Europe’s metallurgical and critical raw materials supply chain is not being dismantled, nor is it being rebuilt in the way official strategies describe. Instead, it is being re-zoned. Carbon, cost and execution risk are being shifted away from Western Europe’s political and regulatory centre toward South-East Europe (SEE), not through dramatic relocations, but through a quiet redistribution of functions, capital and engineering responsibility.
This process is already well advanced. It is visible in investment freezes in Western Europe, life-extension decisions in the Balkans, intermediate capacity expansions in Romania and Bulgaria, and the steady redirection of scrap, concentrates, residues and semi-finished products eastward. From an industrial strategy and investor-grade perspective, SEE is no longer a peripheral manufacturing appendage. It is becoming Europe’s structural buffer zone, where the realities of energy, carbon and engineering are reconciled with Europe’s decarbonisation narrative.
What makes this shift durable is not only cost or energy. It is engineering depth, a factor systematically underestimated in policy discussions but decisive in real asset allocation.
Why outsourcing to see is structurally different from offshoring
Outsourcing to SEE is not comparable to shifting production to Asia or Africa. It remains inside Europe’s logistical, regulatory and industrial gravity field. Distances to Germany, Italy and Austria are short, transport emissions are modest, supply chains are integrated, and compliance with EU product standards is routine. Romania and Bulgaria already sit inside the EU legal framework, while Serbia, Bosnia and North Macedonia operate as de facto extensions of it.
Cost differentials are real and persistent. Labour-intensive metallurgical operations operate at 30–50% lower labour cost, brownfield EPC execution is typically 20–40% cheaper, and non-wage operating costs such as maintenance, land, environmental compliance and permitting remain structurally below Western European levels. Even as wages rise, productivity-adjusted cost gaps remain wide because SEE engineers and technicians typically cover broader scopes per headcount.
Energy systems reinforce this advantage. SEE grids remain transitional. Coal, lignite, hydro and nuclear coexist, providing industrial baseload power at prices that, even when volatile, are structurally lower than Western European equivalents once network fees and balancing costs are included. For metallurgy, where electricity can represent 45–60% of cash cost in ferroalloys and secondary aluminium, this difference is decisive.
Which parts of europe’s metallurgical chain realistically move to see
The first layer of relocation is already visible in energy-intensive primary and secondary metallurgy. Electric arc furnace steelmaking, hybrid BF-EAF routes, ferroalloys, secondary aluminium and copper remelting all fit SEE’s cost and regulatory profile. In steel alone, labour and maintenance differentials translate into €60–90 per tonne, and when combined with longer asset life tolerances and lower compliance overhead, the all-in cost gap versus Western Europe frequently exceeds €120 per tonne, even before CBAM.
Ferroalloys illustrate the logic most clearly. These processes are indispensable to steelmaking yet politically invisible and power-intensive. Permitting new capacity in Western Europe is effectively impossible. In SEE, legacy plants can be modernised and extended incrementally, with governments accepting transitional emissions in exchange for employment and export revenues.
The most strategically important relocation, however, lies in pre-refining and intermediate processing. Ore concentration, flotation, roasting, matte production, anode casting, slag treatment and by-product recovery are carbon-heavy, capital-intensive and low-margin relative to final products. They are also essential. SEE’s ability to host these stages is the cornerstone of its emerging role.
From a CBAM perspective, this is critical. CBAM applies at the import of covered goods, not at the level of concentrates or early intermediates. Shifting pre-refining eastward while retaining final refining, shaping or downstream integration in Western Europe can reduce carbon exposure by 15–25% per tonne in metals such as copper, without breaking proximity to OEMs.
Recycling and dirty circularity: Europe’s unavoidable middle ground
Recycling is central to Europe’s CRM strategy on paper, but politically difficult in practice. E-scrap preprocessing, battery black mass treatment, catalyst recycling and PGM concentration are noisy, chemically intensive and labour-heavy. These activities increasingly face local opposition in Western Europe.
SEE offers a pragmatic solution that still counts as European under CRMA logic. Romania and Bulgaria already handle substantial scrap flows, while Serbia and Bosnia are absorbing increasing volumes under tolling and contract processing arrangements. Operating cost advantages of 25–40% versus Western Europe are common, even after transport and compliance.
The scale is not marginal. By 2030, Europe is expected to generate over 300,000 tonnes of battery black mass annually. Much of the preprocessing capacity required to handle this volume will not be located in Germany or France. It will sit where engineering tolerance, labour availability and political acceptance still exist.
