How CBAM will transform EU steel imports?
MEPS International has compiled and published a list of the most popular CBAM-related Q&As.
The asset was revised to include the EU CBAM’s default embedded carbon emissions values and wider clarification of the regulations following their recent publication by the Commission.
Read on discover more about the motivation for CBAM’s implementation in Europe and to discover what your business needs to do now to set it on the path to compliance.
What are the European Commission’s CBAM import regulations?
CBAM is an element of the ‘Fit for 55’ package unveiled as part of the EU’s European Green Deal in July 2021.
This outlined a target of delivering a 55% reduction in carbon emissions between 1990 and 2030 on the way to becoming a climate-neutral continent by 2050.
CBAM will aim to prevent the Commission’s stringent CO2-cutting measures from causing an exodus of CO2-intensive EU manufacturing processes to less heavily regulated markets. This is commonly referred to as ‘carbon leakage’.
It will do this – and seek to avoid the risk of cheaper, less sustainably produced goods flooding the EU from other countries – by imposing an import duty according to a product’s embedded carbon emissions.
The CBAM covers a selected number of goods at high risk of carbon leakage, including: iron; steel; cement; fertiliser; aluminium; hydrogen; and electricity generation.
Approximately 1.8 to 3.0 tonnes of CO2 are emitted for every tonne of steel produced in a blast furnace. The direct CO2 emissions (melting) of an electric arc furnace are about 0.1 tonnes and the indirect CO2 emissions (electricity generation) are approximately 0.4 tonnes, for each tonne of steel produced.
How will the European Commission’s CBAM regulations work?
The European Commission’s CBAM regulations are designed to function in parallel with the current EU Emissions Trading System (EU ETS).
When a company buys a carbon allowance from the EU ETS, it gains permission to generate one tonne of CO2 emissions. EU steelmakers currently receive free emission allowances under the EU ETS scheme; however, these are gradually being phased out.
The Commission said that free EU ETS allowances had served to “dampen the incentive to invest in greener production at home and abroad”.
CBAM involves applying a carbon price to imports of certain goods into the EU. Initially, only direct emissions from steel production will be considered by CBAM certificates.
Following CBAM’s full implementation in 2026, EU importers will buy carbon certificates corresponding to the carbon price that would have been paid had the goods been produced under the EU’s carbon pricing rules.
If a non-EU producer can show they have already paid a price for the carbon used in the production of the imported goods, in a third country, the corresponding cost can be fully deducted for the EU importer.
If importers cannot provide emissions data, they will face the CBAM’s punitive default values for emissions.
What is the timeline for the rollout of CBAM levies?
A simplified version of CBAM came into operation on October 1, 2023. During this initial transition phase, importers are only obliged to collect and report carbon data.
During the transitional period of the CBAM the importer shall submit a CBAM report, detailing direct and indirect emissions embedded in their imported steel products, every quarter.
From 2026 onwards, the CBAM will be fully implemented and the levy – linked to the EU’s carbon market price (€78/tonne at the start of January 2024) – will be payable.
EU importers will have to annually declare the quantity of goods and the amount of embedded emissions in the goods they imported into the EU in the preceding year, and surrender the corresponding amount of CBAM certificates.
However, this levy will be gradually phased in, from 2026 to 2034, in parallel to a phasing out of the free allowances under the EU ETS. This phasing in period is illustrated here:
What are the EU CBAM’s default values for embedded carbon emissions?
In the initial phase of the CBAM transition period importers will be able to calculate the carbon emissions per tonne embedded in products shipped into the EU using the European Commission’s default values.
A study conducted by its Joint Research Centre (JRC) established a ‘world average’ value for each product covered by CBAM after considering carbon emissions from the production of a wide range of steel products in 15 to 20 countries.
The use of the default carbon emissions values for businesses’ full import volume will only be permitted until the end of June 2024, however. After this, default values can only be used to report complex goods where these estimations represent less than 20% of the total embedded emissions.
