The EU Steel Quota Is Tightest Where China Has No Allocation at All

AI Summary

From 1 July 2026 the EU doubled its steel out-of-quota duty to 50 percent and cut duty-free volumes 47 percent. China holds named EU steel safeguard quota in 4 of 26 categories, none in hot-rolled coil. The duty costs EUR 250 a tonne at CIF 500; CBAM costs EUR 163.53.

Most coverage of this reform reports the 50 percent rate and the 18.35 million tonne total. Those are correct and they are also the least useful numbers, because they are the same for every origin and every product.

What decides an importer’s cost is narrower: which category the goods sit in, and whether the origin holds a named allocation in it. For Chinese hot-rolled coil the answer is that it does not.

What happened

The EU’s steel safeguard expired on 30 June 2026 and was replaced the next day by a permanent instrument rather than a renewed temporary one.

Regulation (EU) 2026/1384 was adopted on 17 June 2026 and published in the Official Journal on 24 June. Its recital 16 states the reason for the central change plainly: the previous safeguard, Implementing Regulation (EU) 2019/159, set the out-of-quota duty at 25 percent, and the rate is now raised to 50 percent to reduce the risk of trade diversion. Recital 17 confirms that the duty sits on top of other duties already applicable to the same categories.

The quota is allocated by a separate instrument. Implementing Regulation (EU) 2026/1457 of 29 June 2026 distributes the total across categories and origins. Its Annex I is the operative table: it gives, per product category and per origin, the annual tonnage, the split between the most-favoured-nation part and the free-trade-agreement part, all four quarterly volumes, and a TARIC order number. Its recital 1 states the framework in one sentence: the steel regulation opened tariff-rate quotas of 18,345,922 tonnes for 26 product categories and set an out-of-quota duty of 50 percent ad valorem.

That allocation regulation runs only from 1 July to 31 December 2026. A fresh implementing act is required for January to June 2027, so the country-level volumes published now are not a two-year certainty even though the 50 percent rate is.

Tariff-rate quota — a volume that enters at a reduced or zero duty, with anything above it paying a higher rate. The EU’s steel quotas reset quarterly and are administered first-come, first-served under Articles 49 to 54 of Implementing Regulation (EU) 2015/2447. A quota is therefore not a right to import; it is a window that closes, and the order number is how a declarant claims a place in it.

Why now

The structure of the allocation matters more than the headline rate, and the structure is unusual.

China holds a country-specific allocation in four of the twenty-six categories. Read from Annex I of the allocation regulation, every one of the four is most-favoured-nation only: the free-trade-agreement column is 0.00, because China has no agreement with the EU covering these categories.

The four add up to 230,510 tonnes a year. For scale, Turkey alone holds 642,294.94 tonnes in category 1.A.

And category 1.A is where the absence bites. That category, hot-rolled coil and the related flat products under CN 7208 and 7211, represents close to a third of the total quota volume by the Commission’s own account. China has no named allocation in it. The only duty-free route is the residual pool listed as “Other countries”, order number 09.9600, which is 22,256.02 tonnes a year, or 5,564.01 tonnes a quarter, open to every supplier in the world that does not hold a named allocation in that category.

Two things about that pool are easy to miss. It is a single shared volume, so it clears on a first-come basis among all unlisted origins. And it is not a fallback that a Chinese supplier can size a contract against: 5,564 tonnes a quarter is a rounding error against the tonnage that moves through a single mill.

The melt-and-pour obligation starts on 1 October 2026. Article 4(1) of the steel regulation requires importers to provide evidence of the country where the steel was first melted and cast, and Article 14(b) applies that Article from 1 October 2026. The first implementing act specifying the form of evidence was due by 31 August 2026. The provision is a declaration requirement today, not a volume cap. Article 12(5) sets the date by which the Commission must assess whether the country of melt and pour should become the basis for quota access: 30 June 2028.

So what

The regulation fixes a percentage and never a price, so a per-tonne figure needs a value per tonne, which is your entry value and not a published number. What can be published is the arithmetic that turns any CIF value into a duty. Here it is, with every input named.

The quota has a price, and it is the size of the duty it avoids. That is the number worth putting in front of a supplier: in category 1.A, an in-quota tonne saves the buyer 50 percent of CIF, and an out-of-quota tonne pays it. The two are the same number read from opposite sides.

And here is the comparison that changes the priority order. Chinese hot-rolled coil already carries a published CBAM carbon cost of EUR 163.53 a tonne at the Q1 2026 certificate price, calculated from the corrected default values and benchmarks in the CBAM per-tonne analysis. At a CIF value of EUR 500 a tonne, the out-of-quota duty is EUR 250 a tonne.

CBAM is the charge everyone has modelled, and on this calculation it is the smaller of the two. An importer who has built a carbon line into the landed cost and has not built a category-and-order-number line has priced the smaller exposure.

Three consequences follow.

First, product form decides more than origin. China’s largest named allocation is in metallic coated sheets, at 182,997 tonnes. Its hot-rolled allocation does not exist. A supplier of galvanised coil and a supplier of hot-rolled coil from the same Chinese mill face different regimes, and the difference is a category number rather than a country.

Second, the quota is a quarter-by-quarter auction nobody calls an auction. Volumes reset each quarter and are claimed first-come. The 5,564 tonnes available to unlisted origins in 1.A each quarter is the entire window, so timing of a declaration is a cost variable. A shipment that arrives three weeks late in a quarter pays 50 percent where the same shipment three weeks earlier paid nothing.

