European carbon prices slide as Germany’s Merz says EU ETS may need revamping
European carbon prices were trading near six-month lows on Feb. 12 after German Chancellor Friedrich Merz said the EU’s Emissions Trading System should be revised or postponed if it undermines industrial competitiveness, comments that could reshape debate at an EU leaders’ summit.
EU Allowances stood at Eur73.01/mtCO2e ($86.75mtCO2e) at 1207 GMT on Feb. 12, the lowest since Aug. 14, according to Intercontinental Exchange data.
EUAs have slumped by almost Eur20/mtCO2e since Jan. 15 amid news that the European Commission is looking to reform the EU ETS, with changes expected around free allocations and allowance supply caps.
“This system [EU ETS] is not the system to generate new revenues. This system is implemented to reduce CO2 emissions and, at the same time, to enable the companies to come to CO2-free production lines,” Merz said at the European Industry Summit in Antwerp late Feb. 11. “If this is not achievable and if this is not the right instrument, we should be very open to revise it or at least to postpone it as we did with EU ETS2.”
Other European leaders have adopted a similar stance on reforming the bloc’s carbon market.
On Feb. 12, ahead of the EU summit, Czech Prime Minister Andrej Babis said EU Allowances were “destroying our industry” and called for a revision of the ETS, arguing that carbon prices should be capped at Eur30/mtCO2e to save European industry.
High carbon and energy costs
Merz acknowledged that the EU was discussing this matter seriously and assured the industry that steps would be taken to address their concerns.
“The elephant in the room is the EU ETS question, but note that we are talking about it in the EU Council,” Merz said. “We had some very strong comments from colleagues in the east but also from the western parts of the EU.”
Merz’s intervention comes as European manufacturers face mounting pressure from high energy costs and carbon prices that exceeded Eur90/mtCO2e in mid-January.
The comments suggest growing political willingness to reconsider the pace of EU climate policy implementation if it threatens industrial output and jobs.
The summit will see EU leaders discuss “European competitiveness in a changing geoeconomic context,” according to the meeting’s agenda.
Merz’s comments follow European Commission President Ursula von der Leyen’s defense of the EU ETS at the same event, in which she said she would push member states to reinvest more of the revenues from carbon permit auctions into industrial decarbonization.
The European Commission has already scheduled an ETS review for the third quarter of 2026, with many governments pushing for greater price predictability through extended free allocations or changes to allowance caps.
The sharp fall in EUAs reflects growing pushback against the expected increase in carbon prices, with an expanding political coalition keen to revisit carbon market rules to ensure prices remain manageable for industry, according to Coralie Laurencin, director of European gas, power, and carbon policy at S&P Global Energy CERA.
“The discussion will take many months to find a landing zone, but many are in favor of a less tight carbon market and lower prices,” said Laurencin. “This is no longer just some countries ranting; this is Europe’s industrial heartland that wants significant change.”
German steel market participants reaffirm bullish outlook for February: Platts survey
German steel market participants reaffirmed their outlooks and expected an increase in prices, inventories and production levels in February, data from the latest Platts German Steel Sentiment Survey showed.
Price index
With expectations of a stronger safeguard mechanism from H2, along with the active Carbon Border Adjustment Mechanism, both sides of the market expected domestic prices to increase in February as imports became less desirable.
The overall index for the month stood at 76.88 points, up from 70.83 points in January. Participants continued to share bullish expectations since the start of Q4 2025.
Trader, stockholder and service center sentiment on price was measured at 68.75 points, while producer sentiment stood at 85 points – the highest both have been measured since the survey began.
Despite these expectations, sources continued to highlight that low end-user demand and relatively high stock levels in Europe would weigh on the extent of any price increases.
Platts, part of S&P Global Energy, last assessed domestic HRC in Northern Europe Jan. 30 at Eur640/mt ex-works Ruhr, up Eur20 month over month, and the highest level assessed since May 2025.
Platts last assessed domestic rebar in Northwest Europe Jan. 28 at Eur585/mt ex-works, up Eur5 across the same period.
| Month: | September 2025 | October 2025 | November 2025 | December 2025 | Janaury 2026 | February 2026 |
| Index: | 54.17 | 65.63 | 66.67 | 70.83 | 70.83 | 76.88 |
Production index
The overall index for production stood at 68.75 points, a large jump up from the 37.50 points measured in January.
Trader, stockholder, and service center sentiment increased over the month from around 33 points to 62.5 in February. Producer sentiment was recorded at 75 points, up from around 42 in the month prior.