From 2026, when the CBAM regulation is fully implemented, importers will have to calculate the embedded emissions of their steel imports’ using the Commission’s EU methodology. This dictates that embedded emissions are established through the accurate monitoring of production processes, mirroring those used in the EU Emissions Trading Scheme (EU ETS).
From 2026, a new set of country-specific default emissions values will only be used to determine steel imports’ embedded carbon emissions content where the data is not available to apply the more accurate EU methodology. As such, these default values will determine the number of CBAM certificates an importer will need to purchase. An accurate emissions value could be demonstrated through a retrospective reconciliation procedure, the Commission said.
What action do I need to take now to ensure my business is CBAM compliant?
The Commission has described its CBAM transition period (October 1, 2023, to January 1, 2026) as a “learning period” for all stakeholders. Nonetheless, fines will apply in the event of non-compliance, so establishing robust processes early is essential.
The registration of reporting declarants on the CBAM Transitional Registry platform, which is being used for the filing and management of CBAM reports, is essential. The reporting declarant is either the importer or an indirect customs representative depending on who lodges the customs declaration. They are responsible for reporting and liable in cases where incorrect or insufficient information is submitted.
Preparations should be made to ensure that the embedded carbon emissions of imported material can be calculated using the Commission’s EU methodology from quarter two, 2024. The use of the Commission’s default emissions values is likely to have negative cost implications in the longer term.
Will steel importers be fined for non-compliance with CBAM emissions reporting during the (pre-2026) transition phase?
During the CBAM transition period, which runs from October 1, 2023, to January 1, 2026, the Commission’s focus is on establishing a reporting process. Nonetheless, penalties of EUR10 to EUR50 per tonne of CO2 emitted can be levied for incomplete or incorrect reporting.
The Commission said that the level of fine would be determined according to several factors. These include: the extent of unreported information; the readiness of the reporting declarant to comply with requests for information or to correct the CBAM report; the intentional or negligent behaviour of the reporting declarant; and the past behaviour of the reporting declarant.
It has also stated that higher penalties would be applied when more than two incomplete or incorrect reports have been submitted in a row or the duration of the failure to report exceeds six months.
Will there be CBAM implications for transport and shipping?
Transport emissions are not currently included in CBAM as only direct emissions from steel production are considered.
However, there are plans to assess indirect emissions through complex supply chains during the CBAM transition period.
Additionally, an agreement has been reached to include maritime shipping emissions for products covered by the EU ETS scheme, specifically those produced in the EU and shipped within or outside of the EU. This inclusion is set to take effect from 2024. Shipping-related emissions will therefore be dealt with separately.
This could also change depending on the outcome of the EU’s evaluation of data gathered during the CBAM transition period, however.
What will happen to the funds generated from CBAM tariffs?
Major EU steel producers have called for the funds raised by CBAM tariffs to be used to help facilitate the sector’s transition to low-emission production processes.
MEPS has previously reported on the need for the European Commission to introduce financial support to help businesses’ net zero transition and energy sector reform to facilitate the push towards its ‘Fit For 55’ emissions targets.
But while the Commission has confirmed that “revenues from CBAM will contribute to the EU’s budget” it has yet to launch a package offering financial support to businesses.
A scheme similar to the United States’ Inflation Reduction Act has yet to be realised.
Do any other countries have plans to impose EU-style CBAM import tariffs?
Upon revealing details of its CBAM regulation in the summer of 2023, the European Commission claims that a number of countries, including Canada, Japan and the United Kingdom, are planning initiatives similar to CBAM.
In December 2023, the UK government announced that tariffs based on steel products’ embedded carbon emissions would come into force by 2027.
Other countries are seeking exemptions or considering applying retaliatory tariffs. WTO rules will also allow countries to challenge the validity of the scheme.
Currently, California is one of few global regions to impose a CBAM-style tariff model, with additional charges levied on some electricity entering the US state.
What is the history of the European Commission’s carbon emissions-related import regulations?
2005 – The European Commission introduced its EU ETS. This was a ‘cap and trade’ scheme where a limit is placed on the right to emit specified pollutants in the region.
