Market evolution: Direct reduced iron (CN 7203) — 2015–2025

Introduction

Direct reduced iron (DRI) and related spongy ferrous products classified under CN 7203 represent a strategically important input for the European steel industry, particularly as the sector transitions toward lower-carbon production routes. The EU has historically been a major net importer of DRI, relying on external suppliers to complement limited domestic production. Over the 2015–2025 period, EU trade in this product has undergone profound structural changes: import volumes have declined while values have risen sharply, the supplier base has been dramatically reshaped by geopolitical events, EU domestic production has contracted, and exports have nearly vanished. This report examines the key dynamics driving these transformations.

1. A shrinking import volume behind rising expenditure

Total imports: less tonnage at higher cost

The EU's import profile for CN 7203 reveals a striking divergence between volume and value trajectories. Total import quantities fell from 2,853,058 tonnes in 2015 to 2,264,095 tonnes in 2025, a contraction of 20.6%. Yet import expenditure rose from €542.7 million to €682.4 million (+25.7%), peaking at €1,107.5 million in 2022. This gap is explained by a near-doubling of unit import prices, which climbed from €190/t in 2015 to €301/t in 2025 (+58.5%), with a peak of €377/t reached in 2022.

The product subheading 720310 (DRI proper) accounts for virtually all import volume — 2,248,263 t out of 2,264,095 t in 2025 — while 720390 (spongy ferrous products and high-purity iron) remains a marginal subsegment, fluctuating between roughly 200 and 34,000 tonnes per year.

Italy consolidates its role as the EU's primary DRI gateway

At the Member State level, Italy has consistently been the largest EU importer, growing from €221.9 million in 2015 to €293.5 million in 2025 (+32.3%). Italy's share reflects its large electric-arc-furnace (EAF) sector, which consumes DRI/HBI as a scrap substitute. Austria and Belgium have seen the most dramatic growth, with Austria's imports surging from €6.7 million to €133.4 million (+1,902%) and Belgium's from €8.3 million to €63.8 million (+668%). By contrast, Spain's imports fell from €160.3 million to €73.7 million (−54%), and Germany's collapsed from €51.3 million to €10.0 million (−80%), likely reflecting a shift in German steelmaking away from DRI-intensive routes or changes in intra-EU redistribution patterns.

2. Geopolitical disruption reshapes the EU's supplier base

Russia's dominance eroded by sanctions

The most consequential structural shift in EU DRI trade over this decade has been the reconfiguration of the supplier base. Russia was by far the dominant supplier in 2015, accounting for €247.0 million in imports (roughly 46% of total import value). Russian shipments peaked at €681.4 million in 2022 before declining to €175.5 million in 2025 (−28.9% vs. 2015). The 2022 peak likely reflects both a price spike and the wind-down phase of existing contracts before EU sanctions on Russian steel-sector inputs took full effect. The subsequent decline confirms the impact of trade restrictions.

New and diversified suppliers emerge

Several alternative suppliers have stepped in to fill the gap:

Venezuela has maintained a strong position as a DRI exporter to the EU, growing its share to €193.6 million by 2025. The United States has experienced the most dramatic expansion, rising from a negligible €83,000 in 2015 to €171.6 million in 2025, reflecting the growth of US DRI capacity (notably Nucor's Louisiana plant). Libya has also emerged as a significant supplier, with imports rising from €26.1 million to €91.4 million (+251%), potentially reflecting the resumption and expansion of Libyan industrial output. Trinidad and Tobago, by contrast, saw its share collapse from €106.6 million to €17.4 million (−84%), likely linked to disruptions in Trinidad's natural gas supply that constrained DRI production there.

Import concentration falls as supply diversifies

The Herfindahl-Hirschman Index (HHI) for import concentration by value declined from 3,243 in 2015 to 2,449 in 2025 (−24.5%), confirming a meaningful diversification of the EU's DRI supply sources. While the HHI remains in the "moderately concentrated" range, the downward trend indicates that the EU is less reliant on any single dominant supplier than it was a decade ago — a direct consequence of Russia's partial displacement.

3. Export collapse, production decline, and rising strategic vulnerability

EU exports of DRI have virtually disappeared

EU exports of CN 7203 have contracted dramatically over the period. In value terms, exports fell from €26.6 million in 2015 to just €3.1 million in 2025 (−88.2%). In volume, the decline was even steeper: from 61,013 tonnes to 2,773 tonnes (−95.5%). Exports to once-significant destinations like Morocco (€15.9 million → €24), Türkiye (€75,000 → €1,142), and Algeria (€2.2 million → €61,000) have essentially ceased. The only destination showing any growth is the United States (€3.0 million → €1.5 million, with a peak of €3.0 million), though even this remains modest. The near-total disappearance of EU DRI exports reflects both tighter domestic supply-demand balances and the EU's transition from a marginal DRI exporter to a near-exclusive net importer.

Domestic production falls in volume but rises in value

EU domestic production of DRI has also contracted. Production volumes declined from 400 million kg in 2015 to 250 million kg in 2025 (−37.5%). However, production value rose from €32.8 million to €150.0 million (+357.2%), reflecting the sharp increase in DRI prices and/or a shift toward higher-value product forms. This divergence suggests that while the EU is producing less DRI in physical terms, each tonne commands a significantly higher price — consistent with the broader inflation in raw material and energy costs observed across the steel value chain.

Net import reliance remains structurally high despite a slight decline

The net import reliance ratio edged down from 93.9% in 2015 to 83.9% in 2025 (−10.6%). This modest improvement is welcome but does not fundamentally alter the EU's structural dependence on imported DRI. The ratio peaked at nearly 100% in some intermediate years, underscoring the near-total absence of self-sufficiency. Export propensity collapsed from 34.1% to 4.0% (−88.3%), confirming that the EU now produces virtually no DRI for external markets.

Price shocks concentrated in 2021 across major suppliers

The volatility analysis reveals three major price shock events. In 2021, import prices from Russia surged by +60.4% (abnormality score of 12.1), affecting a flow representing 60.2% of total import value. Simultaneously, Venezuelan import prices rose +76.6% (abnormality 16.8, 14.1% value share). These shocks correspond to the post-COVID commodity price surge and tightening energy markets that preceded the 2022 energy crisis. On the export side, a 2020 price shock for shipments to Türkiye saw a +463.8% shift (abnormality 26.2), likely reflecting a one-off transaction. The volatility of individual partner flows is also revealing: imports from Canada (CV = 1.30) and Libya (CV = 0.74) are the most volatile, while Russia (CV = 0.26) was historically the most stable supplier — a stability that has now been lost.

Conclusion

Over the 2015–2025 period, the EU's trade in direct reduced iron (CN 7203) has been shaped by three converging forces: rising prices, geopolitical disruption, and persistent import dependency. Import volumes contracted by over 20%, yet expenditure grew by 26% as unit prices nearly doubled. Russia's position as the dominant DRI supplier has been significantly eroded, driving a welcome diversification toward the United States, Venezuela, and Libya, though this reshuffling came at the cost of higher price volatility and supply uncertainty. EU domestic production of DRI declined by 37.5% in volume, while exports have virtually disappeared. Net import reliance, at 83.9% in 2025, remains the defining structural feature of this market. As the European steel sector pursues decarbonisation — which will likely increase, not decrease, demand for high-quality DRI/HBI as a green feedstock — securing stable, diversified, and ideally lower-carbon supply chains for CN 7203 will become an increasingly critical policy and industrial challenge.