Category: Latest Updates

The European Commission has confirmed that indirect emissions will not be included for metals products under the upcoming Carbon Border Adjustment Mechanism (CBAM), while pre-consumer scrap is to become a standalone CBAM product, EU Commission representative Martin Becker said during the European Roundtable on Climate Change and Sustainable Transition (ERCST) webinar on Thursday October 30.
CBAM will enter its definitive phase on January 1, 2026, and is intended to level the playing field between domestic producers that are subject to the EU’s Emissions Trading System (ETS) and international producers that are not under the same requirement.

Despite CBAM approaching fast, the EU Commission is still finalizing details and clarifying elements of the policy. Some concerns were alleviated on October 30 during ERCST’s webinar, with Martin Becker, deputy head of unit at the EU, providing additional information on what changes are coming up.

Most notably, Becker said that additional anti-circumvention measures would be instated, indirect emissions would remain out of scope for the foreseeable future and pre-consumer scrap would be become its own CBAM product.

“As part of the [legislative] proposal in December we’re not only introducing additional anti-circumvention measures but are also extending the product scope to some downstream steel and aluminium CBAM goods,” Becker said on the webinar.

“This channel of avoidance [to a certain extent] will be closed by this extension of the scope,” he added.

Circumvention opportunities set to be eradicated
Market participants have expressed concern for some time about the ability for CBAM liabilities to be circumvented through misleading declarations of emissions intensity. This “is possible because we are building on a customs infrastructure which was built to collect customs duties, not to enforce environmental legislation,” Becker said.

“More granularity in the customs declaration would allow [the EU] Commission to monitor better and for customs to have something to hold onto when they execute the checks. This is something that is in the pipeline,” he said. “There is not at this stage full supply chain visibility, and that limits our ability to trace back the good to the installation where it was produced. That is a weakness that can be exploited by operators.”

“Clearly there is a need for us to close this monitoring gap,” he added.

Becker suggested implementing practices analogous to those used under the steel safeguard measures to help resolve the issue.

EU steel import quotas and out-of-quota levies have been in place since 2018 and are intended to protect EU steelmakers from a potential surge in imports. They have recently been earmarked for review by the EU Commission, however.

One such change is the introduction of a “melt and pour” origin verification for imported steel, making it harder for goods to be relabeled or transshipped via third countries.

“Steel safeguard measures introduce a notion of melt and pour principles and related certificates that need to be provided… similar evidence could help us trace back the product to the installation so as to ensure the emissions report is accurately provided,” Becker said.

“These are the areas where we think legal intervention is necessary,” he added.

Pre-consumer aluminium scrap to become CBAM product, reducing risk of resource shuffling, liability avoidance
“The fact that scrap is current attributed zero emissions is a problem and a major source for lowering CBAM liabilities and resource shuffling in aluminium,” Becker said.

Market participants have long been concerned about the so-called “scrap loophole”, which can be exploited through ex-EU producers through shifting scrap-based aluminium exports into the European market as a substitute for primary aluminium.

Non-EU producers would be able to avoid CBAM costs via this loophole, while EU producers would still be subject to the ETS, according to sources.

“Work is in progress to include scrap, specifically pre-consumer scrap, as a CBAM good into the scope of CBAM and then also assign emissions to pre-consumer scrap as an input,” Becker said.

“That is the architecture that we have, for a precursor to be relevant for the CBAM calculation it also needs to be a CBAM good in its own right,” he said.

But Becker noted there are implementation issues that need to be addressed as it concerns pre- versus post-consumer scrap. This is something the Commission has “on our radar” for aluminium and, to a lesser extent, steel, he said.

If pre- and post-consumer scrap could not be distinguished, Becker said the Commission would not go ahead with an inclusion of pre-consumer scrap as a CBAM good.

As an aside, Becker noted it was “absolutely key to push the decarbonization agenda globally forward. If other countries follow us with similar measures on the domestic side with carbon pricing and in introducing CBAM’s of some sort […] the scope to shuffle dirty products […] will be smaller.”

“If we manage to create a dynamic [like this], resource shuffling, mechanically, becomes a smaller issue,” Becker added.

Indirect emissions to remain outside CBAM’s scope
During the webinar, Becker confirmed that indirect emissions (Scope 2 and 3) will remain outside of CBAM, which will apply only to direct emissions (Scope 1).

