BIR Warning: New EU Steel Regulation Risks Paving the Way for Scrap Iron and Steel Trade Restrictions

Situation Update to October 2025.

In a move aimed at protecting its struggling domestic steel industry from global overcapacity pressures, the European Commission (EC) has announced a groundbreaking and aggressive new regulatory proposal. However, the proposal was immediately met with a strong warning from the Brussels-based Bureau of International Recycling (BIR) regarding the potential consequences for the scrap iron and steel market, a vital link in the circular economy and the EU’s decarbonization goals.

The proposal, announced on October 7, 2025, is more than just a trade defense measure; it is an attempt to strengthen the EU’s competitiveness and strategic autonomy. Yet, BIR views the inclusion of a new monitoring regime for scrap metal as potentially setting a precedent for future trade limitations, directly threatening the competitiveness of the recycling industry and Europe’s green objectives.

1. The Critical Situation of the EU Steel Industry: The Reason for Drastic Action

The explanatory memorandum of the draft law paints a bleak picture of the EU steel sector. The industry is facing “significant and persistent import pressure, both in terms of volume and price, stemming from unsustainable global overcapacity.”

Key Challenges and Updated Data (to 2025):

• Global Overcapacity: Global steel overcapacity currently exceeds 600 million tonnes, more than four times the EU’s total annual consumption, and is projected to rise to 700 million tonnes by 2027. This situation has flooded the EU market with cheap imported steel, putting pressure on domestic prices and production.
• Low Operating Efficiency: The capacity utilization rate of the EU steel industry has sharply dropped from nearly 80% in 2008 to an average of only 65-67% in 2024, a level “far below the profitable threshold.” The industry’s target is to raise this rate to the ideal 85%.
• Job Losses and Decline: Since 2008, the EU steel industry has shed nearly 100,000 direct jobs (about 25% of the workforce) and has been forced to close or reduce capacity at numerous plants across member states.

These trade challenges come against a backdrop of general difficulties: higher energy and production costs in the EU, a lack of a level playing field, and third countries continually implementing trade restrictions, making the EU the primary destination for surplus steel products.

1.1. Decarbonization Risk: The ArcelorMittal Case

The EC’s greatest concern is that this crisis is directly threatening the ability to invest in green steel projects, derailing the Union’s decarbonization targets.

Important Update from June 2025: To illustrate this “loss of investment capacity,” the EC cited the case of the leading Luxembourg steel producer, ArcelorMittal. In June 2025, ArcelorMittal officially announced the suspension of previously announced plans to install Direct Reduced Iron (DRI) and Electric Arc Furnace (EAF) production capacity in Bremen and Eisenhüttenstadt, Germany.

The company stated that the lack of certainty in the policy, market, and energy environments made the continuation of these €1.3 billion projects “unfeasible.” Specifically, the reasons included:

• High Electricity Prices: The cost of electricity in Germany was too high to profitably operate the EAF.
• Uncompetitive Hydrogen Economy: The supply and cost of green hydrogen were not viable, and even natural gas-based DRI was not competitive as a transitional solution.
• Import Pressure: The excessively high level of steel imports and weak demand created an unpredictable business environment.

ArcelorMittal’s necessity to announce the cancellation to avoid breaching funding contracts and to shift investment towards other EU countries (such as Dunkirk, France, which has certainty regarding low-cost power supply) served as a wake-up call, confirming that new trade protection measures were necessary to create the economic conditions for the green transition.

2. Details of the New EU Steel Protection Regulation Proposal

The proposal, if adopted by the European Parliament and the Council, will replace the EU’s current steel safeguard mechanism, which is scheduled to expire in June 2026. It includes three significantly tougher key measures:

• Restriction on Duty-Free Import Volume: Limiting the volume of duty-free steel imports to only 18.3 million tonnes annually, a sharp reduction of 47% compared to the 2024 steel quota.
• Doubling the Out-of-Quota Tariff: Increasing the tariff on steel imported above the quota from 25% to 50%.
• “Melt and Pour” Traceability Requirement: Implementing a strict traceability requirement, forcing importers to declare the country where the steel was first melted and poured into a liquid form. This rule is intended to prevent evasion and re-routing of goods through third countries.

The EC’s goal is clear: by cutting quotas and increasing tariffs, they hope the domestic market will stabilize, allowing EU steel producers to improve economic performance, reach a profitable capacity utilization rate, and attract the necessary investments for decarbonization.

