Steel prices weaken on prospect of EU tariffs

Steel rebar futures dropped to around CNY 3,060 per ton on Friday, their lowest level in two weeks, after reports indicated that the European Commission is preparing to impose steep tariffs of 25%–50% on Chinese steel imports and related products in the coming weeks.

The move is aimed at curbing inflows into the bloc and shielding domestic producers from depressed margins as global overcapacity continues to weigh on prices. Western economies have increasingly emphasized the importance of protecting strategic manufacturing capacity, with steel seen as a critical industry for both industrial resilience and national security.

The prospect of higher European tariffs adds to mounting trade headwinds for Chinese producers, who already face elevated barriers in the US and rising scrutiny in emerging markets. The potential impact extends beyond the EU, as other economies may follow suit with their own protective measures, further restricting Chinese steel’s export channels.

Meanwhile, China itself is under pressure to rein in its vast steel output. Authorities have pledged to limit new capacity additions and accelerate efforts to address chronic oversupply, which has fueled price weakness and eroded margins for mills.

Just last month, Beijing ordered major producers to suspend operations in certain regions as part of a broader campaign to tackle excess production in the ferrous metals sector. Industry analysts note that such interventions may continue into 2026, with policymakers trying to strike a balance between maintaining employment in steelmaking hubs and stabilizing market conditions.

On the demand side, conditions remain fragile. The property sector, historically a key driver of steel consumption, continues to struggle with weak sales and financial stress among major developers.

Infrastructure spending has provided some offset, but not enough to fully absorb excess supply. At the same time, higher iron ore prices—partly fueled by risks at Guinea’s Simandou mine and seasonal restocking in China—are further squeezing profit margins for steel mills.

Overall, the combination of looming EU tariffs, weak domestic demand, and rising raw material costs points to continued volatility in the steel market. Futures prices are likely to remain under pressure in the near term, with any sustained rebound depending on deeper production cuts in China or a stronger-than-expected recovery in downstream demand.