EU Steel and Metals Action Plan: Aligning industrial policy without new tools

Challenges facing Europe’s steel and metals sector

The Steel and Metals Action Plan (SMAP) is a strategic framework aimed at strengthening the European Union’s autonomy over critical steel and metal supply chains. The action plan responds to growing vulnerabilities in these industries, as the European steel and metals sector plays a vital role in the EU’s industrial and strategic autonomy agenda. With over 300,000 direct jobs, the sector is both economically and politically significant. Steel and metals, along with their supply chains, provide valuable materials for the broader economy, supporting sectors such as automotive manufacturing, construction, renewable energy, and power distribution. However, high energy costs, tightening climate regulations, and global competition from regions with lower environmental standards have eroded the sector’s competitiveness. In response to these challenges, the sector has called for a comprehensive sector-specific action plan to restore its competitiveness and ensure long-term resilience.

How industry pressure shaped the SMAP

The SMAP was developed in response to mounting industry pressure and evolving EU industrial policy. The process began in late 2024, when steel and metal social partners called for a dedicated EU action plan to restore competitiveness, support the green transition, and safeguard jobs. This call was followed by the launch of the Clean Industrial Deal in February 2025, which set out a vision for boosting the competitiveness, sustainability, and resilience of the entire EU industry. In early March, the European Commission convened a Strategic Dialogue on Steel and Metals to codevelop a sector-specific response. These developments laid the groundwork for the publication of the SMAP in March 2025. Figure 1 summarizes the key milestones that led to the SMAP’s development, highlighting the role of industry pressure and EU policy evolution.

The SMAP builds on and aligns with several existing EU frameworks. These include the Clean Industrial Deal, the EU Emissions Trading System (ETS), and the Carbon Border Adjustment Mechanism (CBAM), which together shape the EU’s industrial decarbonization and carbon leakage mitigation agenda. It also draws from the Critical Raw Materials Act, which focuses on securing supply chains and increasing local content for key materials. In addition, the SMAP references the European Commission’s Transition pathway for the metals sector and the Competitiveness compass, both of which have identified steel and metals as strategic priorities for strengthening the resilience of the EU industry.

Green steel and circularity: Key to decarbonization

A key element of that vision is the sector’s transition to green steel. Decarbonizing steel production is not only essential for meeting climate targets but also for preserving the EU’s industrial relevance in a globally competitive sector. However, scaling up green steel production requires significant investments in renewable energy, low-carbon process technologies, and scrap collection and processing infrastructure. In theory, this transition could reduce greenhouse gas (GHG) emissions, lower dependency on imported resources, and help safeguard or even create jobs.

Steel and metals recycling is critical to achieving climate goals. Using secondary (scrap) inputs reduces energy use by up to 95% in aluminum production and 80% in steel production, according to industry estimates compiled by EuRIC. Increasing scrap use could help lower the sector’s emissions. Currently, around 80% of all recycled materials processed in Europe are used within the internal market. For aluminum, the share of recycled content is growing. At the same time, exports of aluminum scrap are increasing, highlighting the need for stronger domestic demand and infrastructure to retain and process aluminum scrap within the EU.[1]

[1] Source: EuRIC and BIR (2025)

What the SMAP proposes

The SMAP outlines a comprehensive framework to support the competitiveness, sustainability, and resilience of Europe’s steel and metals industries. Its ambition is to restore industrial strength, accelerate decarbonization, and protect quality jobs. The plan emphasizes key levers such as process electrification, switching to green hydrogen, and circularity, primarily through instruments that are already in place or under development. To operationalize its strategic goals, the SMAP is structured around six thematic pillars. These reflect the EU’s attempt to align industrial, energy, and climate policy into a coherent framework for the metals sector (see Table 1).

These pillars are not new. Rather, they reflect the European Commission’s attempt to align industrial, energy, and climate policies into a clear, sector-focused narrative. The question is whether this structure holds sufficient incentives to address the real-world barriers the metals industry is currently facing and whether it can overcome the interdependent constraints between energy access, infrastructure readiness, investment risk, and policy uncertainty. Barriers such as high energy prices, limited grid capacity, and policy uncertainty have delayed investments in electrification and green hydrogen infrastructure.