3. BIR’s Warning: Scrap Monitoring Risks Trade Restrictions

While the EC’s proposal was welcomed by Eurofer (the European Steel Association) and major steel producers, it has caused deep concern within the recycling industry. Immediately after the proposal was published, BIR, the global representative body for the recycling industry, issued an official response, supporting the goal of protecting the steel industry but warning about a crucial aspect of the draft law.

New Scrap Monitoring Mechanism: Although the proposal does not directly impose any export restrictions on metal scrap at this time, BIR noted that the new regulation introduces a new monitoring regime that could “pave the way for future trade limitations.”

BIR’s Argument: BIR’s Director for Environment and Trade, Alev Somer, stressed that any move towards restricting the export of secondary raw materials (scrap) would pose serious risks:

• Weakening the Recycling Industry’s Competitiveness: Restricting scrap exports will diminish the competitiveness of the European recycling industry, which thrives on its ability to access global markets.
• Undermining Circular Economy Goals: Metal scrap (especially ferrous scrap) is a strategic resource. It is an essential material for the decarbonization of the metals industry, as using scrap in EAFs emits significantly less CO2 than producing steel from iron ore. Trade restrictions would reduce the incentive to collect and process scrap, running counter to Europe’s circular economy objectives.
• Principle of Free Trade: BIR asserts: “Recycled materials are vital for the decarbonization of the metals industry and should be recognized as a strategic resource in the circular economy. Empowering recyclers through free trade—not restricting them—is the key to achieving both climate goals and industrial competitiveness.”

BIR argues that keeping the global scrap market open is crucial to ensure high-quality scrap can find the markets with the highest demand, maximizing its value and promoting the collection and processing cycle. Restricting exports would lead to domestic scrap oversupply, lowering prices, and undermining the entire recycling value chain.

4. Alternative Solution: Focus on Stimulating Green Steel Demand

Instead of relying on trade barriers that risk harming another green industry (recycling), BIR emphasizes that the EU should focus on mechanisms to stimulate demand for recycled steel.

Proposed Measures Include:

• Recycled-content targets: Setting mandatory or incentive-based targets for the proportion of scrap used in new steel production, especially in public projects.
• Green Public Procurement (GPP): Using the government’s purchasing power to prioritize the buying of steel produced using low-carbon methods (often EAFs using scrap).
• Incentives and Mechanisms: Offering financial incentives or tax breaks for steel producers committed to using recycled materials, thereby creating a “level playing field” for green steel.

BIR argues that if the EU genuinely wants to boost scrap usage to meet climate goals, the most effective and free-trade-consistent approach is to generate strong domestic demand through these policies, rather than trying to contain scrap within the bloc via export restrictions.

5. Trade Impacts and Political Outlook

The proposal is already creating immediate trade tensions. The United Kingdom, whose steel exports to the EU totaled 78% (about €3.2 billion) in 2024, has expressed extreme anxiety. British steel producers believe the measures are an “existential threat” to their industry, as a large portion of their steel would face the punitive 50% tariff if not allocated a national quota.

The European Commission asserts that the proposal is fully compliant with World Trade Organization (WTO) rules and will open consultations and negotiations with affected trading partners (under GATT Article XXVIII) to allocate specific country-by-country quotas. While China is the indirect target of the overcapacity issue, data shows the largest direct suppliers to the EU in 2024 were India (nearly €4 billion), South Korea, and the UK.

The proposal will require approval from the Council and the European Parliament. EU leaders have been pressured to act quickly to ensure the measures can be adopted and take effect before the current safeguards expire in mid-2026.

The Choice Between Steel Protection and the Circular Economy

The European Commission’s new regulatory proposal, driven by the severe decline in the steel sector and the stalling of major decarbonization projects like ArcelorMittal’s, marks a major turning point in EU trade policy. With a 47% quota reduction and a doubling of tariffs, the EU has erected a significant protective wall.

However, the BIR’s warning that the scrap iron and steel monitoring regime could lead to future trade restrictions poses a strategic question for the EU: Should the protection of one industry (steel) be allowed to potentially sacrifice the competitiveness of another green industry (scrap recycling)?

To balance the goals of steel protection and circular economy promotion, the EU will have to skillfully adjust the regulation. Implementing mechanisms to stimulate green steel demand, such as recycled-content targets and green public procurement, will be key to appeasing the recycling industry while ensuring the EU steel sector has the economic conditions needed to proceed with the necessary investments for a low-carbon future.

Source: recyclingtoday and compiled from the internet.