Third, the indirect channel is the one with more Chinese tonnage behind it. China’s direct flat exports to the EU are thin, at roughly 3 percent of its flat exports in 2025 and 5 percent in the first five months of 2026, or about 2 million tonnes a year, after years of anti-dumping and countervailing duties. The larger exposure is the third-country route. Turkey’s 1.A allocation fell by roughly 60 percent year on year to 642,295 tonnes, and Turkey is itself a large importer of Chinese semis for re-rolling. Cutting the quota of the country that re-rolls Chinese steel constrains Chinese steel that never appears on an EU customs entry as Chinese.

So the work is a category-and-order-number exercise, not a rate exercise. Confirm which of the 26 categories each SKU falls into, because that decides whether a named allocation exists at all. Identify the order number for that category and origin. Build the landed cost with the 50 percent duty as a scenario rather than a tail risk, since it is now the base case above quota. And where a Chinese-origin product has no named allocation, treat the residual pool as unavailable for planning purposes rather than as a route.

For you

• Importers of Chinese hot-rolled coil and flat products in category 1.A: you have no named allocation, so plan on the 50 percent duty and treat the residual pool as a bonus rather than a baseline. At CIF EUR 500 that is EUR 250 a tonne, which exceeds the CBAM carbon cost on the same tonne by 53 percent.
• Importers of Chinese metallic coated sheets in category 4.B: you have the largest Chinese allocation of the four, at 182,997 tonnes a year under order number 09.9838, but it is MFN-only and it resets quarterly. The FTA half of that quota is closed to Chinese origin, so the effective number is the MFN column alone.
• Anyone buying from a third country that re-rolls Chinese semis: the quota cut lands on your supplier’s allocation, not on China’s. Turkey’s hot-rolled allocation fell about 60 percent, and nothing about the product’s origin label changed. Check the named allocation of the country you actually buy from, because that number moved.
• Anyone who has modelled CBAM and not the safeguard: you have the ordering backwards on current numbers. The carbon cost is EUR 163.53 a tonne; the safeguard duty is 50 percent of CIF. Rebuild the landed cost with both lines, and put the larger one first.
• Anyone shipping in the last weeks of a quarter: the quota is first-come and resets four times a year. A declaration date inside a quarter with quota left and the same date inside a quarter without it are different prices for identical goods.

The data point

FAQ

What is the EU steel out-of-quota duty in 2026?

Fifty percent ad valorem, raised from 25 percent and applicable from 1 July 2026 by Regulation (EU) 2026/1384, recital 16. The rise is intended to reduce the risk of trade diversion, which the Commission judged the previous 25 percent rate under Implementing Regulation (EU) 2019/159 had failed to do. Recital 17 confirms the duty is additional to other duties that already apply to the same categories. So anti-dumping or countervailing duty on the same goods is not offset against it; the two are charged together, from the first tonne above quota. Below the quota the additional duty is zero, and the goods pay only the ordinary tariff.

Does China get a quota under the new EU steel safeguard?

Yes, in four of the twenty-six categories, and every one is most-favoured-nation only. Read from Annex I of Implementing Regulation (EU) 2026/1457: 182,996.85 tonnes in category 4.B under order 09.9838, 47,351.25 tonnes in 3.B under 09.9828, 142.36 tonnes in 1.B under 09.9816, and 19.91 tonnes in 3.A under 09.9826. In category 1.A, hot-rolled coil, China has no named allocation at all. The four add up to 230,510 tonnes a year, against 642,294.94 tonnes held by Turkey in category 1.A alone. The FTA half of each quota is closed to Chinese origin.

What can a Chinese exporter use instead of a named quota in category 1.A?

Only the residual pool listed as “Other countries”, order number 09.9600, which is 22,256.02 tonnes a year or 5,564.01 tonnes a quarter, shared with every other supplier that holds no named allocation in that category. It is administered first-come, first-served under Articles 49 to 54 of Implementing Regulation (EU) 2015/2447, and it resets each quarter. For planning purposes it is not a channel a supplier can commit to.

Which charge is larger on Chinese steel, CBAM or the safeguard duty?

On the published numbers, the safeguard duty. CBAM’s cost on Chinese hot-rolled coil is EUR 163.53 a tonne at the Q1 2026 certificate price of EUR 75.36. The safeguard out-of-quota duty is 50 percent of CIF, which is EUR 250 a tonne at a CIF value of EUR 500 and EUR 350 at EUR 700. The duty is larger across the plausible range of steel prices, and it turns on a category number rather than on emissions.

How we calculated this

The regulation fixes a percentage, never a price, so the per-tonne figure needs one input from you: the CIF value on your entry. The quota volumes are published; the value is yours.

out-of-quota duty per tonne   = CIF value per tonne x 50%
quota rent per tonne          = the same number, read from the other side
EUR 250/t                     = EUR 500 CIF x 0.50

Substitute your own CIF value, and read the allocation for your category and origin from Annex I of Implementing Regulation (EU) 2026/1457 before assuming an in-quota price is available at all.

The point

The reform is usually reported as a rate: 25 percent became 50 percent, and duty-free volumes fell by nearly half. Both are true and neither is the operational fact. What decides whether a tonne pays 50 percent or nothing is whether the origin holds a named allocation in that category, and the answer differs by product for the same origin. China’s four named allocations do not include hot-rolled coil, and the residual pool that substitutes for one is 5,564 tonnes a quarter for the whole world. An importer who has priced CBAM and not the quota has modelled the smaller of the two charges on the same tonne.

Independent analysis, not financial or legal advice.