After some time of producers undergoing seasonal maintenance combined with steady buying activity, both sides of the market expected production levels to finally ramp up as import regulations pushed buyers to purchase locally.
| Month: | September 2025 | October 2025 | November 2025 | December 2025 | January 2026 | February 2026 |
| Index: | 66.67 | 53.13 | 41.67 | 37.50 | 37.50 | 68.75 |
Inventory index
The index showed that market participants expected inventory levels to rise slightly in February as material ordered in Q4 2025 arrived, with some service centers and stockholders holding material in expectation of higher prices later in the year.
Overall, the index was measured at 53.75 points, up from just 25 in January. This was made up of 62.5 points from traders, service centers and stockholders, and 45 points from producers.
Even with expectations of higher inventories, sources noted that uncertainty surrounding pending regulation and costs was making some buyers hesitant over ordering material.
| Month: | September 2025 | October 2025 | November 2025 | December 2025 | January 2026 | February 2026 |
| Index: | 43.75 | 40.63 | 47.92 | 25 | 25 | 53.75 |
Demand picture
Surveyed participants agreed that demand for domestic materials was likely to improve in the coming year due to reduced imports.
According to EUROFER, imports had a share of 27% in relation to European apparent steel consumption in Q2 2025, a historically high level.
With a new safeguard system expected in H2 and CBAM cost uncertainty, the share imports make up in the European steel market was expected to fall, but this was yet to be seen.
Downstream goods
The majority of surveyed participants also added that more downstream products, like cold-rolled coils and hot-dipped galvanized steel, were likely to increase in price faster than HRC in 2026 because they are markets that traditionally rely on cheaper imported material.
Damstahl commissions third high-bay warehouse
Damstahl, a Germany-based distributor of stainless steel products, has commissioned the third new high-bay warehouse it has built since 2023 to replace old facilities, Kallanish notes.
At its headquarters in Langenfeld near Düsseldorf, it inaugurated the site’s second high-bay warehouse this month, after completion in early October. The first one started operation already in July 2024.
In June, Damstahl opened a high-bay warehouse at its Danish site in Skanderborg, which has a storage capacity of 10,000 tonnes – about one third of the site’s sales in Denmark. It consists of 3,800 cassettes, at a length of 100 metres and height of 12m. Companies involved in the construction were engineering company Gråkjær, high bay supplier Fehr, and project coordinator n Langebæk A/S.
The warehouses in Langenfeld have a height of 20m with 3,800 cassettes, and a capacity of 13,300t. The units replaced older warehouses that could not keep up with today’s requirements and ambitions, and facilitate faster delivery times, the company says. The new facilities provide 50% more capacity for the storage of long products, while the Danish site handles mainly sheet products.
Michael Lund, chief executive of Damstahl group, notes the facilities were designed with sustainability as a significant factor, with solar modules accounting for 30% of the warehouses’ energy consumption. The building of three new warehouse systems in a short period was the biggest investment in the company’s 65-year history, he adds.
The inauguration of the second Langenfeld high-bay warehouse coincided with the celebration of Damstahl’s 65th anniversary this month. Founded in 1960, the company is part of the Neumo Ehrenberg Gruppe, which is also active in aseptic and sterile fluid handling, and precision tools production. Damstahl has 300 employees and annual revenue of some €560 million ($648m).
Christian Koehl Germany
The times of open markets ‘are over’: Friedrich Merz
The times of open markets and fair competition “are over”, with domestic manufacturers now needing to be given preference, German Chancellor Friedrich Merz proclaimed emphatically last week.
A key discussion topic in recent weeks has been the idea of introducing a “Buy European” mandate for steel procurement in the EU.
Speaking after the “steel dialogue” attended by multiple industry stakeholders at the German Chancellery in Berlin on Thursday, Merz said: “We have been asked to ensure that European and German steel are given preference in procurement. Yes, I agree.”
“This is somewhat different from what we always considered right in the past, when we had open markets, fair competition, and certainly not these tariffs like the ones now being levied in America. Those times are unfortunately over, and that’s why we must protect our markets, why we must protect our manufacturers, and why we must also grant our manufacturers a corresponding preference when it comes to the use of steel in Germany and Europe,” he continued.
Merz went on to thank Deutsche Bahn for agreeing to procure low-emission rail. The rail network operator has entered a pilot project to procure the rail from Saarstahl’s France-based Rail unit, with the first 1,000 tonnes delivered.
