CBAM: Turkish industry could face scope 3 challenges
Turkey’s electric arc furnace-dominated steel industry is well-positioned to benefit from reduced emissions requirements under the EU’s Carbon Border Adjustment Mechanism (CBAM), says Çolakoğlu chief executive Uğur Dalbeler. However, Scope 3 emissions, tied to the transportation of raw materials and finished products, remain a challenge.
“Turkey is in a stronger position, not only because 75% of its steel production is EAF-based but also due to its over 15 million tonnes of HRC production capacity from EAF, with very low emissions and good experience and good [quality steel production] expertise, Dalbeler tells Kallanish.
The Turkish government has eased regulations for manufacturers to establish renewable energy capacities, aligning Turkey’s renewable energy ratio with that of Germany and Italy. This progress positions Turkey to achieve climate neutrality in Scope 2 emissions.
Although Scope 3 emissions remain a challenge, Turkey still holds a competitive advantage over countries like China, Japan, and Korea.
The primary hurdle to decarbonising the steel industry is securing funding for net-zero projects, Dalbeler says. Experts argue that while funding exists, the projects themselves are often not compelling enough. Wood Mackenzie estimates that achieving the 1.5-degree temperature reduction scenario globally will require $78 trillion, with 90% of energy derived from renewables – a target that seems improbable.
Furthermore, unresolved issues around clean hydrogen availability, storage, and CCUS utilisation persist. The IEA has downgraded CCUS’s role in achieving net-zero from 53% to 37% by 2050, though reaching the target remains feasible for the steel industry.
Dalbeler advocates a more pragmatic approach, emphasising efficiency improvements in production and processing to reduce CO2 intensity. “If we can increase yield in every step, we can significantly lower the CO2 intensity of the final product,” he explains.
He highlights the need to focus on the BF/BOF production route, as creating new EAF capacities is not a comprehensive solution due to limited scrap availability and the scarcity of high-quality ore for direct reduction.
“We need to concentrate on [decarbonising] the BF/BOF route of steel because creating new EAF capacities will not solve the problem. Availability of scrap is limited and the majority is only good for long products. High quality ore for direct reduction is also limited; therefore, we need to reduce BF/BOF emissions, especially as this type of steel production grows in India and Southeast Asia,” he notes.
Setting global CO2 emission limits per tonne of steel, akin to emissions standards for cars, could address both excess capacity and emissions issues. “There’s a significant difference between old and new-generation BFs. We need a global consensus on permissible CO2 emissions per tonne of steel. Anything exceeding this limit should not be produced or traded,” he emphasises.
Dalbeler also stresses the importance of global standards for measuring and standardising greenhouse gas emissions.
Rather than investing in new steelmaking capacities, he suggests prioritising the optimisation of existing facilities. This would enable funds allocated for new EAF projects to be redirected to more impactful areas.
Elina Virchenko UAE
The green steel revolution in 2025 – navigating a new frontier
As we prepare for the arrival of carbon emission-free steel, it is critical to understand the implications for pricing models, market dynamics, and the way supply chains will need to evolve. The key question for the industry is no longer whether zero-carbon steel will happen – it is how to adapt to a world where it becomes the norm. To succeed, stakeholders must adopt new strategies, embrace transparency, and collaborate more deeply than ever before.
Steel mills: balancing innovation with viability
Steelmakers are at the forefront of the green transition, embracing hydrogen-based direct reduction iron (DRI) in Europe and scrap-based electric arc furnace (EAF) technology in the US. While hydrogen shows great promise, its adoption is hindered by high costs, limited availability of green hydrogen, and the need for significant infrastructure upgrades.
Energy costs pose an additional challenge. In traditional EAF steelmaking, energy accounts for 15-20% of production costs, but in new hydrogen-based DRI/EAF processes, this could rise to over 40%, reflecting the energy-intensive nature of hydrogen production.
Regulatory pressures, such as the EU’s Carbon Border Adjustment Mechanism (CBAM), which comes into full effect in 2026, further complicate operations. While CBAM incentivizes decarbonization by protecting low-emission producers from cheaper high-carbon imports, it also pressures steel mills to accelerate investments in green technologies to stay competitive in a changing global market. Rising energy costs and potential supply chain bottlenecks add financial strain, requiring steelmakers to adopt more agile production and procurement strategies.
End users: the demand for decarbonized supply chains
Industries like automotive and construction face dual pressures to reduce carbon footprints while controlling costs. Green steel promises a lower-emission alternative, but its premium – which has consistently tracked at an additional cost of 20-40% across Fastmarkets’ global suite of green steel differentials – remains a stumbling block for many end users.
