Day: 27 June 2023

Steel traders should be preparing for the transition to the EU’s Carbon Border Adjustment Mechanism (CBAM) with just three months to go until the reporting of embedded CO2 emissions on imported goods gets underway.

The three months from October 1 to December 31 mark the first trading period that will be subject to emissions reporting under the new regulations, and the European Commission is now finalising its plans for CBAM’s implementation.

An initial, transitional CBAM period extends to the end of 2025 and only covers the collection and reporting of importers’ carbon data. The payment of tariffs and potential fines does not apply until CBAM’s formal replacement of the existing EU Emissions Trading System (EU ETS) gets underway in 2026.

Right now, steel sector participants have been invited to share feedback on the proposed CBAM implementation process via a consultation. Opened on June 13, this will end on July 11.

Publication of the Commission’s draft Implementing Regulation document, which accompanied the consultation’s launch, has also provided an opportunity to gain an initial oversight of the proposed CBAM reporting process.

The document details the process of reporting, the proposed methodology used to calculate an imported product’s embedded CO2 emissions and the potential fines levied for non-compliance.

An outline of information to be submitted in CBAM reports can also be found in the publication’s accompanying annexes.

Proposed CBAM processes

The Commission’s documentation indicated that a CBAM Transitional Registry platform will be used for the filing and management of CBAM reports. This should be compatible with existing customs systems, it said.

It said there would be choice of three reporting methods during the first year of the transition to CBAM. They are: (a) full reporting according to a new EU methodology detailed in the document; (b) reporting based on equivalent third country national systems; and (c) reporting based on reference values. As of January 1, 2025, only the EU method will be accepted, however.

Three categories of reporting declarants can submit CBAM reports. They are:

• An importer who lodges a customs declaration. This refers to the importer who submits a customs declaration for the release of goods in its own name and on its own behalf.
• An importer who declares the importation of goods. This category includes importers who hold an authorisation to lodge a customs declaration and declare the importation of goods.
• An indirect customs representative. When the importer is established outside the European Union or when the indirect customs representative agrees to fulfil the reporting obligations, the indirect customs representative may lodge a customs declaration and carry out the reporting obligations.

Reporting declarants will be required to submit a CBAM report within one month after the end of each quarter during the transitional period, with the first due by January 31, 2024.

The Commission’s draft Implementing Regulation document revealed that submitted CBAM reports can be modified or corrected within two months of a reporting quarter, under certain circumstances, however.

An initial derogation period will allow the first two CBAM reports to be modified until the submission deadline for the third report on July 31, 2024.

Additionally, if a CBAM report is incorrect or incomplete, the reporting declarant can request permission to make modifications or corrections within one month of the request’s approval by the competent authority or the Commission.

Potential penalties

Although the formal process of CBAM reporting has yet to be determined, an indication was given of potential fines for non-compliance.

The Commission said penalties should be based on the amount of undeclared embedded emissions. It said: “The amount of the penalty, for each tonne of unreported embedded emissions shall be between EUR 10 and EUR 50.”

In the initial transitional period, when the CBAM’s scope is limited to the reporting of data with no financial obligation, the amount of penalty should be based on “the gravity and duration of the failure to report”, it added.

Earlier this month MEPS reported on suggestions that financial support and energy sector reform must accompany CBAM for Europe’s steel mills to meet their emissions-cutting targets.

Later this week MEPS will publish a Q&A document detailing the background to CBAM and answering many of the steel sector’s most frequently asked questions on the subject.

Source: mepsinternational.com

Trading remained slow in the European steel hot-rolled coil market on Monday June 26 amid persistently depressed end-user consumption, sources told Fastmarkets.Buyers opted to book material on a hand-to-mouth basis, resulting in limited restocking demand, sources said.

Despite current weak market conditions, sources were optimistic that demand would begin to improve during July.

Fastmarkets’ daily steel HRC index, domestic, exw Northern Europe was calculated at €672.50 ($732.70) per tonne on June 26, down by €0.80 per tonne from €673.30 per tonne on June 23.

The latest calculation of the Northern European index was down by €12.25 per tonne week on week, and by €78.33 per tonne month on month.