“This is the path we want to take together,” Merz commented.
The Chancellor also highlighted the “human and emotional perspective” of the steel dialogue. “We are not talking about abstract economic figures here, but about the fate of a key industry. We are talking about the fate of entrepreneurs, employees, and their families who are counting on and hoping that politicians will commit to preserving these jobs and that German steel will be protected,” he concluded.
The dialogue emphasised the importance of competitive energy prices (see Kallanish passim). The German government said it plans electricity price compensation to provide additional relief for the steel industry through an increase in aid intensity. It also wants to end exemptions from sanctions for semi-finished steel imports from Russia. It supports efforts to negotiate a quota arrangement with the US, advocates CBAM’s extension to downstream steel products and calls for a WTO-compliant export compensation.
Adam Smith Austria
German engineering manufacturers face sharp order decline amid global trade crisis
Germany’s mechanical engineering sector recorded a steep 19 percent year-on-year drop in new orders in September 2025, reflecting ongoing strain from the global trade crisis and weakening industrial demand, according to the German Engineering Federation (VDMA).
The decline also contributed to a slight contraction in total orders for the first nine months of the year.
Base effects mask deeper structural weakness
VDMA chief economist Dr. Johannes Gernandt said that part of the year-on-year decline stemmed from base effects, as September 2024 had benefited from large-scale plant orders that did not recur this year. “That should not obscure the fact that the machinery and equipment manufacturing industry continues to experience a noticeable slump in demand and underutilization,” Gernandt warned.
He stressed that a sustainable recovery depends on resolving global trade disputes, including US punitive tariffs, and on structural reforms in Germany and Europe to reduce cost burdens and stimulate investment.
The federation reaffirmed its forecast of a five percent contraction in real production for 2025.
Foreign demand collapses, euro zone more resilient
The September 2025 figures show a five percent drop in domestic orders and a 24 percent drop in foreign orders. Orders from euro zone countries fell by 13 percent, while those from non-euro zone countries decreased by 27 percent.
In the third quarter of 2025, overall orders were six percent lower than a year earlier, with domestic orders down by three percent and foreign orders down by seven percent, while orders from euro zone countries and non-euro zone countries fell by two percent and by nine percent, respectively, all on year-on-year basis.
In the January-September period of this year, total orders edged down by one percent compared with the same period last year, while euro zone orders increased by 10 percent and non-euro zone demand fell five percent, both on year-on-year basis.
German ‘steel dialogue’ highlights competitive electricity supply importance
The German government will lobby the European Commission for measures to support the German steel industry, as its existence is under threat, while competitive electricity supply remains critical, German Chancellor Friedrich Merz said after the “c” he hosted in Berlin on Thursday.
“The European Commission’s [EC] recent proposals for effective protection of the steel industry are a step in the right direction,” he said. Meanwhile, “without a significant reduction in energy costs, this [steel] industry in Germany would not be able to survive.”
“Politicians must do everything in their power to preserve the industry,” he continued, adding that local manufacturers should be protected and their transformation to climate-neutral production supported.
The German government has already implemented steel industry support measures. These include the abolition of the gas storage levy, the reduction of electricity tax to the EU minimum and the reduction of transmission grid charges, by €6.5 billion ($7.5 billion) in 2026 alone, the government notes.
It is also lobbying the European Commission for further relief in order to maintain the competitiveness of the steel industry and keep it on its path towards climate neutrality. Specifically, the so-called electricity price compensation is to be expanded and an industrial electricity price is to be implemented, Kallanish notes.
In contrast to the industrial electricity price, the electricity price compensation would provide additional relief for the steel industry through an increase in the aid intensity expressly demanded by the German government.
The government meanwhile continues to work intensively to end exemptions from sanctions for semi-finished steel imports from Russia, with plans to rigorously prosecute any attempts at circumvention.
German finance minister Lars Klingbeil said: “We must continue to reduce energy costs and improve the conditions of competition and give a clear European response to global overcapacity and dumping prices. We want a clear focus on climate-friendly quality steel from Germany and Europe. For our infrastructure and defence, in the automotive industry and in other important areas, we want domestic and European steel to be used as a priority.”
The steel dialogue participants agreed consistent measures are needed to address the negative effects of global overcapacity and the threat of trade diversion to the EU market. “To this end, the EU must exhaust its trade policy possibilities. What is needed is a robust, balanced successor to the safeguards that expires on 30 June 2026 that complies with WTO law,” the government notes.