“Our main concern at the moment is metals, both steel and aluminium, that are both CBAM products where indirect emissions are not in scope. That is going to be the case for the immediate future,” Becker said.

“There is no intention in December to make a proposal to extend the scope to indirect emissions for these two sectors,” he said.

This will come as a relief for some, with aluminium producer Norsk Hydro arguing that if indirect emissions were included into CBAM’s scope, ETS cost compensation for indirect carbon emissions in power prices would probably be phased out.

For instance, Hydro estimates that a Norwegian smelter could face an additional implied tax of around $270 per tonne in 2035 even if using a renewable Power Purchase Agreement (PPA) because of Europe’s unique marginal pricing system which sees gas- and coal-based producers set the price.

It also means there is still arguably room for a “green premium” in the aluminium market.

Fastmarkets currently defines low-carbon aluminium as metal produced with a maximum of 4 tonnes of CO2 equivalent per tonne of aluminium produced under Scope 1 and 2 emissions.

Fastmarkets assessed the aluminium low-carbon differential P1020A, Europe at $0-20 per tonne on October 3, largely stable throughout the year with consumer demand remaining muted.

Using default values across the board poses ‘major problems’
During the definitive period, embedded emissions in CBAM goods can be based on default reference values — which comes with a surcharge — or verified actual values.

Default values have “major problems from a [World Trade Organization] angle but also from a conceptional side, where we want to give incentives for producers abroad to decarbonize and to reward decarbonization,” Becker said.

“Such a move to default values would render that incentive obsolete,” he said.

“But at the same time, we cannot deny that certain forms at a material level of resource shuffling can have grave effects on the effectiveness of CBAM to protect against the risk of carbon leakage,” he added.

While Becker was largely opposed to default values, he did offer a possible solution whereby the EU Commission would identify specific CN codes or CN country combinations that are at risk of harmful resource shuffling.

“For these specific cases that we have identified based on a transparent methodology, we would [apply] country averages as a default and then would subsequently see whether an operator can rebut the presumption that they have not engaged in harmful resource shuffling,” Becker said.

Becker noted this is “needed to make CBAM effective” but remains open to change.

The anti-circumvention changes to CBAM are set to be proposed in early December, while CBAM will officially enter its definitive phase in 2026.

Laura Roberts

fastmarkets.com

Slow patchy demand is keeping green steel premiums in Europe flat, with sources expecting no “breakthrough” in buying interest in the medium term, Fastmarkets heard on Thursday November 6.
Fastmarkets’ weekly assessment of the green steel domestic, flat-rolled, differential to the HRC index, ex-works Northern Europe was stable at €100-170 ($115-196) per tonne on Thursday, unchanged since September 11.

Under Fastmarkets’ methodology, European green flat steel is defined as material produced with Scope 1, 2 and 3 greenhouse gas (GHG) emissions capped at a maximum of 0.8 tonnes of CO₂ per tonne of steel produced.

European mills were quoting premiums for green steel starting around €200 per tonne, with some suppliers targeting €210-300 per tonne. But in practice, tradable levels were lower, sources said.

“If you approach a mill for green steel, they may start by asking for at least a €200-per-tonne premium, but once actual volumes are discussed, suppliers tend to show more flexibility,” a Benelux-based buyer said.

Buyer sources said achievable premiums for green flat steel were set in the range of €100-150 per tonne. Mill representatives suggested a slightly higher range of €150-180 per tonne.

Sources pointed out that because transactions were largely project-based, prices varied widely, depending on the tonnage and region.

“The number of projects in Europe that actually require green steel – at least at this stage – is very limited. The pool of buyers is limited,” a source at a German steel service center told Fastmarkets.

“There are a few buyers who book green steel regularly, but volumes remain stable. For 2026 there is no intention to increase bookings,” a second source at a German steel service center said.

Most sources agreed that green steel will continue to occupy a niche segment of the market for the foreseeable future.

“Without public-sector projects driving demand, the market for green steel will stay limited,” a mill source said.

“[We] will see if [the European Commission’s] Steel and Metals Action Plan implementation can facilitate green steel adoption,” the mill source added.