The solution lies in strategic partnerships between steelmakers and end users, with long-term offtake agreements that balance costs while ensuring supply chain sustainability. Certification standards, still evolving, will become critical to verifying claims and aligning procurement decisions with climate goals.
Middle players: navigating complexity and uncertainty
For middle players such as traders, distributors, and service centers, the green steel transition adds layers of complexity. Managing inventories that include traditional, low-emission, and zero-carbon products introduces logistical challenges, while pricing volatility and regulatory compliance add further strain.
The EU’s upcoming Waste Shipment Regulation, which limits scrap exports to non-Organisation for Economic Co-operation and Development (OECD) countries, will increase competition for high-quality feedstocks within the EU. Middle players must adapt to tighter supply conditions, rising prices, and shifting trade dynamics to maintain their roles in the value chain.
Raw material producers: rising demand for premium inputs
As steel production increasingly pivots to hydrogen-based and EAF technologies, raw material producers face growing demand for higher-quality inputs like DRI-grade iron ore and quality scrap. To meet this demand, these producers may need to innovate by developing methods to improve the quality of lower-grade ores or increase the efficiency of extraction processes. The EU’s upcoming restrictions on scrap exports to non-OECD countries will further disrupt traditional supply chains. Scrap producers will need to adapt by enhancing the quality of their materials through better sorting technologies or exploring regional supply chains to comply with the regulations. Strengthening relationships with steelmakers and securing long-term contracts will be key to ensuring a steady demand for premium materials as steel mills shift toward low-emission production.
Financiers: decoding risks and opportunities
Green steel projects require enormous capital investments, often without guaranteed returns in the short term. For financiers, this raises questions about risk and reward, particularly as regulatory environments evolve. Financial instruments like sustainability-linked loans and green bonds are increasingly critical, and their effectiveness depends on the availability of consistent benchmarks for green premiums.
Financiers also face pressure to align with environmental, social and governance (ESG) goals, and the complexity of valuing decarbonization efforts presents both a challenge and an opportunity. Those who can effectively quantify and mitigate risks tied to green steel investments stand to play a pivotal role in enabling the sector’s transformation.
The role of multi-stakeholder platforms
Collaborative initiatives are essential for navigating the complexities of green steel production. Multi-stakeholder efforts such as UNIDO’s (United Nations Industrial Development Organisation) Industrial Deep Decarbonisation Initiative, and the Climate Group’s SteelZero, bring together policymakers, producers, and end users to align on decarbonization goals and drive systemic change.
These platforms help stakeholders address overlapping challenges, from standardizing low-emission certifications to developing frameworks for sustainable supply chain finance. By fostering collective action, they reduce uncertainty and promote scalable solutions.
Navigating the challenges of today – trade tensions, and the just transition
The global push for decarbonization is colliding with escalating trade tensions. Tariffs on steel and its raw materials could undermine efforts to create open markets for green steel. The CBAM rollout might trigger friction with trading partners, with some viewing it as protectionist.
But this challenge opens the door to regional collaborations. Agreements between climate-aligned countries could streamline trade for green steel, providing a much-needed competitive edge for low-emission producers.
Decarbonization is as much about people as it is about technology. The shift to green steel production risks leaving traditional steelworkers behind, especially in regions dependent on emissions-intensive plants. Without investment in retraining and support, the transition could exacerbate inequality.
Yet, the human dimension also presents an opportunity. Companies prioritizing a just transition will attract ESG-driven investors, build stakeholder trust, and gain a competitive edge by integrating social considerations into their business models.
What lies ahead in 2025
The road to decarbonization in 2025 will be defined by:
• The first zero-carbon steel production in Sweden, setting a global benchmark.
• The phased implementation of CBAM, reshaping trade flows and emissions accounting.
• The fine-tuning of international standards for low-emission steel, providing long-awaited clarity for buyers and sellers.
• Supply-chain disruptions in scrap and iron ore markets, necessitating greater agility and foresight.
• Gradual energy sector transformation in Europe to feed new DRI capacities.
Navigating the transition
Reliable market intelligence will be critical for navigating this new frontier. Clarity of pricing across the entire steel value chain – from raw materials and semi-finished products to finished goods – provides a foundation for informed decision-making. Fastmarkets’ robust pricing solutions, including green steel and green ferroalloy differentials, empower stakeholders to manage volatility, enhance transparency, and build confidence in their strategies.
With the right tools, insights, and collaborations, the steel value chain can transform the challenges of 2025 into pathways for growth and leadership in a decarbonized future.