In addition, it supports the EC’s efforts to negotiate easing US tariffs on steel and aluminium, including derivatives, so that European goods can be exported to the USA using duty-free quotas.
The German government advocates CBAM’s extension to downstream steel products and calls on the Commission to present a model for WTO-compliant export compensation in the near future. Should effective carbon leakage protection via CBAM or compensation payments prove unsuccessful, competitiveness should continue to be regulated through the free allocation of allowances, it adds.
The German Steel Association – WV Stahl – meanwhile called on politicians to act quickly. “There should be no more time lost and at least lower industrial electricity prices should be introduced as quickly as possible,” it urges.
WV Stahl is seeking fair competition instead of market distortion, and has called on the government to lobby Brussels to introduce robust trade protection against price dumping and overcapacity as quickly as possible.
“Competitive energy prices require a permanent reduction of network charges, continuation and deepening of electricity price compensation, and in the medium term, the introduction of a reliable industrial electricity price to keep investments in the country,” the association says.
Svetoslav Abrossimov Bulgaria
Germany to halve grid fees in 2026, but steelmakers demand permanent solutions
Germany’s four transmission system operators have released preliminary nationwide grid fees for 2026, showing that grid charges will be halved thanks to a planned €6.5 billion federal subsidy. The measure will be financed through the Climate and Transformation Fund and is currently awaiting parliamentary approval.
Under the proposal, the average grid fee will fall from 6.65 ct/kWh to 2.86 ct/kWh. The government hopes this temporary subsidy will alleviate some of the energy-cost pressures weighing on energy-intensive industries, including steelmaking.
Steel industry welcomes the move but warns of short-term fix
The German Steel Federation (WV Stahl) has described the planned reduction as “urgently needed and long overdue relief.” Managing director Kerstin Maria Rippel emphasized that soaring grid fees over the past two years have severely hurt the industry’s international competitiveness, coming at a time when mills are struggling with high energy costs, global overcapacity, and weak domestic demand.
German steel producers have experienced a 130 percent surge in transmission fees since 2023, adding roughly €300 million per year in extra costs. These grid fees are compounded by wholesale electricity prices that remain well above levels in other major steel-producing countries, such as France or the US.
WV Stahl argues that, while the 2026 subsidy is a necessary step, limiting the measure to a single year fails to provide the stability needed for industrial investment decisions.
Industry calls for long-term planning security
The federation has urged lawmakers to extend grid fee relief beyond 2026. Year-by-year political decisions, it warns, create uncertainty that deters capital investment, particularly in green steel transformation projects that require long-term cost predictability.
“We call on the members of the German Bundestag to clarify that the grid cost relief will also apply beyond 2026 and into subsequent years,” Rippel said, adding, “Annual individual decisions mean annual uncertainty, and that is poison for companies’ investment decisions. In times like these, companies need long-term planning security to remain competitive and become climate neutral.”
Structural challenges require broader reforms
WV Stahl also points out that grid fees are structurally high due to massive grid expansion investments, which will continue over the coming decades as Germany integrates more renewable power. Combined with relatively expensive wholesale electricity, these costs risk putting domestic steel producers at a structural disadvantage compared to their global competitors.
The federation reiterated its call for a predictable, internationally competitive industrial power price, with a reliable and permanent cap on grid charges seen as a critical first step.
Gerber Steel: EU falling behind in green steel transition as China surges ahead
German stainless steel distributor Gerber Steel has criticized the European Union’s slow progress on its green steel transition, noting that the bloc is failing to meet its decarbonization goals.
Alongside these structural shifts, raw material markets in Europe and Asia remain firm. Iron ore futures on the Singapore Exchange are trading above $106/mt, reflecting resilient demand from global steelmakers.
Europe’s missed green steel targets
Instead of driving industrial transformation, Europe’s steel sector is weighed down by regulatory complexity, subsidy debates, and protectionist measures. Many steelmakers have either frozen their conversion plans, postponed projects, or reconsidered investments.
The underlying reasons are clear: unfavorable market conditions, high risk exposure, and insufficient protection from imports. This reliance on policy shields is preventing the bold steps needed for Europe to lead the global green steel transition.
China moves ahead with green steel partnerships
In contrast, China has made tangible progress. Domestic steelmakers have been shifting to low-emission production methods for years and are now preparing to supply greener materials to industrial customers.
A key milestone is the partnership between HBIS Group and BMW Group China, announced in 2022. Starting in 2026, BMW will integrate HBIS green steel into its vehicle production in China. This agreement shows how the shift from carbon-intensive to green steel can be achieved through market- and competition-oriented ways without heavy reliance on subsidies and protectionism.
