The EU plans to require electric vehicle manufacturers that receive state support to source 70% of their car components from within the trading bloc. This will include 25% of aluminium products that are low-carbon, while for steel the requirement will focus on meeting a 25% low-carbon threshold without rules-of-origin conditions, Fastmarkets heard on Wednesday February 18.
The Industrial Accelerator Act (IAA) that will set out these requirements will be part of the EU’s wider “Made in Europe” strategy, which was intended to reinforce strategic autonomy by reducing external dependencies in critical manufacturing sectors.
The automotive sector uses a range of raw materials, and supply chains for modern electric or hybrid cars include a range of ferrous, non-ferrous and battery materials.
In recent years, the EU has been trying to promote industry while adhering to its strict net-carbon-zero regulations, despite the automotive industry being reliant on China to process critical minerals for batteries.
This has resulted in a range of policies. One of these is the “made in Europe” scheme to boost the demand side, while the ResourceEU and CRMA frameworks were intended to diversify supply for critical raw materials, such as lithium, graphite and cobalt for batteries.
Improvements have yet to be seen, with the Eurozone manufacturing purchasing managers’ index at 49.5 in January 2026, below the 50-point threshold that indicated that European business was still contracting due to weak demand and production.
The EU’s local battery industry also recently called for extra support to develop an independent European battery supply chain while gigafactories plans were being cancelled.
“This is no trial period: Automotive suppliers have announced more than 100,000 job cuts since 2024,” Benjamin Krieger, secretary at the European Association of Automotive Suppliers (CLEPA), said.
Initial versions of the act identified steel as the main focus, suggesting that public procurement and state aid for steel should require low carbon emissions and origin from the EU. But revisions to the act made in the week ended February 13 represented a significant shift, softening the “made in EU” rules and allowing certain third countries to be treated like EU producers in the public procurement of key industrial goods.
In the recently leaked Annexes to the IAA, seen by Fastmarkets earlier this week, public procurement procedures would require that at least 25% of the steel used in buildings, infrastructure and transport projects be low-carbon. A parallel 25% threshold would apply to aluminium.
But the wording differed for the two materials. For steel, the text specifies that “at least 25% of the total volume of steel used shall be low-carbon.” For aluminium, it states that “at least 25% of the total volume of aluminium used shall be low-carbon and of Union-origin.” This introduces a rules-of-origin requirement for aluminium that is not present for steel.
The same distinction applied to public support plans for construction, renovation and vehicle purchases, where aluminium must meet both low-carbon and Union-origin criteria, while steel is required only to meet the low-carbon threshold.
Aluminium markets face supply constraints with the closure of the Mozal smelter in Mozambique and the introduction of costs arising from the EU’s Carbon Border Adjustment Mechanism (CBAM) on January 1, 2026.
The secondary aluminium and billet market premiums were already starting to reflect these changes, as well as the reversion of import duty to 6% from 4%.
Fastmarkets’ weekly assessment of the aluminium 6063 extrusion billet premium, ddp North Germany (Ruhr region), was $540-570 per tonne on February 13, compared with $490-530 per tonne on January 2.
Supply constraints were expected to affect the primary aluminium market in the next few months, with the IAA adding further pressure on European producers to meet demand.
Meanwhile, for green steel, the IAA was expected to help with unlocking green steel demand through public procurement, if implemented decisively.
Europe’s green steel market continued to be under strain while subdued demand clashed with shifting policy support. Trading in both flat and long products has slowed significantly, with buyers pushing back against the current premiums for low-emission steel.
Industry participants continued to highlight the lack of downstream demand. Distributors and service centers have shown limited interest and producers maintained that stronger demand from end-users would be essential for green steel to move beyond its current niche status.
Reflecting the muted trading environment, Fastmarkets’ weekly assessment of the green steel domestic, flat-rolled, differential to HRC index, exw Northern Europe, was unchanged at €100-150 ($119-178) per tonne on February 12.
