World Steel Industry Trends
Labour
Labour costs are relatively small in the steel industry, since the processes are generally capital- rather than labour-intensive. An advantage of labour cost is therefore generally not decisive in determining the competitive position of a steel producer.
Access to captive raw materials, transport costs for raw materials and products, technical efficiency and process losses are usually more significant than the cost of labour in determining the difference between plants. The labour cost element becomes increasingly important with the degree of processing of the steel product - production of tinplate is more labour intensive than production of slab.
This is one reason for the rapid movement of some producers (e.g. in Japan) into downstream products, such as organic coated coil, where their labour cost advantage can offset their fundamental disadvantage of importing raw materials.
Large steel companies are usually unionised and have wage rates that are high by national standards. Strong unions can often restrict the flexibility of a plant in its response to market conditions. Smaller plants sometimes have the advantage of non-union employment.
Large steel plants are often major employers in their local area, with two consequences. The first is a strong political position, which enables steel companies to be heard in government in such matters as disputes over unfairly priced imports or legislation over carbon taxes. The second is a potential obligation to maintain employment for political reasons, or to pay for social overheads such as company housing and medical facilities that might normally be the responsibility of governments.
European Steel Sector Employment Crisis
The European steel industry currently supports around 2.5 million direct and indirect jobs across the EU, but faces an unprecedented employment crisis. In 2024 alone, the sector experienced 18,000 job losses, adding to more than 95,000 jobs lost since 2008. Major producers including Thyssenkrupp Steel have announced plans to cut up to 11,000 jobs by 2030, whilst thousands of additional positions are at risk at ArcelorMittal and other producers, echoing the wider pressures facing plants such as British Steel's Scunthorpe works.
The crisis stems from multiple factors: global overcapacity reaching record levels, US tariffs of 50% on steel imports (imposed June 2025) redirecting heavily subsidised Chinese steel to European markets, and energy costs that are 2-3 times higher than in the United States. European steel production has declined by 31 million tonnes since 2018, whilst import penetration has reached 27% of the domestic market. Steel consumption in the EU fell by 1.5% in 2023 and an estimated 2.8% in 2024.
The industry and trade unions have united in calling for an EU Steel Action Plan, demanding robust trade defences, competitive energy prices, and policies ensuring EU steel content in public procurement to create markets for green steel whilst protecting employment during the decarbonisation transition.
Environmental issues
Steel producers face increased costs and restrictions on their operations to meet environmental regulations. This affects at least the following aspects of their operations.
- restrictions on iron and coal mining, particularly affecting mining in forest or other sensitive areas, such as in parts of Brazil and India. These can create a severe delay or completely block the supply of raw materials.
The catastrophic failure of the Brumadinho tailings dam in Brazil on 25 January 2019 exemplifies the extreme environmental and safety risks associated with mining operations. The collapse at Vale's Córrego do Feijão iron ore mine killed 270 people and released approximately 12 million cubic metres of toxic tailings into the Paraopeba River, devastating the local ecosystem.
Research has shown that the disaster occurred three years after the pond stopped receiving new tailings, highlighting that decommissioned dams pose continuing risks. The failure mechanism involved slow accumulation of microscopic displacements in deposited tailings layers, which conventional monitoring systems failed to detect.
Following this tragedy, Brazil has decommissioned tailings ponds using the upstream dam construction principle and introduced tighter regulations on tailings management. This disaster, following the 2015 Mariana dam failure at another Vale facility, has prompted global demands for greater transparency and stricter regulations on tailings dam management.
- restrictions on forestry, affecting the supply of charcoal, which is an input to some pig iron production in Brazil. This type of operation will be required to be completely self-sufficient by replanting all trees consumed.
- limits on chemical emissions, dust and noise in urban areas. This will severely limit the ability of steel producers in Western Europe, North America and Japan to expand or renew their existing capacity, particularly for the more noxious processes of coke and sinter production. This is likely to lead to relocation of the basic steelmaking operations of integrated producers to other countries, such as a shift from Western to Eastern Europe and from North to South America.
Carbon Pricing and Border Adjustments
The European Union's Carbon Border Adjustment Mechanism (CBAM) entered its transitional phase in October 2023, requiring importers to report embedded emissions in steel and other carbon-intensive products. From January 2026, CBAM will be fully implemented, requiring importers to purchase certificates corresponding to embedded emissions at prices aligned with the EU Emissions Trading System. Free allowances under the EU ETS will be phased out between 2026 and 2034 at the same pace as CBAM is phased in, fundamentally changing the competitive dynamics for European steel producers and their international competitors.
The iron and steel sector represents the largest import value of the six sectors initially covered by CBAM, with 30% of EU demand for steel basic materials and key intermediates met by foreign supply. This mechanism aims to prevent carbon leakage whilst encouraging global decarbonisation, but creates significant compliance burdens and cost implications for producers and importers. Countries without carbon pricing mechanisms will face competitive disadvantages when exporting to the EU, potentially reshaping global trade patterns in steel.
Integrated steelmaking based on coal is a larger emitter of carbon dioxide. In the short and medium term carbon taxes will have transitional exemptions for existing producers, but they will eventually have to pay those taxes. This provides a competitive advantage to countries that do not levy such taxes and capacity for integrated steelmaking may be located or relocated in those countries. Electric steelmakers will not avoid carbon taxes because the tax will be in the price of purchased electricity, where that is generated from coal or gas.
Water availability
The steel industry is a large consumer of water. This includes water for:
- concentration in the iron ore mining industry
- coal washing in the coking coal industry
- cooling of furnaces in iron and steelmaking
- lubrication and cooling in the hot-rolling process.
The steel industry uses large amounts of water, though approximately 90% is released back to source, often cleaner than when extracted due to advanced water treatment practices. However, water scarcity driven by climate change continues to pose risks to steel production facilities globally, particularly as areas experiencing water stress become drier whilst water management regulations tighten.
It would seem that water supply will not be a large issue for an EAF steel plant and associated rolling mill, but would become significant for an integrated steel plant or if iron ore mining requires a wet concentration process to upgrade the crude ore (as opposed to a dry process in which the iron can be magnetically separated from the ore without large quantities of water for flotation or other processes).
Plants in Qatar, Saudi Arabia, UAE and Oman are in desert locations. These have DRI and EAF processes and perhaps use desalinated seawater produced in association with their gas-fired electricity generation. Water supply does not seem to be an issue restricting their expansion. In other countries the availability or price of water supply will be a limiting factor on the development of the steel industry. In all cases investment will be needed in water recycling processes to minimise the requirement for fresh water supplies.