European authorities are moving toward increasing lead market support afforded to steelmakers under the Industrial Accelerator Act, according to a draft report by rapporteurs dated 8 September, re-introducing domestic content requirements in public procurement.
The report comes from the rapporteurs for the European Commission’s proposed Industrial Accelerator Act (IAA), each representing the committees jointly responsible for consulting on the IAA drafting process: the Committee on International Trade; the Committee on Industry, Research and Energy; and the Committee on the Internal Market and Consumer Protection.
The European Commission presented its proposal for the IAA back in March, seeking to deliver on commitments to implement policy stimulus for domestic low-carbon steel demand.
Unfortunately for steelmakers, contrasting industrial priorities between member states resulted in the ‘low-carbon steel label’ being cut from the Commission’s proposal, instead pursued under delegated acts of the Ecodesign for Sustainable Products Regulation (ESPR).
The published IAA proposal still contained requirements that public procurement of steel products source at least 25% of the total volume from low-carbon suppliers, but did not attach a requirement that these producers be based in the EU, as the Commission considered further restrictions on international supply unnecessary in view of July’s intensification to the EU’s steel trade framework.
Parliamentary committees have since been reviewing the IAA document, and on 8 September drafted just under 200 amendments to the proposal.
The committees’ suggestions contain two core developments: the re-introduction of domestic content requirements for the public procurement of steel, and the extension of “melted and poured” provisions to the interpretation of “Union origin.”
Public procurement mandates
The draft report brings a “Union origin” requirement back into the public procurement of steel products from 2029 – covering “steel, and any product the performance of which depends mainly on steel, intended for use in buildings, infrastructure and motor vehicles for civil purposes” – alongside the existing “low-carbon” requirement, both at 25% of the total volume.
This 25% low-carbon and Union origin threshold would then be increased to 35% from 2032, and to 50% from 2036.
Other amendments clarify the boundaries of what qualifies as low-carbon, unfortunately not yet in terms of specific numerical classification thresholds, but instead that material “shall be considered low-carbon where it falls within the two highest performance classes.”
These performance classes are still under review, though the Commission’s Joint Research Centre (JRC) has published its initial recommendations as part of its preparatory study for the ESPR delegated act for steel.
The JRC set these thresholds at a significantly higher level than most in the market expected, intending to ensure there was sufficient supply already contained within the highest classification (30% of availability) for a low-carbon mandate to be effective. However, this could compound in a lack of regulatory ambition across performance classes if drafting rationales are not aligned across the EU’s political institutions, for example if the JRC’s top classification remains inflated, despite the IAA’s acceptance of the runner up.
Union origin
On Union origin, the committees have tabled significant amendments, to the benefit of domestic steelmakers. Not only would Union origin be re-included in the procurement requirements, but the definition of Union origin would include an intensified version of the “melted and poured” clause newly contained in the EU’s July revision of its steel tariff rate quota (TRQ) framework.
To qualify as Union origin, a steel product – including “components and assembled final products containing steel” – must:
- have been originally melted and poured in the EU, referencing the same definition as the EU’s July steel TRQ regulation;
- have been produced using primary iron inputs of at least 75% Union origin, defined as iron ore “processed” via direct reduction or blast furnace within the EU.
Further committee amendments clarify that “processed” means the “solid-state reduction of iron ore into metallic iron through the application of a reducing gas or agent, excluding any subsequent briquetting, handling or transportation operations,” and that steel scrap is explicitly excluded from consideration as a “primary iron input.”
This would effectively mean that only steels within the required low-carbon classification thresholds, melted and poured in the EU from EU-origin DRI or pig iron would quality for the 25-50% procurement requirement. Scrap-based EAF producers could also presumably qualify, due to the percentage-based nature of the primary iron input requirement.
The draft report containing the amendments is scheduled for committee vote on 1 December, with an indicative first reading in the European parliament scheduled for 14 December.
Author: Benjamin Steven
