The European Commission launched the CISAF on June 25. This is a new state instrument intended to support the EU’s Clean Industrial Deal, focusing on decarbonizing industry and enhancing its competitiveness.
CISAF replaces the Temporary Crisis and Transition Framework, and enables EU member states to grant aid for clean energy, industrial decarbonization, and clean-tech development. It will be in effect until 2030.
Key support areas include: rapid roll-out of renewables and low-carbon fuels (such as hydrogen); temporary electricity-cost relief for energy-intensive users tied to decarbonization investments; incentives across diverse decarbonization technologies; expansion of clean-tech manufacturing including critical raw materials; and public-private de risking through equity, loans or guarantees.
Steel
European steel distributors’ association Eurometal has repeatedly flagged the “critical” challenge of high energy costs for Europe’s steel industry, on all sides of the supply and value chain of steel products.
“We welcome the European Commission’s new state aid framework as a step in the right direction, particularly in the context of safeguarding Europe’s green industrial base,” EUROMETAL president Alexander Julius told Fastmarkets.
“The new flexibility is helpful, but its effect will be uneven unless member states actively mobilize support plans – and this remains uncertain in many cases, especially for mid-sized market participants in the steel value chain,” he added.
Indeed, access to renewable energy at affordable prices has become a stumbling block for European steel industry decarbonization efforts.
Between 40 million and 50 million tonnes per year of new green steelmaking capacity – using just electric-arc furnaces (EAFs), or EAFs and direct reduced iron (DRI) – is expected to come online in Europe over 2025-30, Fastmarkets’ research team has estimated.
Currently, about 55% of steel in Europe is produced via the blast furnace-basic oxygen furnace (BF-BOF) route, while around 45% of European steel is manufactured using the EAF route. This figure is projected to increase to roughly 57% while the EU transitions to cleaner technologies in pursuit of its net-zero emissions target by 2050.
Moving to the DRI/EAF production route, however, raises concerns in the European market, notably regarding energy efficiency.
While BF-BOFs use 0.05MWh per tonne of steel production, EAFs use 0.45MWh per tonne of steel, a mill source has estimated. This makes EAFs as much as 10 times less energy efficient as BOFs.
“We need sufficient renewable energy at affordable prices to be able to decarbonize,” a second mill source said.
Electricity prices in Europe continue to be much higher than in many other parts of the world. Industrial rates frequently surpass €100 ($106) per MWh, whereas costs in regions such as the US and China are often closer to €30-50 per MWh. This disparity creates a serious competitiveness challenge for energy-intensive sectors such as steel production.
Producer sources have warned that, even taking into account the costs of the EU’s Carbon Border Adjustment Mechanism (CBAM), imports still might be more competitive than Europe-made steel. considering the “enormous” disparity in electricity costs.
European steel association Eurofer, meanwhile, said that it was too early to comment on the CISAF and its effect on markets.
“[CISAF] is an extremely complex piece of legislation which requires an in-depth assessment together with our members to fully understand the effect it will have on the sector. Therefore we are still examining it,” Eurofer’s spokesperson told Fastmarkets on June 26.
Silicon
Other metal production is also deeply affected by energy cost inputs. Silicon metal’s uses extend from silicone chemicals in white goods, to high-purity polysilicon for solar panels and semiconductors, and it is particularly heavily affected by energy costs.
The EU imposes an anti-dumping duty on silicon metal imports from China, but even after that duty, market participants tell Fastmarkets that China-origin material trades in the EU at prices not economically viable for European producers.
“Silicon metal is highly energy-intensive, with electricity prices being a major cost driver, often accounting for a significant share of total production costs,” Fastmarkets analyst Emre Uzun said. “In that sense, European producers are particularly sensitive to energy prices, whereas in the US and China, the effect is lessened due to the greater availability of low-cost energy.”
In the silicon market, there was also concern about uneven state aid. One long-time silicon market trader predicted that larger, wealthier countries would be able to be vastly more generous with their subsidies than smaller countries, contributing to a less balanced market.
And in silicon, poor conditions in the market could undermine the supply-side support measure.
“The effect will be very small,” the silico trader said. “Because of the general situation in the market, there is [heavily reduced] consumption in Europe.”
