Introduction to the EU’s CBAM for Steel Imports

Overview of the EU’s CBAM Mechanism

The EU’s Carbon Border Adjustment Mechanism (CBAM) will take effect in 2026. Its goal is to prevent carbon leakage by requiring non-EU steel producers to meet the same carbon emission standards as European manufacturers. Under CBAM, companies importing steel to the EU must buy carbon certificates. While the fiscal impact of CBAM will begin in 2027, the initial costs will be felt from 2026.

The introduction of “CBAM extras” presents challenges, especially for smaller businesses in the supply chain. Companies must prepare for these upcoming changes.

The Mechanics and Financial Implications of CBAM

CBAM ties the price of carbon certificates to the EU Emissions Trading System (ETS). In January, the price of EU carbon allowances was €71.52 per tonne of CO2 equivalent. This price fluctuates over time, impacting the cost of carbon certificates. Importers will need to buy certificates matching the carbon content of their goods. Non-EU producers must also register on the EU platform and declare their emissions values for verification.

From January 1, 2026, steel importers must account for carbon emissions in their pricing. In the first year, they will only pay for 2.5% of embedded emissions. However, this rate will rise to 100% by 2034. The new regulations will increase the cost per tonne of steel. Companies must adapt to these financial changes as soon as possible.

Supply Chain Cooperation and Cost Mitigation

The CBAM will require greater cooperation throughout the supply chain. Smaller businesses may struggle with the added financial burden. Stronger collaboration between importers, processors, and end-users will be essential to manage the new costs.

One Northern European buyer estimated that their CBAM-related costs for steel imports in 2024 would add €6.5 million ($7.3 million) in expenses. This amount is unmanageable for many smaller players. Additionally, steel prices are expected to rise by €56 per tonne due to CBAM extras. Companies must adapt their contracts to include emissions surcharges and prepare for increased costs.

Future Amendments to CBAM and Carbon Leakage Risks

In late 2025, the European Commission will propose amendments to CBAM. These changes could expand the scope to additional steel products and introduce anti-circumvention measures. For example, downstream steel products like auto parts and cookware might not fall under CBAM, which could lead to carbon leakage. EU manufacturers may then source ready-made steel products from countries with looser emissions standards, undermining the EU’s emissions reduction goals.

This shift could harm the competitiveness of the EU’s downstream industry, pushing local producers to the brink.

SuperMetalPrice Commentary:

The EU’s CBAM will significantly impact the global steel market. Its financial implications will raise prices and shift trade dynamics. Early preparation is crucial, particularly for businesses within the steel supply chain. Companies that embrace emissions-tracking systems, strengthen supply chain collaboration, and manage financial reserves will be in a stronger position to thrive under this evolving regulatory landscape.