The phasing in of the EU’s Carbon Border Adjustment Mechanism (CBAM) in 2026 was expected to give green steel demand “a boost” but not immediately so, sources told Fastmarkets.

“The ‘breakthrough’ year will be 2030 – when free carbon permits under [the Emissions Trading System (ETS)] will be halved. That would make a substantial difference,” a buyer in Northern Europe said.

At the same time, industry sources noted that ongoing discussions in Brussels about a potentially slower phase-out of free ETS allowances from 2028 onward could also influence the speed of green steel adoption. Some think a slower phase-out would protect Europe’s industry and prevent sudden cost increases. Others argue it would weaken the carbon price signals needed to push companies toward low-carbon investment.

“Policymakers must find the right balance: easing the phase-out could help producers for now, but it might also reduce the pressure on buyers to switch to green steel until carbon costs rise more sharply later in the decade,” a second mill source in Europe said.

Julia Bolotova

fastmarkets.com

Passenger car production at German assembly lines reached 353,600 units in October, which is 4% lower than in the same month last year, according to automotive association VDA.

This continues a gentle year-on-year downward trend, Kallanish notes. In January-October, production was however up 1% y-o-y, totalling 3.5 million units.

However, compared to the pre-crisis year of 2019, year-to-date production of 2025 remains 12% lower.

Exports of cars fell just short of the previous year’s figure last month. The 277,500 brand-new passenger cars exported from German production facilities represented a decline of 1% on-year. In January-October, passenger car exports reached 2.7mn units, matching the previous year’s level. After ten months, exports were still 10% below the pre-crisis level of 2019.

VDA highlights the production figures for electric cars in October, with 83,390 electric cars produced in Germany, up by 52% on-year, marking a new production record. So far this year, the German electric car market is up 47%, reaching a volume of 683,400 new registrations.

VDA continues to estimate that around 1.7m EVs will be manufactured in Germany this year.

German carmaker Volkswagen (VW) recently said it continues production despite fresh semiconductor shortages and ongoing global supply problems (see Kallanish passim). However, given the evolving circumstances, short-term effects on VW production cannot be ruled out.

The carmaker is examining alternative sourcing options in order to minimise possible effects on its supply chain.

The European Automobile Manufacturers’ Association (ACEA) previously warned that virtually all automakers in the region were feeling the effects of the conflict between Dutch chip producer Nexperia and China (see Kallanish passim). According to the association, Nexperia informed customers that it could not guarantee continued chip supplies.

Svetoslav Abrossimov Bulgaria

kallanish.com

 

Relocating German steel production abroad would result in billions of euros in economic losses in the event of a crisis, according to analysis by economists at the University of Mannheim.

According to the study, the German economy faces up to €50 billion ($57.6 billion) in annual loss of added value if it were to experience a global “steel shock” without domestic steel production, Kallanish notes.

The document speculates a scenario in which major steel exporters, such as China, would significantly reduce their exports to Europe in a short period of time due to geopolitical conflicts or supply chain problems. In such a case, downstream industries such as construction, metal production, mechanical engineering, electrical engineering, and the automotive industry would have to pay considerably more for steel, according to the report.

“This cost increase would reduce production and thus value creation in these sectors,” note study authors Tom Krebs and Patrick Kaczmarczyk. “Such a crisis would also reduce household incomes, which in turn would negatively impact domestic demand.”

“But even a gradual decline of the steel industry would have economic and political consequences,” they add. “Steel-intensive regions such as Duisburg, Eisenhüttenstadt, Bremen, and Saarland would be particularly affected. Experience from the US and Great Britain shows that economic decline in industrially dominated regions is often accompanied by a rise in right-wing populist movements.”

This also applies to Germany – a policy that abandons key industries not only weakens the economy but also democratic stability, the report notes.

“The study clearly shows that the steel industry is not like any other,” Jürgen Kerner, second chairman of IG Metall union, told German state news agency DPA. “An end to steel production in Germany would massively jeopardise the country’s industrial base as a whole – with serious consequences for the economy, society, and political stability.”

German Chancellor Friedrich Merz held a “steel summit” on Thursday with representatives of the country’s steel industry and the minister-presidents of each state where the steel industry is prominent – ​​North Rhine-Westphalia, Lower Saxony, Brandenburg, and Saarland (see separate story).