Green steel in focus: five key questions answered by experts
The context
In 2023-2024 Fastmarkets launched 12 green and reduced carbon steel prices to assess the price differential against traditional flat and long steel prices, to establish benchmarks in the emerging markets, bring more transparency for the industry and support the investment decisions needed to reduce emissions.
MB-STE-0904 Green steel domestic, flat-rolled, differential to HRC index, exw Northern Europe, €/tonne
MB-STE-0905 Green steel base price, HRC exw Northern Europe, daily inferred, €/tonne
MB-STE-0907 Green steel import, differential to HRC index, cfr Vietnam, $/tonne
MB-STE-0908 Green steel base price, hot-rolled coil cfr Vietnam, weekly inferred, $/tonne
MB-STE-0911 Flat steel reduced carbon emissions differential, exw Northern Europe, €/tonne
MB-STE-0912 Flat steel reduced carbon emissions, daily inferred, exw Northern Europe, €/tonne
MB-STE-0916 Green steel domestic, differential to US HRC, fob mill, $/short ton
MB-STE-0917 Green steel base price, hot-rolled coil fob US mill, weekly inferred, $/short ton
MB-STE-0921 Green steel import, differential to rebar assessment, cfr Singapore, $/tonne
MB-STE-0924 Green steel base price, rebar cfr Singapore, weekly inferred, $/tonne
MB-STE-0922 Flat steel reduced carbon emissions differential, exw China, yuan/tonne
MB-STE-0923 Flat steel reduced carbon emissions, daily inferred, exw China, yuan/tonne
The subject experts
Alexander Fleischanderl, chief technology officer, Primetals Technologies
Jose Noldin, chief executive officer, GravitHy
Paulo Carvalho, independent consultant and managing director, decarbValue
The Q&A
There are quite a few new green steel projects announced in Europe with new green steel tonnages expected to arrive in the market starting 2025-2026. Volume-wise, how many tonnes of green/carbon reduced steel will be in the market in the next five years?
Alexander Fleischanderl: It’s true that Europe is progressing at high pace with multiple transition projects. However, the first thing required is a definition of “green steel.” We see individual brandings for steel producers in the market, where the carbon footprint is different. And we should stop the proportional green steel allocation system, where the reduced fossils usage is allocated to a specific amount of steel produced.
The real carbon footprint of the individual coil purchased by the end-customer is different to what is allocated. What we need is a coil- or sequence-based carbon footprint certificate.
The ongoing transition projects will still work with a high share of natural gas for their Direct Reduction Plants (DRPs). The steel produced will be low-carbon steel, but not net-zero yet.
But cost competitive real green steel cannot be expected soon. Hydrogen procurement deals are at a level of around €8 per kg instead of earlier reported forecasts of €2-3 per kg before 2030.
The chicken-egg problem is obvious, the hydrogen market must scale, but it hasn’t yet because the demand side is weak.
Despite these roadblocks, we recognize a growing interest for low-carbon footprint steel from the demand side especially for automotive and white goods, but also in terms of public procurement. The share of green steel in Europe in five years’ time could be around 10% of total production.
But its competitiveness compared with “gray steel” (regular steel) can only be achieved by combining three things: the benefits from the avoidance of emissions trading scheme (ETS) payments; a green steel premium; and support from the public for Capex [capital expenditure] and Opex [operational costs].
Jose Noldin: I strongly believe the market will be tight and more than people might anticipate. But that will strongly depend on regulation, standards and definitions, rather than on self-imposed targets. It is carbon pricing developments and broader initiatives, such as the European Union’s “Green Deal Industrial Plan” and “Steel and Metals Action Plan,” that will move the needle in terms of business environment, demand aggregation, etc.
To give some numbers, I expect the demand for truly green, fossil-free steel (less than 400 kg of CO2 per 1 tonne of steel) to be at least 10 million tonnes a year in 2030. As the offer will not be there, people may end up with solutions such as CO2-reduced/mass-balance steels, which, in my opinion, is very borderline from a greenwashing perspective.
Paulo Carvalho: It depends on what we are calling “green steel” here. In terms of hydrogen-based, near-zero-emissions steel (with a CO2 footprint well below 400 kg per tonne, including Scope 3 emissions), for flat products, the available tonnages are [almost non-existent right] now – other than tiny pilot volumes – and will be very limited in the next five years. But before 2030, [availability will be] in the low-single-digits in millions of tonnes in the best case scenario.
Stegra [formerly H2 Green Steel] is likely to have ramped up the plant it is building in Boden, Sweden; Hybrit/SSAB will be scaling up its first demonstration plant; and GravitHy may have started up its H2-DRI [hydrogen-powered direct reduced iron (DRI)] plant in France enabling hydrogen-based green steel production elsewhere.
