Tariffs and policy shape 2025 market, 2026 to answer questions

2025 will be remembered for punitive US tariffs, hard-hitting European policymaking and significant merger and acquisition activity – either concluded or anticipated. It has also raised significant questions for 2026, such as how will China’s new export licencing system impact trade, how will the market get to grips with the EU’s Carbon Border Adjustment Mechanism (CBAM) complexity, and will the EU and US agree the long-touted steel trading pact among “like-minded” countries?

2025 begins with hope

The year started on a positive note for demand prospects, with Eurofer forecasting EU demand to rebound in 2025 after a protracted decline, and the EU market anticipating policy measures to support industry. There was promise in Syria following an end to the war and change in regime, with significant reconstruction anticipated. In February, newly sworn-in US President Donald Trump meanwhile first agreed to hold talks with Russian President Vladimir Putin on ending the war in Ukraine.

M&A features prominently

On the M&A front, US Steel and Nippon Steel took joint legal action against outgoing US President Joe Biden’s blocking of the biggest steel industry M&A deal in recent times. Following months of intense negotiation with the new Trump administration, however, the Japanese steelmaking giant acquired US Steel in full, but with the US government retaining control over certain aspects like potential plant closures and headquarter relocation.
In Europe, the year started with Italian authorities receiving binding offers for the acquisition of the long-troubled Acciaierie d'Italia, which ultimately came to nothing. 2025 is ending with Flacks Group reported to be in pole position to acquire the former Ilva assets following a new round of tendering. Jindal Steel International has meanwhile been in talks since September over acquiring European steel giant thyssenkrupp Steel. If these deals are completed next year, 2026 will be a still more significant year than 2025 for steel M&A activity.

Trump’s tariffs test markets

Trump was inaugurated as US President for the second time and wasted no time reimplementing blanket 25% Section 232 tariffs on steel, which he later raised to 50%, bringing imports of many product categories to a halt. While US downstream steel users, including carmakers, screamed tariffs were hurting business, US mills took the opportunity to raise prices, with hot rolled coil peaking at $975/short ton and remaining elevated for the remainder of the year (see chart).

The US also announced a 25% tariff on foreign-made cars, spooking global carmakers that were already suffering from tough market conditions.

Turkish mills fight scrap despite lower prices

Despite being touted by some as “the new gold” thanks to its ability to decarbonise steelmaking, scrap prices averaged at far lower levels in 2025 than the previous year. With steel prices also lower and margins tighter, however, Turkish mills opted to import more billet this year than in 2024 – with a substantially larger tonnage coming from China, enabling Turkish long steel exporters to remain competitive. It will be interesting to see if this workaround remains available to them in 2026.

EU policy goes into overdrive, demand remains a problem

The European Commission announced the unprecedented Steel & Metals Action Plan, containing legislative proposals to support the steel industry. The report was criticised for lacking concrete measures; however, these, such as the EU’s new steel trade regime, and CBAM competitiveness fund and downstream expansion, have since started to take shape and are soon to be tested.

As was the case earlier in the year, the problem nevertheless remains a lack of demand and high energy costs in Europe. Despite earlier optimism, Eurofer’s latest prediction is for European demand to fall 0.2% in 2025. A rebound by 3% is forecast for 2026, but forecasts have proved too optimistic in recent years.

One factor that would certainly help is a rebound in Europe’s traditional economic growth engine. Following the election of Friedrich Merz as German Chancellor, the new CDU-led government announced a $500 billion infrastructure investment package, sending a wave of optimism through the country, whose ailing economy has stifled European growth. The impact of this is likely to be seen only from 2026, however.

Europe goes reverse on steel nationalisation

Steel industry nationalisation was meanwhile another big theme in Europe. Until recently, the notion would have been ridiculed by most, but the industry’s struggle to survive and retain jobs amid foreign competition, coupled with difficult geopolitical conditions intensifying focus on economic security, made it acceptable this year. UK Parliament was recalled for an extremely rare Saturday sitting on 12 April and agreed to pass on the same day a bill enabling it to take control of British Steel. In December, the Polish government acquired plate maker Huta Czestochowa. The French Parliament meanwhile agreed to nationalise ArcelorMittal’s assets in the country, although the Senate is likely to block the bill.

Chinese exports hit new heights, licences cast doubt

Despite being slapped with anti-dumping duties in multiple jurisdictions this year, including major hot rolled coil export destination Vietnam, Chinese steel exports are predicted to hit a record high in 2025, surpassing 2015. Late in 2024, many observers forecasted, wrongly, that trade cases would reduce Chinese steel exports this year. 
However, the latest measure that could impact exports comes from within China itself. Authorities announced recently they would introduce steel export licences for around 300 products. Although some observers say this will disrupt shipments, others argue the core impact of the licensing system could be to tighten the oversight of non-VAT steel exports, but that it will not directly restrict volumes. This should nevertheless bode well for export pricing.

China flexes muscles in iron ore market

Despite the market holding its breath on multiple occasions in recent years, it has become accepted that Chinese steel demand is unlikely to receive any significant economic stimulus, as the country transitions towards consumption. However, costs can be mitigated. Beijing has stepped up efforts this year to gain more influence over seaborne iron ore pricing, pushing for yuan-denominated iron ore payments and launching a new portside iron ore spot price index by COREX. With the commissioning of Simandou, it has also secured iron ore supply in Guinea, reducing reliance on Australian miners.

The outlook for 2026

What 2026 brings is anyone’s guess. Chinese exports were a thorn in the global industry’s side in 2025 and 2024, and the market will be watching how they are impacted by the new licences. With CBAM benchmarks, default values and methodology finally published, the market is digesting the complexity of the mechanism – it is likely to redefine global trade from next year. Participants will be watching closely if talks can bring an end to the devastating Ukraine war, which would create significant reconstruction demand and restore investment confidence.

M&A is likely to feature prominently again in 2026 as industry restructures under difficult conditions, with eyes on Europe’s largest steel plants in Taranto and Duisburg. Governments intervening or taking stakes in steelmakers could also be a continuing trend as concerns persist over economic security amid geopolitical tensions. The market will meanwhile be watching the US Supreme Court ruling in the case over Trump’s tariffs, which could have a major impact on global trade.
Also, after a subdued 2025, scrap prices may come under more scrutiny as mills aim to lower emissions to comply with CBAM.

Source:Kallanish