Svetoslav Abrossimov Bulgaria

kallanish.com

ArcelorMittal Belgium’s Steelanol carbon capture and utilisation (CCU) project currently lacks economic viability, chief executive Frederik Van De Velde reiterated during a hearing earlier this week in the Belgian federal parliament.

Earlier this year, ArcelorMittal warned the Steelanol plant, which converts carbon monoxide from blast furnace gases at ArcelorMittal Gent into ethanol, may be shut down as it is unprofitable in current conditions (see Kallanish 23 June).

The electrification of the Gent plant is being postponed, as current small sales volumes of low-emission steel do not justify the investment (see separate article).

Last year, the Steelanol facility, with a capacity to produce 80 million litres of ethanol annually, increased production to a level that allowed large-scale shipping via barge. However, Van De Velde pointed out that the European legislative framework for ethanol production remains inadequate for the adoption of this new fuel type.

By 2030, fuels will be required to be of non-biological origin, adding further uncertainty. There is significant regulatory ambiguity regarding future fuel prices, production methods for next-generation fuels, the evolution of CO2 costs, and the future functioning of the EU Emissions Trading System (ETS). Moreover, there is still no clear framework for developing a green steel market, which is essential for the long-term investments needed for decarbonisation, he added.

Assuming a constant CO2 cost of €80/tonne, ArcelorMittal Belgium estimates its cumulative CO2 costs will amount to approximately €4.75 billion between 2025 and 2034, Van De Velde said. The company has called on the government to reinvest part of the CO2 tax revenues into industrial decarbonisation projects. “If we are only taxed, it will be difficult to remain competitive,” Van De Velde warned during the hearing.

He drew attention to the current global overcapacity in the steel industry, which has caused the company to lose market share. Due to a sharp decline in domestic steel consumption in China, total Chinese steel exports have risen significantly, including higher volumes directed towards Europe. This surge has resulted in global overcapacity spilling into the European market. Between 2012 and 2024, Europe shifted from being a net exporter to a substantial net importer, with finished steel imports increasing from around 15 million tonnes to approximately 30mt.

“As import market share doubled in 12 years time, capacity utilisation for flat steel went down to unviable levels … A viable domestic capacity utilisation is core to ensuring the green transition, economic resilience and security,” Van De Velde noted.

Europe’s new trade instruments will revert import market share to a viable level, a necessary condition for investment, profitability, and sustainability.

“Every loophole in CBAM weakens investment in green steel and makes European producers less competitive, at the risk of losing the future of Europe’s green steel,” Van De Velde added.

Citing worldsteel figures, the steelmaker expects that Chinese domestic steel consumption will decline to 860 million tonnes in 2026, a 1% drop year-on-year. In the EU plus UK, the company expects an increase in steel consumption of 3.5% to over 141mt.

Natalia Capra France

kallanish.com

Demand for low-CO2 steel products remains weak across Europe, with limited willingness from customers to pay a premium for “green” steel. Developing a market for green steel is however essential to unlocking decarbonisation investments, says ArcelorMittal Belgium chief executive Frederik Van De Velde.

Speaking at a hearing earlier this week in the Belgian federal parliament, monitored by Kallanish, Van De Velde emphasised that new regulatory frameworks are required to stimulate demand for low-emission steel products. These include the effective implementation of CBAM and trade measures, competitive energy pricing, and stronger government support for industrial investments.

“In order to create a market for green steel as a steelmaker you need clients ready to buy your products at a fair price. Today, we realise there is a weak demand for low-carbon products,” Van De Velde stated.

Once the decarbonisation roadmap is fully implemented, steel production costs, and consequently prices, will increase. “Clients tell us that what counts for them is the price,” he explained, adding that the number of buyers willing to pay a premium for ArcelorMittal’s low CO2 steel products remains “extremely limited”.

Current green steel volumes are insufficient to justify further large scale investments or to reach the 2 million tonnes/year of green steel capacity required to build the company’s first electric arc furnace in Belgium. He pointed out the urgent need to create a market for green steel, which would, in turn, trigger the investments necessary to decarbonise Europe’s steelmaking industry.