Various other projects could also be at or close to ramp-up, while some may face delays – so volumes will still be relatively small and that will remain the case even if we add volumes from European scrap-based EAF flat steel plants – because there are only a handful of those.
The bulk of low-carbon flat steel within this timeframe will still be of certificates-based products, or using mass balancing, with a higher carbon footprint. So the supply-demand balance will still be relatively tight. For long steel, a much bigger share of European production already meets lower CO2 emissions thresholds, so the supply-demand balance is much less tight.
Most of the EU flat steelmakers are opting to switch from the conventional, blast furnace-basic oxygen furnace (BF-BOF) route to using electric-arc furnaces (EAFs) or the EAF+DRI steelmaking route, but what other options does industry have?
AF: Well, there are not too many transition options out there, despite opting for EAF, with a flexible feedstock mix, but including DRI/HBI to dilute tramp elements coming along with scrap usage. The DRP can either be integrated or decoupled from steelmaking, allowing for an investment in regions that benefit from much lower energy costs.
A viable option, still not sufficiently supported by governments, is carbon capture utilization and storage (CCUS). We believe the net-zero timeline will be missed without a proper deployment of CCUS technologies.
Last, but not least, there is the option to optimize existing assets. This includes the electrification of burners and furnaces, endless casting & rolling, any energy efficiency measures, waste heat recovery from waste gas as well as improving circularity [through] yield improvement, recycling of by-products and more scrap usage.
JN: Options include 100% scrap (very limited due to scrap availability both in terms of quantity and quality), biomass (huge challenges in supply chain) and CCUS (huge issues with regulation, economics and TRL). Other options, such as Molten Oxide Electrolysis (MOE), still have a long development journey ahead of them.
I, therefore, firmly believe that pursuing the H2 based DRI+EAF route – especially with innovative business models where Iron is decoupled from steel – remains the right way to go and will allow for a very competitive scheme. In this way, iron is produced where low-carbon electricity is available and competitive; is then shipped globally as a commodity to steel producers that will play in their own backyards, in their comfort zone – ie, steel production. And in the transition, using hot-briquetted iron (HBI) to boost blast-furnace operations can also be a very interesting and competitive solution.
PC: Europe has a large fleet of existing BF-BOF plants, many of them running very efficiently and close to downstream processing plants and end markets – although most are suffering in current market conditions. Therefore, many players are opting for an intermediary solution, replacing the BFs only (with a DRI+smelter to leverage lower-grade ores) and keeping the steelmaking with their existing BOFs. The economic case for this solution is probably better than a full conversion to H2-DRI steelmaking, especially if the cost of hydrogen remains higher for longer.
Imported, or third-party, DRI/HBI could also play a major role, either from EU countries/sub-regions where green power prices are competitive, or from third countries/regions such as the Middle East & North Africa (MENA) region, which are well suited to renewable power and have competitive gas prices.
Policies and regulations in the EU are massive drivers for decarbonization, notably the EU emissions trading scheme (ETS) and its carbon border adjustment mechanism (CBAM). So, is CBAM a problem or a saviour for the industry? What impact will there be on the market once CBAM is fully phased in from 2026 on and free-ETS certificates start being phased out (halved by 2030 and fully eliminated by 2034)?
AF: ETS is the main pillar supporting EU transition project investments. For example, assume that a 6 million tonnes per year steel mill emits 10 million tonnes of CO2… If the ETS price is at €150 per tonne in 2034, the steelmaker would have to pay €1.5 billion per year, adding €250 per tonne of steel produced.
CBAM is, indeed, controversial [because] it adds a lot of administrative burdens for all players in the steel value chain, including technology providers, such as Primetals. But it is the only instrument identified to avoid carbon-intensive steel from flooding into the EU from other markets. So it at least provides a level [playing field] for all players. But it can be expected that foreign markets will produce their own share of low-carbon steel for export to the EU, so the CBAM weapon may not be as effective as hoped.
JN: CBAM cannot be reduced to a saviour or a problem. It is a good (yet complex) starting point because without instruments like CBAM the market does not resolve the decarbonization puzzle by itself. CBAM is imperfect, I agree, but it is definitively needed, so I hope it stays and gets improved, optimised, fixed, reinforced, and so on… but not abandoned or significantly slowed down.
The impact is obvious! For example, with a carbon pricing of €100 per tonne of CO2 once allowances are phased-out, a fossil-based steel producer will have a “penalty” of roughly €200 per tonne of steel if it insists on sticking with the coke-based BF-BOF route. From a different perspective, this could be considered the so-called “green premium” which is needed during the transition while the CBAM/phase-out allowances are not fully in place.
