This article is part of a series on steel distribution association EUROMETAL’s 75th Anniversary conference 2-3 July, discussing challenges and opportunities for the sector from its policy background; trade protection; the Carbon Border Adjustment Mechanism; green steel; and the evolving role of European steel distribution.
Doubtless the largest change on the horizon of the European steel industry, and for its distribution sector specifically, is the upcoming definitive phase of the Carbon Border Adjustment Mechanism (CBAM), mandating the payment of carbon duties on the embedded emissions content of imported material from January.
A majority of frustrations expressed at EUROMETAL’s 75th Anniversary concerned these incoming, and uncertain, liabilities under CBAM once it enters its definitive phase. To no one’s surprise, distributors were overwhelmingly negative, describing the instrument as – alongside more colourful language – a “nightmare by nature,” “insane,” “a fiasco” and, most illustratively: “a molotov cocktail for the entire supply chain.”
While many acknowledged the necessity of CBAM in ensuring European industry does not bear the weight of global decarbonisation alone – and welcomed last-minute, patchwork amendments such as the simplification package, plans to extend CBAM’s remit to downstream products, and possible rebates for European exporters – certain legislative or reference gaps were said to be hindering the industry’s preparations for January.
For producers, this concerns gaps in the instrument potentially incentivising carbon leakage, with Eurofer Director General Axel Eggert detailing that over 70% of the almost 30 mt – or EUR50-65bn – of European steel and steel-containing products are exported to countries without comparable climate policies.
“CBAM is at a critical point, it has the potential to save, or destroy, industry in Europe,” said Dr Henrik Adam, President of Eurofer. “But it is very easy to see how this nice cocktail could become a molotov cocktail by overconsidering technical arguments, not action.”
For distributors, a lack of clarity as to the financial burdens of CBAM, as well as arduous administrative obligations, risk overwhelming their activity and profitability.
“Decarbonisation has been taken as a mantra without proper consideration for pragmatism and competitiveness,”; said Antonio Marcegaglia, CEO of Marcegaglia. “It could now be too late.”
Foreign exporters such as Turkey largely see CBAM as an opportunity if they can predict and quickly align to EU regulatory requirements: with a high-weighting of electric-arc furnace production, and abundant solar supply; exporters in adjacent regions could see strong demand from European importers stocking green steel. However, even within Europe, incumbent producers with existing low-carbon productions have struggled to turn this advantage into green premiums, as seen in the long steel market.
Most notably, the European Commission is yet to release the benchmark Emission Trading System (ETS) values for 2026-2030, a core part of the formula dictating an importer’s exposure to European carbon costs. This leaves importing distributors in the dark as to the specific costs of importing under CBAM, with material from some origins already likely to fall liable to CBAM costs.
Speaking at the event, Managing Director of trading house STEMCOR, Julian Verden, estimated from his industry sources that the benchmark value for the blast furnace route – by which the majority of the world’s steel is produced – would be around 1.4t CO2e per tonne of steel. In attempting to pass relevant carbon costs downstream, however, Verden found that his customers were “completely unwilling” to commit to variable costs, instead insisting on a fixed price structure for purchasing that has already led STEMCOR to embed an estimated CBAM premium into recent trading – despite lacking an authoritative reference.
“The get-off-the-pot moment is quickly approaching,” said Verden, describing a rush in demand to import and customs clear international steel before CBAM duties become due in January. “This year is going to be a bit of a nightmare for us all, but I do believe we’ll make it through.”
STEMCOR estimates that, assuming a benchmark for blast-furnace route production of 1.4t CO2e/t and an EU Emissions Allowance (EUA) price of EUR76, imported steel of 2.1t of embedded CO2e would see additional costs of around EUR56/t from January – though in reality the spotlight on and greater demand for EUAs should see this increase, with McCloskey’s affiliated carbon team CAMIRO forecasting prices above EUR80 from January.
Verden quashed hopes – including his own – that CBAM could be further delayed to better map to the realities of the industry, stating that from his conversations with senior CBAM authorities the upcoming transition into the definitive stage was “basically inevitable.”
Verden’s own preference would be for a hybrid of the definitive and transitional periods, seeing the Commission publish benchmark values early alongside a flat CBAM duty for 2026 and moving to payment on verified emissions in 2027, potentially launching fully in partnership with the UK’s own version of CBAM.
Benjamin Steven Journalist, Steel
