Europe's steel border now operates under two mechanisms that work in different ways. The first, the Carbon Border Adjustment Mechanism (CBAM), raises the cost of imports by pricing their embedded carbon. The second, the EU's new tariff-rate quotas (TRQs), limits total import supply and determines where that supply can originate.
According to Fastmarkets, an overseas mill can be carbon-competitive and still be shut out by quotas. CBAM entered its definitive phase in January 2026, and the new TRQs replaced the old steel safeguards on 1 July 2026, as reported by Fastmarkets with reference to the EU regulation 2026/1384 published in the Official Journal. Fastmarkets forecasts that EAF-based hot-rolled coil (HRC) imports will rise by more than 25% by 2035, with lower-emission DRI- and scrap-based EAF supply growing even faster.
Imports of green steel, defined as below 0.8 tCO2e per tonne of steel, are projected to rise from 0.3 million tonnes to 1.6 million tonnes over the decade. Fastmarkets notes that this remains a small share of EU low-emission production, with imported low- and near-zero-emission steel averaging less than 20% of European equivalents over the period. Total import volumes are expected to remain flat through to 2035, even as net EU deliveries increase.
The growth in imported EAF steel is more than offset by a decline in blast furnace volumes, as rising CBAM costs weigh on less efficient facilities. Overall import volumes fall sharply between 2025 and 2027 as the TRQs take effect, and remain subdued thereafter because the 50% out-of-quota duty makes larger volumes unviable, according to the Fastmarkets analysis. Medium-emission production, in the range of 0.8 to 1.4 tCO2e per tonne of steel and largely made via gas-based DRI, is forecast to fall from 2.3 million tonnes to 1.8 million tonnes as new capacity in greener categories comes online.
Fastmarkets' modelling indicates that CBAM is likely to level the playing field for EU industry. Importers must pay a carbon price designed to mirror EU ETS costs. For 2026 imports, the certificate price is set quarterly based on EU ETS auction prices, and the price for the third quarter is EUR 82.32 per tCO2e.
Certificates will be available for sale from February 2027. In the Fastmarkets model, when CBAM costs are excluded, the EU ETS pushes most standalone European EAFs to the top of the supply curve, with only Japanese and Chinese facilities subject to strong anti-dumping duties faring worse. Large volumes of cheaper Turkish flat steel are identified as a threat to EU producers on both price and quantity.
Including CBAM costs allows EU production to compete more fairly, and several facilities are expected to be competitive for European deliveries on a pure cost basis. The mechanism is not a blanket import barrier. Efficient overseas EAFs can still compete after CBAM, and higher-cost European plants do not become cheap by decree.
Fastmarkets describes CBAM as an emissions filter that narrows the carbon-cost advantage of producing abroad and favours imported steel with lower verified emissions. The carbon filter itself may soften. The European Commission's July 2026 ETS review proposal would reinstate 15% of the phased-out free allocation for CBAM sectors from 2028, extend the phase-out to 2038, and slow CBAM's phase-in, according to Fastmarkets.
A flatter cap trajectory also points to a more moderate carbon price. In Fastmarkets' moderated-policy scenario, a significantly lower EUA trajectory keeps European costs down and reduces the border cost attached to imported emissions. In that case, costs for importers of EAF steel rise by 5% on average, and the overall cost curve becomes flatter, since many European facilities are already competitive without CBAM costs.
Fastmarkets notes a double effect: a softer ETS path keeps conventional EU steel competitive for longer, but it also weakens CBAM's support for lower-emission European EAFs and domestic production more generally. Quotas add a further constraint. The EU's new steel regulation sets tariff-free quotas totalling 18.3 million tonnes across 26 product categories, 47% below 2024 quota levels, and doubles the duty on volumes above the relevant quota from 25% to 50%, as reported by Fastmarkets.
Country allocations reflect parameters including historical trade flows from 2022 to 2024, which leaves countries without an allocation competing for small residual quotas. Fastmarkets finds that this legacy allocation does not align well with projected low-emission capacity. Across categories 1A, 1B and 2, which cover most hot-rolled coil and downstream products, projected EAF capacity in some countries far exceeds their allocated quotas.
Saudi Arabia and Canada are cited as having significant potential for EAF exports in the coming years but only nominal quotas, or none at all. Fastmarkets cautions that capacity does not equal export availability, and that an EAF is not automatically near-zero emission, since feedstock and electricity remain important. Europe's border regime therefore pulls in two directions.
CBAM makes the import mix cleaner and strengthens the relative competitiveness of EU EAFs, particularly under a rising carbon price trajectory. The TRQs limit exposure to global overcapacity but may also exclude some of the supply that CBAM would otherwise favour. Under a moderated EUA scenario, the carbon filter weakens and the TRQ gate becomes more decisive.
In Fastmarkets' assessment, the result is a more selective market in which carbon helps determine cost and quotas determine access.
Source: fastmarkets.com