But a workable and strong CBAM, along with a full phase-out of the allowances, will make the polluters pay and will, therefore, serve as a huge driver for investments in green steel.
PC: CBAM is a temporary but necessary evil – as I keep repeating. Necessary, because, in the absence of a global carbon price, European production is penalised vis-à-vis imports and that distorts capital allocation (and jobs, tax generation etc); evil, because the sheer complexity of compliance – most usual exporters to the EU are not prepared yet – generates distortions itself and ends up being a de-facto non-tariff trade barrier.
So, in my view, CBAM has to be temporary. There will be pushback from other regions and, ultimately, industry and policy efforts have to be toward convergence of carbon policies and pricing globally, not on raising border tariffs. Until that happens, of course, it will affect the market, favouring imported steel with lower-emissions footprints – with MENA potentially emerging as a key source – and penalizing existing conventional steel importers.
Another major impact will be on the competitiveness of EU steelmakers in export markets: because there is no ETS rebate for exports or “inverted CBAM.” The European mills [that bear a carbon costs] will increasingly be at a competitive disadvantage in export markets without a similar carbon price and will lose market share.
Raw materials challenges arise from new ways of steelmaking. Can we expect potential shortages of pellets, scrap? And how will raw materials supply chains evolve?
AF: The trend for massive new DRI/HBI capacity is likely to continue and even accelerate. DR-grade iron ore will be in short supply and pelletizing capacity is likely to run short as well.
We see three ways forward: iron ore beneficiation efforts; using lower-grade iron ore in DRP; and ground-breaking fluidized bed based DRP that does not require pelletizing. In the case of lower grade ore usage, a smelter is required to maintain high metal yields and efficient gangue removal in he form of added-value slag to support circularity.
Fluidized bed DRPs are more energy efficient, improving yield and are lower in overall Capex. Utilization of more scrap is indeed the most effective way to decarbonize. However, even in 2050 more than 50% of steel production will be based on virgin iron ore. The EU is still exporting about 20 million tonnes per year of lower-quality scrap, mainly to Turkey. We should increase our efforts to process and clean EU scrap to produce a recycled feedstock with certified quality and chemical analysis. Digitalization, including artificial intelligence (AI) will support these efforts.
JN: I believe the market will react if the demand is there. Today, pellet makers, for example, face a chicken-and-egg dilemma. There is a potential shortage, but projects need to be more mature and reach final investment decision (FID) to allow pellet producers and scrap processors to invest in new capacity, new technologies and debottlenecking!
If nothing is done, yes, there will be a shortage. But I still believe that when DR projects reach FID, pellet producers will recognize the great opportunity to play in the high-value side of the business and then invest in new capacity.
Still, for some years the market may be tight and support good premium levels which, by the way, will incentivize new investments in capacity.
PC: DR-grade pellets and agglomerates are already relatively scarce and the raw materials industry has an immense challenge to ramp up capacity and production. That requires big investments in concentration/beneficiation plants and pelletizing plants as well. Other high-grade pellets will also be increasingly used, in combination with a melter/submerged-arc furnace to remove gangue after the DRI making process, which will help alleviate the relative scarcity.
Scrap is already fully recycled and we already broadly know now how much will be available to be recycled into new steel in, say, 2050 – only about half of the world’s steel needs by then. But given it’s direct contribution to lowering the carbon footprint of the steel produced, I currently see a scramble for scrap resources (and sorting/processing facilities) and that will only intensify in the coming years.
The supply chain will continue to further integrate vertically into scrap and the miners, steelmakers and end users will intensify the development of partnerships to ensure end-to-end availability of high-quality raw materials for the required low-carbon final products.
Renewable energy and green hydrogen are deemed to be the weak spots of decarbonization, notably due to high price of hydrogen. Are there alternatives to the use of green hydrogen in steelmaking?
AF: Renewable power availability and pricing is the most pressing roadblock. Power prices have a strong impact on hydrogen prices – the main reason why decoupling the energy-intensive ironmaking from steelmaking has become an omni-present discussion point.
Regions like the Middle East, North America and Australia have different energy prices. We are talking about up to 10-fold prices per MWh in Europe! The alternative to hydrogen is electrification of process steps (again electric power) and the intermediate use of natural gas while processes are designed to switch to hydrogen at a later stage.
JN: I believe people are looking from the wrong angle here. Instead of just saying that hydrogen is expensive, people should reconsider their business model. Make hydrogen where low-carbon electricity is available and competitive and then ship DRI/HBI as a commodity to steel-producing sites. It’s a big mistake is to insist on making iron close to steel just because “this is what we have been doing as an industry for decades.”
