Southern Europe’s steel supply chain is moving toward a potential trade shock, as fragile demand coincides with sweeping trade measures and the approaching financial phase of the EU’s Carbon Border Adjustment Mechanism, market participants warned at an event held by EUROMETAL in Milan this week.
The event brought together distributors, traders, mills and policymakers to discuss growing concerns that the regulatory pace is outstripping market preparedness, particularly in import-dependent Italy.
Participants repeatedly stressed that while Europe is seeking a level playing field, the cumulative burden of CBAM, new safeguard measures and administrative complexity risked weakening the broader manufacturing base that the policies aim to protect.
President of Italian steel services body Assofermet, Cinzia Vezzosi, urged in the event’s opening speech that European competitiveness should be prioritized in regulatory changes or risk furthering the ongoing deindustrialization.
“We need rules, but they must be clear and balanced and must meet the number one objective, which is making the continent more competitive,” she said.
CBAM exposure
One of the themes emerging from Milan was the increasing relevance of delivered-duty-paid (DDP) pricing structures, particularly in Southern Europe, where imports account for a larger share of flat steel consumption than in Northwest Europe.
“People had time to prepare and report data last year, but many didn’t, and now they are complaining,” one participant said, referring to CBAM’s transitional reporting phase. “The market needs to adapt quickly. DDP offers are becoming more relevant.”
Early enthusiasm for import trading had faded as the financial implications of CBAM became clearer, several traders said. While shipments for June arrival are still achievable, visibility beyond that remains limited, with both buyers and sellers reluctant to assume liability for future carbon costs.
Market participants expect the European Commission to publish an official list of certifiers later this year, but doubts remain over capacity and consistency, alongside the functioning of the emissions verification and certification processes.
“If you don’t have actual emissions values clearly embedded in pricing, it becomes very tricky,” one distributor said. “A lot of companies are not prepared. The costs will come as a surprise in 2027.”
Regulatory hurdles
Alongside CBAM, the forthcoming safeguard regime dominated discussions. Participants questioned how reduced import volumes would be offset, particularly given the limited idle capacity within the EU, as one trader labeled the incoming trade measures as a “gamechanger” and “more important than CBAM at this stage.”
“Who will make up for the potential loss of 12 million-15 million mt of imports?” one trader asked, referencing struggling operations. “EU mills don’t have that flexibility.”
A key theme across both panels was the apparent lack of regulatory urgency for trade protectionary measures against steel derivatives, or downstream products, as several panelists and attendees warned that the focus on upstream steelmaking risked neglecting downstream industries.
EUROMETAL President Alexander Julius said during his keynote speech that European manufacturing remained uncompetitive on a cost basis to Chinese production, with energy costs and employment costs as two of the largest detractors for European firms. Julius outlined that “steel derivatives are the hidden threat driving European deindustrialization” and that “Europe cannot compete with products that are the same quality but significantly cheaper.” With domestic prices increasing, further import restrictions could see steel derivatives become increasingly cost-competitive,
“We are protecting steel production, but not steel-using sectors,” one speaker said. “There are no quotas on derivatives, so we incentivize imports of finished products.”
Several participants argued that the speed and layering of legislation, spanning trade defense, CBAM, and environmental reporting, had created regulatory fatigue and failed to address a fundamental lack of demand.
“There are hundreds of pages of regulation, but the real problem today is a lack of demand,” one attendee said. “The dynamism in the market right now is administrative.”
Speakers pointed to persistent structural challenges, including high energy costs since the COVID-19 pandemic, infrastructure gaps and elevated tax burdens, particularly in Southern Europe. While aerospace and select high-value manufacturing segments were showing resilience, overall steel demand was described as fragmented and weak.
Coherent industrial policy
Across panels, a recurring message was the need to align environmental objectives with industrial competitiveness.
“Environmental policy must be supported by industrial policy,” Tommaso Sandrini, of Assofermet, said. “When manufacturing is lost, the whole system suffers.”
Some participants expressed frustration with what they perceive as limited responsiveness from Brussels, with industry bodies now preparing coordinated initiatives at both EU and national levels to advocate for clearer, more balanced implementation.
While most agreed that trade measures may temporarily restrict imports, several argued that once clarity emerges, global suppliers are likely to reorganize and re-enter the market competitively.
For now, however, sentiment in Milan suggested a sector caught between structural transition and cyclical demand weakness, with limited visibility on how the balance between protection, decarbonization, and competitiveness will ultimately settle.
“Steel represents a small share of total emissions,” Tommaso said. “We have to be careful we don’t destroy our value chains in the process of trying to fix the problem.”
