The Clean Industrial Deal: A Critical First Step – Now Deliver the Radical Change Europe’s Steel Industry Urgently Needs

The European Commission’s Clean Industrial Deal marks an important political milestone. It signals a growing awareness that Europe cannot succeed in its green transition or compete in a more fragmented, high-stakes global economy without a strong, sovereign industrial base.

For the European steel sector—not only a symbol but a determiner of European sovereignty, foundational to everything from wind turbines to electric vehicles, construction to defence—the Clean Industrial Deal (CID) and the subsequent Steel and Metals Action Plan (SMAP) rightly identify many of the core challenges: global steel overcapacity, unfair trade practices, skyrocketing energy prices, weaknesses in the Carbon Border Adjustment Mechanism (CBAM) and availability of critical raw materials such as ferrous scrap. 

But while the diagnosis is on point, the treatment remains incomplete or still to be implemented. Without rapid, structural solutions to these issues, laudable initiatives on lead markets, local content and circular economy risk being insufficient to turn the tide.

As Mario Draghi pointed out, in light of today’s geoeconomic shifts our industry has become even more strategic: the EU must deliver “radical change” to ensure competitiveness, decarbonisation, business stability and, ultimately, prosperity and autonomy.

The European steel industry has outlined four priority issues for immediate and effective action from European policymakers:

1) Stop spillover effects of global overcapacity and level the playing field for European steel

The “external dimension” of the CID focuses mainly on horizontal issues such as raw material access and international partnerships. While steel sector-specific measures are mentioned in the SMAP, without rapid follow-up—particularly aiming at restoring a level playing field—the EU risks losing not just its industrial base, but its strategic autonomy.

Global steel excess capacity has surpassed 600 million tonnes and is projected to reach 720 million tonnes by 2027—over four times the EU’s production. Recent U.S. tariffs further pressure trade flows to be diverted. The EU must urgently develop, before summer and without waiting until June 2026, the “highly effective trade measure” as promised in the SMAP to reflect today’s market reality and replace as a matter of urgency the current steel safeguard, which has proven ineffective.

2) Update the CBAM to close loopholes and prevent resource shuffling

The CID was quickly followed by the adoption of the Omnibus package, which simplifies the CBAM before fixing its loopholes. Yet revision of key elements critical to CBAM’s effectiveness—exports, circumvention, resource shuffling, downstream sectors—have been scheduled only for the second part of the year.

A full review is urgently needed now, with loopholes closed well before 2026:

– Under the current CBAM, non-EU steel producers can sell their less carbon-intensive products on the EU market at cheaper prices while maintaining carbon-intensive production for domestic or non-EU markets—without added costs or emissions reductions.

– Without an effective export solution, EU producers will still pay carbon costs on exports, becoming even less competitive globally and putting around 19 million tonnes of production at risk.

– CBAM doesn’t cover steel-intensive downstream applications, such as automotive and renewable infrastructure components, incentivising non-EU production and the relocation of entire EU manufacturing value chains to third countries.

3) Make Energy Affordable

EU wholesale energy prices remain above historical levels and 2–4 times higher than in the U.S. or China. With energy a major part of steel production costs, affordability is vital for competitiveness and decarbonisation.

While the Clean Industrial Deal and the Action Plan for Affordable Energy acknowledge the industry’s need for lower energy prices, proposed solutions still don’t include a structural reform of EU electricity market design to decouple electricity prices from fossil fuels.

The plan relies on tools—like long-term power purchase agreements (PPAs)—that haven’t delivered meaningful benefits to energy consumers, while transitional energy price relief arrangements at internationally competitive levels are needed for energy intensive industries as well as relief from regulatory costs in electricity bills. In this regard, the recent Clean Industrial Deal State Aid Framework (CISAF) presents a mixed picture, whose concrete impact on the ground is yet to be fully assessed. Efforts to boost capacity and grid investments in low-carbon electricity are welcome but will only deliver in the medium term.

4) Retain strategic resources such as ferrous scrap and boost their recycling and reuse in Europe

Ferrous scrap is a vital secondary raw material, essential not only for the EU steel industry but for the broader economy. Recycling it into new steel significantly cuts CO2 emissions, reduces energy consumption, and limits dependence on virgin materials. As a cornerstone of steel decarbonisation, its strategic importance is increasingly recognised globally. 

The Circular Economy Act’s mention in the Clean Industrial Deal as a way to increase supply of high-quality secondary raw materials is a positive step. Yet the EU remains the world’s largest exporter of ferrous scrap, often to countries with lower environmental and social standards. This enables foreign industries to outbid EU steelmakers, putting them at a competitive disadvantage.

To achieve tangible results, the Circular Economy Act should formally recognise ferrous scrap as a strategic secondary raw material. Targeted tools and measures must help retain this resource within the EU, ensuring availability and quality to support decarbonisation while safeguarding EU industrial competitiveness and strategic autonomy.

Europe can only be stronger with European Steel!