It’s very simple! Hydrogen-based DRI/HBI can be cost effective and a smart way to store and/or transport hydrogen! It’s just that it will be H2 in “metallic form.” In other words, decoupling iron from steel can catapult the H2 economy and decarbonize steel production with a very interesting and competitive value chain. In the future, Iron will be produced by ironmakers and steel by steelmakers. Looks logical, doesn’t it?
PC: Ironmaking has been dominated by coke (fossil coal) as the key reductant and, although hydrogen is the key solution to reducing the reliance on fossil reductants, natural gas is a tried-and-tested (and widely used) alternative.
To produce near-zero emissions steel, its CO2 emissions have to be captured and stored. The economics and geology for that to happen at scale are still to be proven and differ widely region by region, and it can involve controversial aspects such as enhanced oil recovery, but in my view carbon capture and storage (CCS) will play a key role in the steel sector’s transition to net zero.
CBAM ‘bureaucratic monster’ but ‘right’ tool
The EU’s Carbon Border Adjustment Mechanism (CBAM) is a “bureaucratic monster” with flaws, but also a well-intended tool, panellists said during the Kallanish Green Steel Strategies event in Brussels on Wednesday.
“It’s a bureaucratic monster,” asserted Alexander Julius, managing partner of distributor macroMETAL and EUROMETAL Presidency member.
Christoph Zinsser, head of project finance at Stegra, agreed with the definition of “monster”. He also however noted the need to stay on course for the scheme. “The biggest challenge is if uncertainty comes into this, a risk of regulation changing frequently – that would be the worst outcome, from our perspective,” he noted.
Panellists nevertheless saw it as the right tool for the task of keeping carbon-intensive steel out of the EU, but they called for changes to be made to expand the scope of products covered.
“It’s the right tool; it needs development over many years to come … There is a lot of work still to be done,” Zinsser said.
Julius warned that instead of CBAM-levied steel being shipped to the EU, steel-consuming final goods are arriving instead. “The only problem is … ready made products are entering the EU; carbon leakage is not today active, but those products are coming without regulations and without the bureaucratic environment. Those products are not under the HS codes considered by the European commission,” he said.
“If we want to avoid carbon leakage, which is a good idea, we need the protection, we need to go the whole road down. We need to also grab every single product in the value chain so that we are creating a level playing field for European manufacturing; otherwise, we are sacrificing [it],” he added. He called for coverage of the majority of HS codes in the value chain.
Zinsser also noted flaws in the mechanism, and the need for scope expansion.
“The practice [trial phase] will ultimately show all of the flaws that there undoubtedly still are,” he said.
Josu Piña Bilbao, director of business development at SSAB Europe, also agreed with calls for the scope to be extended but noted positives to the scheme.
“CBAM has sparked the investment of low-emissions steel in other regions, outside of Europe, especially countries which are interested to export to Europe. We will see a change in trade flows,” he noted.
He also touched on the topic of the potential of rebates for companies exporting from Europe, who were facing higher production costs and therefore not a level playing field.
“We are all waiting for [CBAM], so that there will be a level playing field after 2026, when importers will have to pay,” he added.
Meanwhile, Julius also noted that European producers still have their free allowances which, in most cases, should be valid past 2030, which means their carbon costs are basically not existent.
He added that CBAM will also change import flows, referring to countries such as Turkey which are 70% EAF based and therefore have an advantage when it comes to supplying the EU.
Carrie Bone UK
European Commission to consider changes to CBAM to help exporters
Development of relevant proposals is expected in 2026
The European Commission will explore options to help European industries affected by carbon border adjustment mechanism (CBAM), such as the steel and aluminum sectors. This was announced by the Director-General for Taxation and Customs Affairs of the European Commission Gerasimos Thomas, Bloomberg reports.
According to him, this will take place as part of the revision of the mechanism, which will be held next year. Based on the results of the discussion, the relevant proposals will be formed and presented in 2026. According to the official, the EU will leave no stone unturned to help the bloc’s exporters cope with the side effects of CBAM.
EU exporters complain that their products will become more expensive as emissions costs increase.
As Thomas noted in an interview at the COP29 climate conference in Baku, maintaining the competitiveness of European industry during the energy transition is a key priority of the second term of EC President Ursula von der Leyen. According to him, there are several ideas, and nothing is ruled out. Thomas also added that the EU realizes that the problem will have to be solved earlier than expected.
Previous attempts by European lawmakers to create a mechanism to help EU exporters were rejected because of concerns that it could violate WTO rules. The CBA has already been criticized by the bloc’s trading partners, such as Brazil and China. In addition, Thomas noted, the EU is waiting to see how the new US administration will react to the mechanism.