2019 – Commission President Ursula von der Leyen unveiled the European Green Deal. This was a set of ambitious policy initiatives with the overarching aim of making the EU climate neutral in 2050.
2021 – The Commission proposes its Carbon Border Adjustment Mechanism (CBAM) with the aim of equalising the price of carbon between domestic products and imports.
April 2023 – The European Parliament ratified CBAM.
October 2023 – The transition period for CBAM starts. Importers must collect and report carbon data.
January 2026 – Definitive CBAM measures start, beginning the phase-out of the EU Emissions Trading System (EU ETS).
January 2034 – EU Emissions Trading System (EU ETS) ends.
For more information on the European Commission’s Carbon Border Adjustment Mechanism, visit its Taxation and Customs Union’s dedicated CBAM website.
Source: mepsinternational.com
Polish mills increase rebar prices to cover higher production costs
According to sources, rebar prices in Poland increased due to higher production costs, including rising feedstock prices, combined with slow demand, which put pressure on Polish mills’ profit margins.
Rebar
Polish mills offered rebar in the range of 2,850-2,900 zloty ($719-732) per tonne CPT, which nets back to about 2,830-2,870 zloty per tonne ex-works, sources told Fastmarkets.
In comparison, before the Christmas and New Year’s break, offers for rebar were heard in the range of 2,820-2,840 zloty per tonne CPT, which nets back to about 2,800-2,810 zloty per tonne ex-works.
This is an increase of 30-60 zloty per tonne compared with the end of December.
“The mills now call for an additional 50 zloty per tonne,” a consumer source told Fastmarkets.
Some deals were heard concluded at the higher prices, but the traded quantities were not specified.
A buyer source estimated the tradable market level at 2,850 zloty per tonne CPT, which nets back to about 2,830 zloty per tonne ex-works.
According to a producer source, the current offer price range for rebar is achievable.
Fastmarkets’ weekly price assessment for steel reinforcing bar (rebar) domestic, exw Poland was 2,830-2,870 zloty per tonne on Friday, increasing by 50 zloty per tonne from 2,780-2,820 zloty per tonne on January 5.
Market participants had mixed expectations about the future development of rebar prices.
“Many distributors still have cheap stock bought in the past. If the mills do not see enough demand, they can decrease their prices again. But [this couldn’t happen] sooner than the end of January,” a distributor source told Fastmarkets.
On the other hand, the distributor source said that demand for rebar in Poland had revived a bit after the holiday lull.
“If the Polish mills are persistent enough, the new [higher] prices can be accepted by the market in the end,” they added.
A consumer source believed that the market would accept the new prices, adding that rebar can be found in the secondary market for 20-30 zloty per tonne less, but only some diameters were in stock.
Import offers from Italy were heard at €656-667 ($720-732) per tonne CPT.
Wire rod
Polish mills offered wire rod in the range of 3,100-3,300 zloty per tonne CPT this week, sources told Fastmarkets, largely unchanged from the end of December.
Demand was low, however, and no major deals were heard in the market.
Market participants estimated the tradable level at 2,900-3,000 zloty per tonne CPT, but bullish sentiment prevailed among Polish mills, keeping the assessed range stable.
Fastmarkets’ weekly price assessment for steel wire rod (drawing quality), domestic, delivered Poland was 2,900-3,100 zloty per tonne on January 12, unchanged since December 8.
“Demand [for wire rod in Poland] is still very weak. There is no restocking, and no demand from construction or any other sector,” a distributor said.
A consumer source confirmed that demand for wire rod in Poland was low. According to the source, this was due to the winter season — when construction activity is low — and the overall economic situation in Europe.
“Interest rates are increasing, inflation grows, and there is a lack of appetite to invest,” the consumer source said. According to the source, these factors have affected construction, which is the main consumer of long steel products.
“The mills are trying to make money with the small volumes they sell,” the source added.
Offers of imported material from Italy were heard at €665-675 per tonne CPT for drawing-quality wire rod and at €655 per tonne CPT for mesh-grade wire rod.