Chemicals and metallurgy as one system
Metallurgy cannot function without chemicals. Sulphuric acid, industrial gases, reagents, fluxes and basic battery chemicals form an integrated industrial ecosystem. Western Europe is increasingly shedding bulk chemical capacity while preserving specialty chemistry and IP-heavy segments. SEE is absorbing the opposite: large-volume, energy-intensive chemical production linked to metals, batteries and construction materials.
Chemical plants in SEE typically operate with 15–25% lower fixed OPEX, and co-location with metallurgical sites reduces logistics, waste treatment and downtime costs. These facilities are rarely visible to end consumers, making them politically expendable in the EU core while remaining industrially indispensable.
Engineering: The decisive but underestimated advantage
Cost and energy explain why SEE is attractive on paper. Engineering explains why it works in reality.
SEE is not a low-skill industrial periphery. It is a region shaped by decades of operating steelworks, smelters, power plants, chemical complexes, mines and transmission systems under capital scarcity. That legacy has produced a deep pool of metallurgical, mechanical, electrical and process engineers accustomed to high-temperature, high-wear, high-availability assets.
Senior engineering salaries in SEE typically sit 40–60% below Western European equivalents, with junior and mid-career engineers 30–45% cheaper. More importantly, engineers in SEE carry broader responsibility per headcount. They are used to running sub-optimal assets efficiently, improvising under feedstock variability, stretching maintenance intervals and keeping plants online without constant OEM support.
This capability is increasingly rare in Western Europe, where heavy-industry engineering has been hollowed out by decades of outsourcing, early retirements and compliance-driven organisational models.
Owner’s engineering, brownfield execution and risk absorption
SEE has quietly become a reservoir of owner’s engineers, EPC engineers and site managers. Projects are executed with fewer contractual layers, faster decision-making and greater tolerance for value engineering and deviation management. As a result, metallurgical and chemical projects in SEE often achieve 15–30% lower EPC cost per installed tonne or megawatt, not only because labour is cheaper, but because engineering is embedded on site.
Brownfield optimisation is another critical advantage. Europe’s industrial future is increasingly brownfield. New greenfield smelters or refineries in the EU core face near-insurmountable permitting barriers. SEE engineers specialise in life-extension, retrofits, hybridisation and incremental decarbonisation. Emission reductions of 10–25% per tonne achieved through engineering optimisation can materially reduce CBAM exposure at a fraction of the cost of greenfield replacement.
From an investor perspective, SEE also absorbs engineering execution risk. Ramp-up risk, feedstock variability, maintenance uncertainty and workforce continuity risk are transferred eastward. Plants operate with lower automation density and higher manual intervention, trading theoretical efficiency for resilience. For assets where unplanned downtime can cost €0.5–1.5 million per day, this resilience has tangible value.
Where the hard limits remain
Not everything will move. Final, high-visibility green products such as battery cathodes, permanent magnet alloys, aerospace-grade materials and consumer-branded low-carbon metals will remain anchored in Germany, France and the Nordics. OEMs demand proximity, reputational control and subsidy alignment.
Rare earth separation and magnet production remain politically sensitive and security-linked. SEE may host pre-processing and alloying, but full separation capacity is unlikely to relocate in the near term.
CBAM also imposes a ceiling. SEE production can undercut Western Europe even after CBAM in many segments, but it cannot compete with fully subsidised, zero-carbon flagship plants powered entirely by hydro or nuclear. SEE’s role is not to replace Europe’s green narrative, but to make it economically survivable.
The real CBAM equation and the strategic conclusion
CBAM does not eliminate SEE outsourcing. It penalises dirty, distant imports, not near-EU industrial relocation. Short logistics chains, feasible MRV alignment and incremental decarbonisation pathways mean that for many metals, SEE production plus CBAM certificates remains €80–150 per tonne cheaper than Western European production by the late 2020s.
Europe is not abandoning metallurgy. It is re-zoning it. The EU core concentrates clean, subsidised, visible production. SEE absorbs carbon-exposed, capital-efficient, execution-heavy stages that keep the system running. Engineering capability is what makes this division durable rather than opportunistic.
For industrial strategists and investors, the implication is clear. SEE is no longer just where industry can still be built. It is increasingly where Europe’s industry can still be engineered, operated and kept alive during the transition.
Elevated by clarion.engineer