Buying activity remained quiet on Monday in the Northern European HRC market. Further significant future price drops remain unlikely however, sources told Fastmarkets.

“Demand remains slow, and customers prefer to maintain medium-to-low levels of stocks,” a trader source in the region said.

“Negotiations for contracts for the second half of 2023 are still pending, so the market remains in wait-and-see mode,” he added.

Buyers’ estimates of tradeable values were in the range of €670-680 per tonne ex-works.

Fastmarkets calculated its daily steel HRC index, domestic, exw Italy at €646.25 per tonne on Monday, down by €7.50 per tonne from €653.75 per tonne from June 23.

The Italian index was down by €10 per tonne week on week and by €42.50 per tonne month on month.

In Italy, official offers of August- and September-delivery HRC from integrated mills and re-rollers were heard around €630-670 per tonne ex-works, sources told Fastmarkets. Buyers’ estimates of tradeable values were still being reported at €650 per tonne ex-works.

A deal was reported by a buyer at €640-650 per tonne ex-works.

Meanwhile, HRC offers from Asian mills to Italy were heard at around €610-620 per tonne CFR on Monday.

Published by: India-Inés Levy

The European Commission finally introduced its long-awaited 11th sanctions package against Russia for its invasion of Ukraine, in an announcement on June 23.The new package was expected to be imposed back in May, but it was delayed because of disagreements between member states, with notable opposition from Hungary and Greece, sources told Fastmarkets.

Among other things, the new package includes a new anti-circumvention tool that is supposed to allow the EU “to restrict the sale, supply, transfer or export of specified sanctioned goods and technology to certain third countries whose jurisdictions are considered to be at continued and particularly high risk of circumvention,” according to the release on the Commission’s website.

In particular, the anti-circumvention tool will affect imports of iron and steel products processed in a third country that incorporate iron and steel products originating in Russia.

“At the moment of importation, importers shall provide evidence of the country of origin of the iron and steel inputs used for the processing of the product in a third country,” according to the document published on the EU Official Journal.

Thus, the new clause would affect semi-finished steel product exports from Russia, Fastmarkets understands.

Russian semi-finished imports have been specifically targeted before, in the eighth sanctions package introduced in October 2022, but with a long transition period and generous quotas, Fastmarkets reported previously.

Notably, between October 7, 2022, and September 30, 2023, 3.75 million tonnes of semi-finished steel products falling under CN code 7207 12 10 (steel slab) would be allowed to enter the EU market without restrictions. A similar amount — also approximately 3.75 million tonnes — of steel slab would be allowed to enter the EU between October 1, 2023, and September 30, 2024.

For products falling under CN code 7207 11 (steel billet), 487,202 tonnes will be allowed to enter the EU between October 7, 2022, and September 30, 2023; 85,260 tonnes will be allowed between October 1 and December 31, 2023, and 48,720 tonnes allowed January 1-March 31, 2024, according to the EU Official Journal.

Despite the intention of the sanctions — to restrict trade — some market sources have said that the generous quotas granted by EU authorities actually encourage slab imports from Russia. Material of this origin comes at a slight discount compared with Asian slab.

Russia’s slab imports to the EU amounted to 3.37 million tonnes in 2022, compared with 3.98 million tonnes in 2021. During 2023 to date, Russian mills have continued to sell slab to the bloc, with volumes in January-February 2023 of around 536,000 tonnes.

The new regulation would prevent non-EU suppliers from selling finished steel products manufactured from Russian semis to the EU market.

“This [new sanctions package] would, in theory, limit export of Turkish HRC to Europe because Turkey continues buying Russian slab. However, in reality it is unlikely to have a major impact on the market, since Turkish HRC suppliers have not really been active in the EU market recently, since they cannot compete with much cheaper Asian material,” an EU-based trader told Fastmarkets.

The new sanctions package also includes transport measures; notably, a prohibition of trucks with Russian trailers and semi-trailers from transporting goods to the EU. Marine transport will be targeted as well: vessels that engage in ship-to-ship transfers suspected to be in breach of the Russian oil import ban or G7 Coalition price cap will be banned from EU ports.

Published by: Julia Bolotova