Offers from Ukraine were heard at €640 per tonne FCA for mesh-grade wire rod.
Published by: Darina Kahramanova
HRC price flattens in Europe amid sluggish buying; sentiment still positive
Earlier this week, key integrated steelmakers in Northern Europe issued new offers for April-delivery HRC at €800 ($878) per tonne ex-works.
These new offers, however, were far above buyers’ tradeable values estimated of €720-750 per tonne ex-works.
Some buyer sources suggested that €700 per tonne ex-works was still a “reasonable” price for HRC in the region, given the lack of end-user demand.
“Mills are relaxed due to having full order books, but buyers are not in a rush either,” a steel service center in Germany said. “The market has been very quiet recently, and the lack of consumption certainly remains a trigger factor.”
Market sources said that limited supply and restocking were likely to support price rises in the domestic market in January, but “not as high as €800 per tonne ex-works,” they said.
Fastmarkets calculated its daily steel hot-rolled coil index, domestic, exw Northern Europe at €731.88 ($802.84) per tonne on January 12, up by €0.63 per tonne compared with €731.25 per tonne on Thursday January 11.
The index was also up by €36.88 per tonne week on week and by €45.38 per tonne month on month.
In Southern Europe, meanwhile, Fastmarkets calculated its daily steel hot-rolled coil index, domestic, exw Italy at €721.67 per tonne on January 12, increasing by €1.67 per tonne from €720.00 per tonne on January 11.
The index was up by €32.09 per tonne week on week and by €49.38 per tonne month on month.
On Friday, buyer sources estimated the market price at €700-740 per tonne ex-works and said that tighter supply was likely to continue to support price rises through January.
Firm offers and bids were still rare in the market, however.
Key suppliers indicated target prices of €770-780 per tonne delivered (€755-765 per tonne ex-works) for HRC with March-April lead times.
“Everyone just came back to the market after [new year] holidays,” a buyer source said. “More time is needed to see what the real market level is.”
March-shipment HRC from Asia to Italy was reported to be available at €660-670 per tonne CFR, but few suppliers were active.
Market sources have not yet reported any significant affects from the shipping crisis in the Red Sea.
“Most vessels [carrying HRC] are already past the Suez Canal,” a buyer source said. “Some container ships are currently considering the option to go around the Cape of Good Hope. So far, I can’t see this [shipping crisis] raising import prices much.”
Published by: Julia Bolotova
European HRC market stays bullish on full order books, lack of imports
The European hot-rolled coil market remained bullish Jan. 12 due to full order books and a lack of competitive imports.
The absence of real demand concerned some market participants as major steel mills restarted their idled blast furnaces, suggesting higher supplies in coming months.
“The demand in Q1 is unlikely to be any better than what it was in Q4,” an Italy-based service center source said. “I believe there is enough material in the market up to Q2 and prices may not go up to the levels mills are targeting.”
Market participants estimated the short-term tradable value for domestic HRC to touch Eur750/mt ex-works Ruhr. The tradable value for the current spot market was estimated at Eur720-750/EXW Ruhr.
A couple of mills in Northwest Europe made offers for limited volumes of material for March and April shipment at Eur735/mt EXW. This followed an announcement of target prices of Eur800/mt EXW Ruhr earlier in the week to Jan. 12.
Platts assessed the price of domestic HRC stable day on day at Eur730/mt EXW Ruhr Jan. 12.
Interest for imported HRC remained bearish due to geopolitical conditions and safeguard quotas getting exhausted from other countries for the first quarter. Buyers remained hesitant about booking tonnages, which would be subjected to safeguard quotas again in the second quarter, with some of them concerned about the volume getting exhausted in Q1.
“Import is not a favorable option anymore due to safeguard quota exhaustion and the Red Sea situation,” a trader said.
Japanese and Indonesian mills made offers for May-arrival imported HRC at Eur690-700/mt CIF Antwerp.
