The introduction of the new tariff-rate quota (TRQ) system on 1 July has led to a significant reduction in import activity in Europe. Regional mills hold sufficient spare capacity to fill the resulting gap, but restarts may not arrive quickly enough to prevent near-term steel supply shortages.
New EU TRQ system significantly reduced import activity
The introduction of the new TRQ system on 1 July led to a marked reduction in import activity in Europe. According to CRU’s Global Steel Trade Service, to date, most country quotas remain available despite being set at significantly lower levels than historical import volumes.
Few European importers are currently willing to take the risk of incurring the 50% out-of-quota duty, and many have turned to domestic sources to secure material, with residual import interest largely focused towards Q4.
Can steel mills in Europe fill the gap?
There is spare capacity in Europe to fill the supply gap from steel import quota reductions, and several restarts have already taken place.
ArcelorMittal has restarted furnaces at Asturias, Dabrowa Gornicza and Fos-sur-Mer, as well as the HDG line at Flemalle. Salzgitter has confirmed the restart of blast furnace C in Q4, while Liberty Galati in Romania has resumed downstream operations and started to process slabs under tolling agreements.
However, Metinvest’s Ferriera Valsider rerolling facility suspended production in mid-August following a force majeure event, while Acciaierie d'Italia may be legally required to suspend hot end operations at Taranto by October due to environmental infringements. These developments are expected to further tighten supply in Europe in 2026 H2; and a temporary finished steel supply shortage is likely to emerge in the market as regional demand picks up from September.
The recent strikes on Zaporizhstal – a Ukrainian major flat steel mill which exported around 1.5 Mt of sheet products to Europe in 2025 – are likely to exacerbate near-term supply tightness in the EU market. The facility is currently shut down, with considerable damage to its blast furnace infrastructure. The restart timelines remain highly uncertain.
We expect regional capacity utilisation – which is currently running well below its potential – to rise with the ramp-up of underutilised capacities and help to alleviate supply pressure. In addition, the potential restart of idle assets could also provide additional relief to the market. However, capacity ramp-ups and restarts may not come online quickly enough to offset the shortage.
Higher blast furnace utilisation will support pellet demand
In terms of steelmaking raw materials, capacity restarts and the prospect of higher blast furnace utilisation rates in 2026 H2 are already translating into increased buying interest for iron ore in Europe. This marks an important shift in behaviour, as European mills have deliberately maintained low iron ore inventory levels in recent years, given weak steel demand conditions.
Steel mills in Europe are also expected to move towards charging higher-grade iron ore, particularly pellets, in order to improve blast furnace productivity and efficiency.
The combination of increased volume demand and a shift towards premium-grade inputs suggests the pellet market will face tightening conditions in 2026 H2, with implications for both European pellet producers and seaborne suppliers.
Slab re-rolling is an alternative to raise European output
As the new TRQ system does not cover semi-finished products, steel mills in Europe could also opt to ramp-up rolling mill output rather than steelmaking, with incremental output fed by imported slabs and billets. This strategy has gained traction since CBAM took effect, given imported semi-finished products’ emission costs can be significantly lower than those associated with domestic production.
APAC steel market is under pressure from increased competition
As EU buyers shift towards regional supply, Asian countries face increased competitive pressure. Major Asian steel exporters – such as China (Taiwan), Japan and most Southeast Asian countries – do not have free trade agreements (FTAs) with the EU and are disadvantaged within the new TRQ system compared to EU FTA partners. Furthermore, many countries, particularly in Southeast Asia, did not receive Country Specific Quotas, as they failed to meet the 5% historical export threshold, and need to compete for limited space within the “Other Countries” quota.
As a result, trade flows in Asia have been reconfigured and significant volumes originally destined for Europe have remained within the APAC region since the implementation of the new system. Asian suppliers previously focused on exporting finished products to Europe have increasingly turned to slab sales, as semi-finished products fall outside the scope of the new EU TRQ system.
We will continue to closely monitor global steel market developments and will update our clients as the situation evolves. If you’re interested in receiving the latest forecasts see our Steel Service offerings here or directly request a demo.
And if you want to understand how the EU steel import quota reduction will impact global trade and steel prices, contact us here.
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