The United States has been calling for the development of its own CBAM analog: recently, both Democrats and Republicans have put forward relevant proposals.
Toward the end of 2025, the EU will announce what steps in the US and other countries can be considered equivalent to the European mechanism in terms of climate impact. The Director-General for Taxation and Customs Affairs of the European Commission emphasized that the EU will not allow circumvention of regulation, but there will be a system that encourages and incentivizes countries that take measures to minimize the environmental impact of carbon-intensive sectors covered by the CBA.
Source: gmk.center
Bureaucracy counteracts EU low-emission transition intentions: AIST conference
European regulation and bureaucracy are counteracting the region’s own good intentions to be a leader in the transition to cleaner steelmaking, according to panellists at last week’s AIST European Steel Forum 2024 in Essen.
Bettina Hübschen of the state of Saarland’s hydrogen-promoting agency, Saarländische Wasserstoffagentur, bemoaned the scale of regulation facing the market.
“We have succeeded in over-regulating a market that does not even exist,” she told delegates at the conference attended by Kallanish. “We need to give companies room to breathe,” she added, noting the complicated funding landscape in the region. “There are various schemes but [it is] very complicated for the companies to understand ‘what is right for me’.”
She also noted the long timeframe for applying and awaiting the outcome of the funding decision, which could take years, slowing down the process.
Other panellists concurred, with René Gissinger of Pipe GmbH saying: “We need to allow the market to do its job.”
He called CBAM a “horrible thing”, adding: “The ambition is high, but the execution is low.”
Gissinger nevertheless supports the drive towards CO2-reduced steels, as he hears customers asking for it. “Steel needs to turn green not to stay a dinosaur,” he asserted.
Meanwhile, Nicole Voigt of Boston Consulting Group warned not to get lost in easy “regulation-bashing”. During her research regarding CBAM, for example, she has noticed unexpected interest from overseas. “We get a lot of inquiries from China, which I did not expect,” she explained.
Christian Koehl Germany
UK government confirms 2027 CBAM introduction
The UK government has confirmed that its Carbon Border Adjustment Mechanism (CBAM) will start from January 2027, it says in a published consultation document dated 30 October.
It says the mechanism will place a carbon price on some of the most emissions-intensive industrial goods imported to the UK from the aluminium, cement, fertiliser, hydrogen, iron and steel sectors. Within these sectors, the CBAM will only apply to specific imported “CBAM goods”, determined by the product level scope of the CBAM and identified by commodity code.
The document confirmed, as previously announced, the mechanism will be applied to “direct”, “indirect” and select “precursor” product emissions embodied in imported CBAM goods, Kallanish notes.
The consultation, which launched back in March, proposed that imported scrap, identified via commodity codes, within relevant sectors will not be within the scope of the UK CBAM.
The government adds that the January 2027 start date would balance the need to give businesses time to prepare, while also taking action on carbon leakage amid its ambition to decarbonise the country.
Companies who responded to the consultation include British Steel, Celsa Steel UK, Electrosteel UK Ltd, Hyundai Steel, Jaguar Land Rover, Mughal Steel, Salzgitter Mannesmann UK, Stemcor, Tata Steel Europe and UK steel.
The UK’s current main measure to mitigate carbon leakage risk is the system of free allocation under the UK ETS. Reforms to the UK ETS, as set out by the UK ETS Authority in July 2023, will reduce the number of permits available for purchase from government by 45% between 2023 and 2027, and the number of free allowances will also decrease.
The document also notes that in September 2024 the UK ETS Authority consulted on moving the start of the second free allocation period from 2026 to 2027 and extending the current allocation period to include 2026.
A move to 2027 would enable the government to align the implementation of the Free Allocation Review with the introduction of the UK CBAM, ensuring a holistic policy approach to carbon leakage, authorities observe.
The UK ETS Authority will make a final decision and respond to the consultation in due course.
Carrie Bone UK
European Commission study on the potential extension of the scope of the CBAM to downstream products
European Commission Directorate-General for Taxation and Customs Union (TAXUD) is conducting a Study on a potential CBAM scope extension to downstream products.
The objective of this study is to assess the feasibility of extending the scope of the CBAM to products further down the value chain (downstream products) of the goods that are currently listed in Annex I of the CBAM Regulation (upstream CBAM basic goods).
The purpose of including downstream products is to mitigate the risk of carbon leakage of upstream CBAM basic goods as well as the downstream products.
As part of the study, they are carrying out a stakeholder survey. The aim of this survey is to gather both evidence and the views of relevant stakeholders on the major concerns, areas of consensus or points of contention as regards a CBAM scope extension to downstream products.