Platts assessed the price of imported HRC up Eur10/mt day on day at Eur680/mt CIF Antwerp Jan. 12.
Author Rituparna Nath, rituparna.nath@spglobal.
Italian re-rollers aim for higher heavy plate prices on rising slab costs
Italian re-rollers have been targeting higher domestic prices for heavy plate in the week to Jan. 12 as import slab offers rise.
Offers for the material have been reported at Eur780-800/mt ex-works Italy and one source also reported offers as high as Eur830/mt ex-works Italy.
Deals have been reported at Eur750/mt ex-works Italy and tradable values have been reported at Eur740-750/mt ex-works Italy.
Platts assessed domestic prices for heavy plate in South Europe stable on the week at Eur750/mt ex-works Italy on Jan. 12.
Demand, in the meantime, remained slow after Christmas holidays in the EU.
“Demand is at medium level, bigger customers in general are still on hold to better understand real price and demand movements,” a trader said.
Stockholders are expected to return to the market soon looking for volumes.
The next round of import slab purchases is expected to be settled at higher prices.
Firm offers of slab from China have been heard at $670-$680/mt CIF Italy.
Platts assessed prices for imported slab in South Europe up by $25/mt on the week to $670/mt CIF Italy.
Market sources said that the logistical issues related to geopolitical situation in the Red Sea region and rising freight costs are unlikely to have impact on the slab supply from Asia in the short-run. Some sources, however, believe that the situation might create some delays for deliveries around April.
Author Maria Tanatar, maria.tanatar@
Metalshub to digitalise Outokumpu sourcing
Outokumpu will extend its partnership with software solutions provider Metalshub, to digitalise Outokumpu’s raw material sourcing activities.
“Our customers expect us to provide a traceable supply chain and, therefore, we have in place stringent requirements on our suppliers, too. Developing and digitising our supply chain processes is an important part of this work,” the stainless steelmaker says in a statement sent to Kallanish.
Outokumpu has been using Metalshub for spot-demand sourcing through its public tendering process. The steelmaker has now contracted the German-based software forge to expand from solely public tendering purchases to also capturing direct to supplier transactions or contract call-offs via the sourcing platform. This will improve operational efficiency and standardise documentation in the collaboration with suppliers, Outokumpu notes.
“We work together with our suppliers to strengthen the sustainability of the supply chain – including environmental, social and governance aspects. We are now inviting our raw material suppliers to join us on the Metalshub platform,” says Marc-Simon Schaar, chief procurement officer at Outokumpu.
Christian Koehl German
New Salzgitter power line construction to start soon
Construction work on the Salzgitter industrial power line energy transition project will begin this quarter, Kallanish hears from power grid operators Tennet and Avacon.
From 2026, the line will bring large quantities of green electricity to the city of Salzgitter, making a decisive contribution to Salzgitter AG’s production processes in a climate-friendly and future-proof manner, Tennet states. “The timely completion of the Salzgitter industrial line is crucial for the success of our transformation towards almost climate-neutral steel production,” says Salzgitter AG chief executive Gunnar Groebler.
“In addition to the rapid expansion of renewable energies, the consistent parallel expansion of the transmission and distribution grids is crucial for the successful transformation to a climate-neutral future,” adds Avacon AG ceo Marten Bunnemann. With its 110 kV line, Avacon is strengthening the Salzgitter grid node, thus enabling the provision of power for the Salzgitter region.
Besides steelmaker Salzgitter AG, another big industry player is Volkswagen AG unit PowerCo SE, which is building a large battery cell plant in the region. “As a manufacturer of battery cells, we are part of the transformation of the automotive industry. To ensure that this transformation towards sustainable mobility is successful, we are planning to use renewable energy sources to produce our battery cells,” says its chief operating officer Sebastian Wolf.
Christian Koehl Germany
Acerinox focuses investment on VDM Metals development
Acerinox says it will invest €67 million ($73m) in its VDM Metals division as part of its strategy on the development and expansion of high-added-value products, Kallanish notes.
