European steelmakers are pressing ahead with investment and restarting idled capacity just as the bloc's new tariff-rate quota regime takes effect. According to the industry association Eurofer, around 10 million tonnes of crude steelmaking capacity have returned to production, and at least EUR3.4 billion of investment decisions were taken in 2026, as reported by MEPS International. Behind these headlines, however, the market remains cautious: output is tightly managed, energy costs are rising, and demand is only expected to recover gradually.
Domestic supply is tightening. MEPS respondents describe producers keeping firm control over output, and coil buyers report fewer offers of domestic material and longer delivery lead times. Buyers attribute this to limited mill production under high energy costs, and to producers' wish to draw down the large inventories that stockists built up to cushion the impact of the new quotas.
Worldsteel data show EU crude steel output fell 0.3% to 84.5 million tonnes in the first eight months of 2026, following a 2.9% year-on-year decline in 2025 to 125.8 million tonnes, which the source describes as a record low. In its third-quarter Economic and Steel Market Outlook, Eurofer puts capacity utilisation at 65-67% for the first five months of 2026. On the demand side, Eurofer's quarterly report forecasts that demand from steel-using sectors will grow 1.5% in 2026, after a 0.1% decline in 2025, and rise 2.5% in 2027.
Some domestic supply of certain products is being directed to export markets, most notably beams for the United States, according to MEPS respondents. Even so, EU steel exports fell 20% year-on-year in the first half of 2026. Energy costs are the main constraint on the cost base.
According to the report, the Dutch TTF gas benchmark rose from a January low of just over EUR27 per megawatt hour to more than EUR87 per megawatt hour in mid-October, following a further escalation of hostilities in the Middle East. Citing data from the think tank Ember, the source reports that wholesale electricity prices have risen by between 14% and 21% over the past two months, with further increases anticipated. European mills are struggling to recover these production costs through selling prices, which is one reason they are keeping output disciplined in the coming months to protect margins.
On trade, European producers are counting on the stringent measures introduced by the EU and the UK to underpin their long-term investments. The EU regime caps tariff-free steel imports at 18.7 million tonnes per year. Quota uptake in early October suggests this is already squeezing third-country supply: by October 13, 55 of the 286 EU quota categories had been fully used, totalling more than 1.3 million tonnes.
Among the exhausted categories were two of the largest under the Steel Regulation, covering hot-rolled sheets and strips from India, at 149,319 tonnes, and from Turkey, at 160,574 tonnes. The September introduction of the EU's melt and pour rules of origin, together with existing CBAM charges, has further complicated procurement from non-EU suppliers. For Italy and for downstream users, the situation is more difficult.
The source identifies Italy as facing the highest energy prices in the region, and reports that some rerollers have moved part of their production to night-time hours to offset higher costs. For distributors and processors that rely on domestic supply, scarcer offers and longer lead times are likely to raise procurement risk and complicate planning, while elevated costs remain a growing concern. This is an interpretation of the source's findings rather than a figure reported by it.
All figures in this article are as reported by IndexBox and attributed to Eurofer, Worldsteel, MEPS International and Ember, as indicated in the text. They have not been checked against the primary publications.
Source: indexbox.io