A lesson from China’s Steel Action Plan
China’s recently-published Steel Action Plan reinforces this trajectory. Its first principle calls for “strengthening industry management to promote survival of the fittest”, signaling a strategy built on innovation, consolidation, and competitive progress.
Gerber Steel contrasts this with Europe’s current path, where additional protectionism and regulatory delays risk leaving the region further behind in the global steel decarbonization race.
Salzgitter delays Salcos hydrogen steel project by three years
Salzgitter, Germany’s second-largest steelmaker, said Sept. 22 in an emailed statement to Platts that it is delaying the expansion stages of the Salcos project by approximately three years, citing worsening market conditions and the lack of regulatory support from the federal government.
The decision was taken by the company’s supervisory board on Sept. 18, according to the emailed statement.
“Since 2022, the economic and political-regulatory conditions have significantly deteriorated,” it said, adding that the company is still awaiting the regulatory changes promised by the federal government.
Salzgitter added that the federal government must act to support the German steel industry by providing a sustainable, secure, and affordable energy supply; accelerating the ramp-up of the hydrogen market; supporting the adoption of carbon-accounted steel products; and advocating for consistent trade protection at the EU level.
The delay comes as European steelmakers grapple with weak demand, high energy costs, and competition from imports, particularly from China.
Revised project timeline
While Phase One, involving the construction of a direct reduction unit, an electric arc furnace, and an electrolysis plant, remains on track to launch in 2027, Salzgitter will now postpone an investment decision on Phases Two and Three until 2028/29, instead of 2026 as previously planned.
Similar projects by companies like ThyssenKrupp and ArcelorMittal have also faced challenges related to funding, regulatory support, and market conditions.
The Eur2.5 billion ($2.9 billion) Salcos project was officially launched in 2019 and is part of Salzgitter’s broader strategy to reduce CO2 emissions in its steel production processes and transition from traditional blast furnace to hydrogen-based steelmaking processes by 2033, cutting overall CO2 emissions by an estimated 95%.
The company started construction of the 100-MW phase one electrolyzer in February, which is to produce 9,000 mt/year of renewable hydrogen, supporting phase one requirements of 150,000 mt/year for steel production.
The electrolysis plant will be among the largest green hydrogen facilities in Europe to date.
In June 2024, Salzgitter opened a tender to source up to 120,000 mt/year of renewable hydrogen for the Salcos project.
The tender was for supplies from 2027, subject to connection to the planned German hydrogen pipeline network.
Salzgitter previously said it was planning to use up to a total of 150,000 mt/year of hydrogen at its steel production plant, including the 9,000 mt/year produced from its own 100-MW electrolyzer from 2026.
Platts, part of S&P Global Commodity Insights, assessed the cost of green hydrogen production via alkaline electrolysis in Germany, backed by renewable power purchase agreements, at Eur7.08/kg ($8.34/kg) on Sept. 19.
The assessment reflects one possible pathway for producing EU Renewable Energy Directive-compliant green hydrogen.
Stockholding: German steel sales, stocks tumble as market weakness persists
Total German steel sales in August dropped by 13% on the month and by 6.8% on the year to 747,487 mt, while steel stocks were down 1.1% on the month and 2.7% on the year to 1,865,093 mt, according to German sales and stocks association BDS (Bundesverband Deutscher Stahlhandel) data published on Sept 22.
In the given period, sales in all categories registered a decrease, the data showed.
In August, sales of long steel products were down by 13% on the month and by 1% on the year to 236,714 mt. Sales of flat steel products dropped by 12% on the month and by 10% on the year to 438,550 mt. Sales of other products also moved down, falling 17% on the month and by 4.1% on the year to 72,223 mt.
Steel stocks
In August, long steel stocks were down by 2.1% on the month, but were up by 4.7% on the year to 647,894 mt.
Stocks of flat steel products went down by 0.1% on the month and by 6% on the year to 1,184,330 mt. Stocks of other steel products were down 18% on the month and by 13% on the year to 32,869 mt.
In August, German steel production continued its steep decline, with crude steel output falling almost 11% year over year to 2.57 million mt, with the data underscoring the persistent headwinds confronting German steelmakers as they navigate a challenging operating environment that has pressured margins and production levels throughout 2025.
Platts, part of S&P Global Commodity Insights, assessed Northern European HRC at Eur570/mt EXW Ruhr, stable on the day.