The Spain-based stainless steel producer is implementing the so-called “Beyond Excellence Programme” to improve the group’s overall competitiveness between 2024 and 2026. The plan is focused on improving quality of output, while growing the use of scrap and becoming more energy efficient.
“The investment will increase VDM’s sales by 15% and will also strengthen integration by allowing the processing of high-performance alloys at the manufacturing facilities at Campo de Gibraltar in Spain, and increasing product range,” Acerinox comments.
The project includes the expansion of three re-melting furnaces, as well as the upgrade of the annealing, pickling and defect detection lines. The company will also develop a second atomiser for the production of stainless steel powders for use in additive manufacturing.
“This investment will double the output capacity of this material, allowing growth in a market in which VDM Metals is already a highly valued supplier,” Acerinox explains. “The company is betting on the growth of this sophisticated material that is in high demand, taking a step forward in its strategy of manufacturing high-added-value products and providing solutions for the stainless steel and high-performance-alloys markets.”
VDM is one of Europe’s largest producers of specialty alloys and a large global supplier of high-performance products, used mainly in the aerospace, oil and gas, nuclear, chemical and automotive industries.
Todor Kirkov Bulgaria
Slovakian authorities seek Nippon Kosice plant clarification: reports
Slovakian Minister of Environment Tomáš Taraba and Minister of Economy Denisa Saková plan to visit Japan to meet with Nippon Steel representatives to obtain clarification on the Japanese steelmaker’s intentions for the Kosice steelworks, according to Slovakian media reports.
US Steel’s Kosice (USSK) plant will be part of the deal agreed by Nippon Steel last month to acquire US Steel for over $14 billion (see Kallanish passim). Taraba is concerned about the €600 million ($658m) his ministry offered to USSK for its transformation to low-emission steelmaking, according to reports.
“We need to know from the potential Japanese investor what it intends to do with the plant. There are too many people employed there to just wait for it to be finalised,” Taraba is quoted as saying.
Neither ministry’s spokespeople responded to request for comment on Friday.
A senior Czech steel industry representative indicated this could be a good opportunity for Nippon Steel to work with one of the Japanese carmakers in Central and Eastern Europe.
Nippon said it expects to close the US Steel acquisition in the second or third quarter of 2024. However, according to reports, the US national security review of the takeover is unlikely to conclude until late this year, potentially delaying the transaction.
USSK’s nine-month-through-September 2023 shipments fell 6% on-year to 2.88 million net tons, but raw steel production rose 1% to 3.3m nt. Ebit plummeted 95% to $25m.
The firm received last year €300m of EU Recovery and Resilience Facility funds from the Slovakian government for its plan to decarbonise by switching to electric arc furnaces.
Adam Smith Poland
Voestalpine commissions Primetals for EAF in Linz
Voestalpine has placed an order with Primetals Technologies for a 180-tonne electric arc furnace to be implemented at the steel producer’s site in Linz, Austria. Startup is scheduled for 2027.
The EAF will play a key role in voestalpine’s green transition programme, “greentec steel”. As a first step in this decarbonisation programme, one EAF will be built at each of voestalpine’s sites, in Linz and Donawitz. The Donawitz plant will be equipped with an EAF by Danieli (see Kallanish 13 September).
Linz will be equipped with Primetals’ “EAF Ultimate”, which the technology supplier says is part of its latest generation of electric steelmaking plants, highlighting the furnace’s raw material flexibility. The equipment includes a dedusting system, a waste-heat recovery system, electrical grid stabilisation, and material handling for alloying materials and additives.
The order also includes full Level 1 and 2 automation, a power supply system, and the LiquiRob robotic system, which increases efficiency and occupational safety at the plant.
The EAF Ultimate will be designed to incorporate solutions for environmentally friendly steel production. For example, the heat recovery system will convert much of the waste heat into steam, which is then fed back and used in other production units, Primetals explains.
The order will be carried out by Primetals Technologies Austria GmbH, which is also located in Linz, nearby voestalpine’s steelworks.
Christian Koehl Germany