In Belgium, ArcelorMittal operates four steel hubs located in Ghent, Geel, Genk, and Liège, generating approximately €5 billion ($5.8bn) in revenue, employing around 5,000 people last year.

The company’s decarbonisation strategy in Belgium focuses on energy and production efficiency through the so-called “Green Primary” project, which promotes circularity, increases scrap usage and electrification, as well as the deployment of biofuels, carbon capture and utilisation (CCU), and carbon capture and storage (CCS) technologies.

ArcelorMittal Belgium currently uses two blast furnaces. The company plans to construct two EAFs, progressively phasing out the existing blast furnaces and targeting a 50% reduction in CO2 emissions.

In Belgium, the company is implementing the CCU Steelenol project. The €215 million facility operating in Ghent may be shut down, the steelmaker warned in June, as it is unprofitable due to current EU regulations (see Kallanish 23 June).

Natalia Capra France

kallanish.com

Uncertainty, oversupply, weak demand and relentless competition prevail in global longs market, fewer false hopes entertained

The same pattern continues to prevail in the global long steel products market – weak demand, new capacities and mills running below where they should be. The global picture has narrowed: demand is flat and partly seasonal, supply keeps increasing and the supply-demand balance looks worse every week. The main issue is not really demand or supply, it is about who can still move material. The tonnages are there but trading opportunities have shrunk and competition is relentless. China keeps exporting because it must and, with most traditional markets closing behind protective barriers, exporters are fighting over the same limited opportunities for open trade.

Mills lack profitability, buyers lack interest, system lacks oxygen

Prices appear stable, but confidence seems to be absent. Mills remain busy, but lack profitability, while buyers hold stocks, but have no appetite to buy more. The system still functions, but with less and less oxygen.

Uncertainty still predominates, 2026 foreseen to be difficult for exporters

Uncertainty is still the prevailing tone in the market. The recent China-US talks were not as positive as the leaders described, similar to the situation regarding China’s five-year plan. It seems that China will continue to flood the market with 10 million tonnes every month. On the other hand, due to the 50 percent Section 232 tariffs, US imports will be reduced by 10 million tonnes annually and the new safeguard system in the EU will take approximately another 20 million tonnes of demand from the import market. This means import demand will be down approximately 30 million tonnes annually. With total Chinese exports increasing by around 60 million tonnes, next year will be very difficult for exporting countries.

Longs imports into EU almost at standstill, regional prices foreseen to increase by Q1

In the EU, the uncertainties about CBAM, reduced quotas and higher duties have led to an almost 100 percent standstill in imports of long steel products into the EU market.  As the shipments ordered a month ago are now entering the market, the impact on domestic mills’ price increases is still not visible. The seasonal demand trend will not provide any help either to bring prices up. However, it is expected that the prices of EU domestic producers will increase significantly in the first quarter of 2026 at the latest due to the absence of import alternatives.

New capacities in US increase pressure on prices

US long product demand remains flat and below 2024 levels, while domestic supply has expanded with new mill capacities, adding pressure on prices. Imports are minimal due to the 50 percent Section 232 duty, compounded by the AD/CVD tariffs on traditional suppliers.

Extended US government shutdown hits confidence levels in domestic market

The 0.25 percent interest rate cut in the US has done little to revive construction activity, and even a further reduction of a similar scale expected in December would not significantly shift market sentiment. The ongoing US government shutdown – now exceeding 30 days – has further weakened confidence, delaying infrastructure spending and procurement. Overall, the US market remains oversupplied and cautious, with limited visibility for an improvement into early 2026.

Few positives entering the holiday season, protectionism here to stay for now

We are entering the holiday season up to mid-February and so market activity will be slower than usual in the northern hemisphere. It is very tough to point to real positives in the market, but at least we know where we stand now. Protectionism is not just a temporary phase, it is the current framework market players have to operate in. This at least brings a certain level of stability: there are fewer unexpected twists and there is somewhat greater predictability in the market.

At least no escalation in US-China trade tensions, future interest rate cuts may help

Another positive development is that the trade war between the US and China has not escalated. Further interest cuts in 2026 will certainly help, if they happen.

Current market status unstable, with unsatisfactory outlook

Under these circumstances, the current status of the market can be described as unstable with a tough, slow and unsatisfactory outlook.

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General Information

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