Although the SMAP consolidates a wide range of policy initiatives, its practical impact depends on the strength and specificity of its instruments. The following section evaluates whether the plan’s tools are sufficient to address the sector’s competitiveness, investment, and decarbonization challenge.

A framework with few firm commitments

The SMAP consolidates existing EU policy instruments under a new strategic narrative. While its six-pillar structure offers thematic clarity, the SMAP does not include new financial instruments, like tax incentives, or guaranteed energy contracts that would typically reduce investment risk in capital-intensive sectors.

Among the many initiatives mentioned, five measures stand out for their potential to address key structural challenges, namely, cost competitiveness, carbon leakage, and investment risk. We selected these based on their expected relevance to addressing these challenges, their prominence in the SMAP timeline, and their potential to influence market dynamics across various parts of the value chain (see table 2).[2]

[2] Other SMAP measures may also be relevant. This selection focuses on those with the clearest links to competitiveness, carbon leakage, and investment risk and those which are most concrete in terms of implementation detail and sector relevance.

The five selected measures show a balance between long-term ambition and short-term action. Some, like the melt-and-pour rule and carbon intensity label, are innovative ideas that could help the sector become more sustainable, but they are still early in the policy process and will not have an immediate effect. Others, like trade defense adjustments and the EUR 1bn pilot auction, are already being implemented. These offer more immediate support by protecting EU producers from unfair competition and helping companies invest in cleaner technologies. The Circular Economy Act falls somewhere in between. It is still being developed but could play a role in increasing the use of recycled metals and improving access to scrap within the EU. If implemented effectively, these measures could improve the sector’s cost competitiveness and reduce emissions intensity, but their impact depends on timely execution and industry uptake.

What the SMAP enables, and what it does not

The SMAP does not appear designed to disrupt the metals sector. Rather than reshaping the playing field, it reinforces existing dynamics such as electrification, trade defense, and circularity. For market participants, the key question is not what the SMAP says, but what it enables. And for now, the answer is: not much, at least not concretely. The plan leans heavily on horizontal, cross-sector EU instruments rather than introducing new tools tailored to the steel and metals industry. However, these instruments are not designed with the specific needs of the metals sector in mind. There are no new subsidies, no dedicated investment vehicles, and no guaranteed energy contracts for metals producers. Even the EUR 1bn pilot auction, which falls under the EU Innovation Fund, though significant, is open to all energy-intensive sectors, leaving steel and metals firms to compete for access.

That said, the EU has already approved substantial support for green steel and metals. Between October 2022 and February 2025, nearly EUR 9bn in state aid was authorized for 10 steel decarbonization projects, with additional funding from the EU Innovation Fund. National schemes in Germany, France, Italy, and others have also contributed. In this light, the SMAP may be less about launching new funding and more about aligning existing support. Without new dedicated funding or regulatory support for metals producers, there is a risk that smaller firms or less advanced regions may struggle to access decarbonization support in time.

The SMAP also outlines potential energy cost relief mechanisms including power purchase agreements (PPAs), two-way contracts for difference (CfDs), tax exemptions, and grid access reforms. However, these are not metals-specific, and their effectiveness depends on national implementation. While this flexibility may help tailor support locally, it also risks uneven access and delayed impact. Trade defense measures offer similar ambiguity. The proposed melt-and-pour rule could strengthen origin tracing, and a carbon intensity label might support a green premium. But both remain in preliminary stages.

Why industry has concerns about the SMAP

The publication of the SMAP was widely seen as a long-overdue step toward a more coordinated EU industrial policy for metals. After years of fragmented efforts, the sector welcomed the European Commission’s recognition of its strategic importance and the need for a unified approach to competitiveness and decarbonization.

However, this initial optimism has been tempered by growing skepticism. According to Reuters, industry groups argue that the current policy mix does not provide sufficient incentives to derisk capital-intensive decarbonization projects. Electrification and green hydrogen are central to the SMAP’s decarbonization vision. Yet, like other electricity users, the steel and metals sector face long grid connection delays that can slow down investments in electric arc furnaces (link in Dutch), as well as uncertainty around the availability and pricing of green hydrogen.

