tomorrow might bring, making forecasts and preparing sound budgets had become nearly impossible, geopolitical risks had increased, safeguard measures and consequently trade wars had become ever more damaging, and sustainability had come to the forefront."

We lost our export markets to other countries, led by China, due to our high production costs

"In light of all these developments, in 2025 we continued to lose our export markets to other countries, led by China, due to uncompetitive prices caused by high production costs. In the domestic market, the problems caused by abrasive competition from increased supply pressure — driven by exports being restricted to our largest markets, the EU and US, due to safeguard measures — continued. Operations were kept running with great sacrifice at break-even costs or razor-thin margins. And once again we saw that regardless of our production costs, it was falling demand and rising supply that determined product prices."

Changes to the inward processing regime will negatively affect cold-rolling, coated sheet, and pipe producers

"First, I want to briefly discuss the concerns created by changes to the Inward Processing Regime (IPR) implemented in our country. As you know, a new regulation to the IPR has shortened certificate periods while introducing a minimum 25% domestic procurement requirement for the production of goods to be used in exports. While this application pleased our domestic hot-rolled sheet producers, it did not please many sectors, primarily cold-rolling and coated sheet producers as well as pipe manufacturers. We know that the steel production sector does not only comprise liquid steel producers."

The cold-rolling and coated sheet production sector accounts for 45% of flat steel exports

"Liquid steel is the beginning of a long value chain, but not its entirety. The sector most adversely affected by this application — the cold-rolling and coated sheet production sector — accounts for 45% of flat steel exports ($2.1 billion), forming the cornerstone of export-oriented industry. Any increase in their costs will directly erode their competitiveness."

"Pipe producers in Türkiye are also the world's 4th largest manufacturer with 7.5 million tonnes of capacity and $2 billion in export revenue. And the policy change will directly put their competitive advantages at risk. Because in these sectors, flat steel constitutes 60–80% of the final product cost, and even the slightest cost increase can be devastating. Representatives of these two sectors in particular continue to state on every platform that they must import in order to export."

The 25% domestic procurement requirement in IPR will lead to supply-demand imbalance and cost increases

With this change:

• Limiting certificate periods to 6 months will make the production-supply-export chain impossible, weakening the competitiveness of these sectors.
• The 25% domestic procurement requirement will create supply-demand imbalance and cost increases, eliminate flexible raw material procurement, and particularly disadvantage rollers.
• Declines in exports will cause disruption in production plans, and losses in foreign exchange revenues.
• Value-added, employment, and export contributions will decrease.

South Korea and China anti-dumping investigation on cold, galvanised, and painted sheets must be concluded as soon as possible

"Another closely followed development in 2025 was the anti-dumping investigation launched on 25 December 2024 by SOGAD regarding the increasing imports of cold, galvanised, and painted sheets from South Korea and China. These investigations must legally be concluded within 1 year. However, the Ministry has the authority to extend the period by up to 6 months if deemed necessary. Concluding the investigation as soon as possible is of great importance, as delays create opportunities for new orders to be placed."

CBAM uncertainties will continue this year

"Looking at the EU's Carbon Border Tax Application (CBAM) that came into force on 1 January 2026: CBAM was launched as a tool to put a fair price on the carbon emitted during the production of carbon-intensive goods entering the EU and to encourage cleaner industrial production in non-EU countries, though it is also characterised as another safeguard measure."

"CBAM, which is being made into a trade standard, saw its transition period — lasting over 2 years within the Green Deal framework — end, and the actual implementation where financial obligations come into force began on 1 January 2026."

"Since 1 January 2026, EU importers of carbon-intensive products in sectors such as iron and steel, cement, aluminium, fertiliser, and hydrogen are required to purchase and surrender CBAM certificates for the carbon emissions of imported products."

"CBAM uncertainties will continue this year, and the fact that Türkiye's EU-compatible ETS system has still not been implemented constitutes another leg of these uncertainties."

The EU's new quota regulation does not comply with ECSC Free Trade Agreement principles

"The European Commission has proposed a new regulation that significantly tightens the current system, citing the expiration of existing steel safeguard measures in 2026. The proposal envisions reducing steel import quotas by 47% to 18.3 million tonnes, raising the duty rate for above-quota exports from 25% to 50%, effectively making above-quota imports impossible."

"In response: considering the importance of our steel trade with the EU and the EU market, our country's excess capacity and the necessity of exports — if the new regulation is implemented, free trade will effectively become impossible. The trade balance based on the principle of reciprocity established under the ECSC Free Trade Agreement between us and the EU will be completely disrupted, and export channels for the Turkish Steel Sector will be closed."

Türkiye will be in a four times more disadvantageous position compared to the EU

"The proposal states that the share of imports in consumption in the EU should not exceed 12.7%. However, in Türkiye, this ratio is already at 48%. In this case, Türkiye will be in a four times more disadvantageous position compared to the EU."

"The simultaneous application of such a strict safeguard measure with the Carbon Border Adjustment Mechanism (CBAM), one of the EU's environment-based policy tools, has no logical counterpart, and it is assessed that such an application would result in the mechanism losing its function."

Global oversupply poses the biggest risk to the sector

"Finally, I can say that in our sector, where global supply is steadily increasing and oversupply is seen as one of the biggest risks, perhaps an even more challenging 2026 awaits us after a difficult 2025..."

"I hope we have a year in which none of our producers' efforts go to waste, their paths are always open, and we all enjoy health, peace, and tranquillity."