Industry group Eurometaux has also warned that the SMAP’s strong focus on long-term decarbonization risks overlooks the immediate competitiveness challenges faced by energy-intensive industries. This tension remains unresolved in the current policy mix. The concern resurfaced in June 2025, when Eurometaux and other stakeholders criticized the new EU state support rules for failing to provide meaningful, near-term support tailored to the steel and metals sector.

Recycling organizations have also raised additional concerns. In a joint statement, recycling groups EuRIC and BIR welcomed the SMAP’s recognition of circularity and the environmental benefits of recycling. However, they challenged the European Commission’s rationale for exploring scrap export restrictions, which is to retain strategic secondary raw materials within the EU. Recyclers argue that such measures misdiagnose the problem. They warn that restrictions could distort global recycling markets and harm European recyclers by lowering prices, even though 80% of scrap already remains within the EU. The remaining exports, they stress, are driven by insufficient domestic demand, not “scrap leakage.” An abrupt withdrawal of this resource could inadvertently push their industries to emission-intensive primary steel production for replacement, potentially reversing any emissions savings achieved domestically. Bellona, an environmental NGO, also warned that such restrictions risk shifting emissions abroad rather than reducing them.

Why the metals recycling supply chain could limit policy impact

The fragmented structure of the metals recycling value chain could limit the effectiveness of EU-wide policy instruments. At the top of the funnel are collectors, including informal and formal waste pickers and local contractors. These collectors, along with sorters and aggregators and processors, make up the majority of the approximately 5,500 firms operating in the EU metals recycling chain. Most of these companies are small, geographically dispersed, and labor-intensive. They are often undercapitalized and face limited access to finance. These early-stage actors are rarely targeted by policy incentives and often lack the digital infrastructure needed for traceability. In contrast, the narrower end of the funnel comprises traders, brokers, and industrial end users, which are fewer in number and often larger in scale. This structural imbalance makes it difficult for top-down policies to reach and engage the lower tiers of the chain, especially when relying on tools that require coordination, scale, or digital traceability.

Because upstream players are small and undercapitalized, policies requiring digital traceability or compliance documentation might fail to reach them effectively. Moreover, the growing regulatory burden, including requirements for traceability, contamination tracking, and custody documentation, may accelerate consolidation. Custody documentation refers to the formal records that track the ownership, handling, and transfer of materials throughout the supply chain. While such requirements can improve transparency and accountability, they also introduce administrative complexity and costs. Smaller firms may struggle to comply, which could lead to further concentration in the sector and reduce the diversity and resilience of the supply chain.

The SMAP is perhaps not the breakthrough support that the European steel and metals industry was hoping for, but it was likely never intended to be. It does not introduce new instruments, shift market logic, or unlock immediate investment. Instead, it serves as a strategic signal: a framework to align existing initiatives that directly or indirectly support the industry and a reaffirmation of the EU’s long-term commitment to maintaining steel and metals production within its borders.

This positioning matters. By consolidating multiple policy areas under one strategy, the SMAP provides visibility and coherence that could help stakeholders navigate EU industrial policy more effectively. It brings together circularity, energy, and trade under one umbrella, which is a first for the EU metals sector. For many stakeholders, this alone is a step forward. However, visibility is not the same as support. Industry groups across the supply chain have voiced concern that the SMAP lacks the financial tools and regulatory certainty needed to influence investment decisions, whether toward achieving decarbonization or simply retaining production capacity in Europe. Recyclers warn that proposed scrap export restrictions could backfire by putting downward pressure on scrap prices, thus increasing financial pressure on the sector. Additionally, the fragmented structure of the supply chain, particularly among upstream actors, may slow the pace of change due to limited capacity to respond to complex regulatory demands.

If the SMAP is to evolve from a strategic roadmap into a practical policy instrument, it will likely require follow-up measures. These could include enforceable standards, targeted funding, and mechanisms to derisk decarbonization investments. The SMAP’s success will ultimately depend not on its vision, but on whether it is followed by enforceable, well-funded, and sector-specific measures that can drive real change. Without such measures, the SMAP risks becoming a roadmap without a route.