Particularly, input is sought on the administrative burden and costs importers of downstream products may face in complying with the CBAM if the scope were to be extended to downstream products.
The survey will be open from today until October 25th, 2024.
You can find the link to the survey here: CBAMScopeDownstream2024
Password: CB4M_d0wnstream
More background information n the objectives of the study can be found in the introductory section of the survey.
CBAM is step forward but not enough to rebalance global markets, European IREPAS conference attendees say
CBAM, a carbon tariff for all carbon-intensive products imported into the European Union, was passed by the European Commission in December 2022 and its transitional phase began in October 2023.
Starting in October 2023, buyers of goods originating outside the EU must purchase certificates which equal the total emissions in the production of the goods.
There is no limit to the number of certificates that can be purchased to avoid restricting trade.
The cost of these certificates are calculated by the European Commission on a weekly basis according to the average price of the closing EU Emission Trading System (ETS) carbon dioxide (CO2) allowances for each week.
Impact of CBAM
CBAM can help to address imbalances related to European companies who are constrained by carbon taxes attempting to compete with countries who are not subject to any regulatory strictures, Louis Redshaw, Founder of Redshaw Advisors, told IREPAS attendees.
CBAM will help reduce carbon leakage, Redshaw said.
Carbon leakage was described when, for reasons of costs related to climate policies, businesses were to transfer production to other countries with more relaxed emission constraints, in turn resulting in an increase in their total emissions.
By placing a fair price on the carbon emitted during the production of all carbon-intensive products entering Europe, European mills, who currently need to pay for carbon credits equivalent to their carbon emissions, will be on a more equitable basis with importing countries who do not currently have the same taxes in place.
Some European market participants, however, were skeptical about how effective CBAM would be in rebalancing the playing field.
Carbon credits
European companies must buy carbon credits, normally from the government, to produce steel. When a company buys a carbon credit they can generate one ton of CO2 emissions.
The development of carbon credits turned carbon dioxide into a commodity, which could be monetized like any commodity.
Currently, the top 10% of the lowest emitting steel producers in Europe do not pay for carbon credits, while the remaining 90% of European steel producers have to pay varying amounts for carbon credits to offset their carbon emissions.
Pre-CBAM, European domestic mills were burdened by the cost of climate policies which non-EU countries were not, making them uncompetitive.
“CBAM will help to make competition fair. If importers are not taxed similarly to European mills, the European steel industry will die,” Redshaw said.
The greater a producer’s emission, the more they need to pay for carbon credits, thus incentivizing them to invest in decarbonizing processes.
By ensuring all countries importing steel into Europe have to pay similar amount, sustainable goals do not stop EU countries from being competitive or profitable.
Market responses
Many conference attendees felt that CBAM could help support European mills remain competitive when faced with so many economic challenges.
Some non-European exporters who were already providing CBAM certificates to buyers in Europe importing their stock, reported high levels of bureaucracy involved with submitting the correct information quarterly.
“It will help to put a fair price on the carbon emitted. Steel producers in Egypt who export to EU have already been asked to fill in necessary paperwork for CBAM. This is a very bureaucratic procedure and may become a burden in the future for producers,” a producer source from Egypt told Fastmarkets.
“CBAM will help support European mills and global targets towards becoming more sustainable,” a second producer source from Egypt said.
Skepticism
Some sources, especially in Europe, did not think CBAM would either encourage global decarbonization or significantly rebalance global markets.
CBAM has put a cost on carbon, but it is not enough to counter the other factors which have resulted in a lack of balance in the global markets, these sources said.
These factors included foreign country subsidies, lower gas and electricity costs, lower labor costs and lower or no regulations in the construction sector, the sources added.
These more skeptical market participants felt that by just putting a price on ‘carbon’, other key areas which required addressing were not being considered.
“Europe has been affected and limited by its own desire to become carbon efficient and this has been a contributing factor to Europe losing market share of steel production, weakening domestic demand and becoming uncompetitive domestically,” a German trader said.
Europe is currently trying to decarbonize, digitize and remain profitable, sources said. But, at least in the short term, the goal of decarbonizing is at odds with the goal of profitability, Fastmarkets heard.
“European producers don’t just have to deal with the carbon issue, they also have to deal with high energy costs because of high taxation on energy and renewable energy transformation and high energy costs and importing expensive raw materials and finding the money to invest in decarbonizing technology,” a producer source from Spain said.
Whereas there is a lot of pressure from every side to transition to low-carbon environment in Europe, this is not the same in non-EU countries.
In other countries, for example China and Algeria, where the steel industry is buoyed up by subsidies, carbon tariffs like CBAM will not incentivize them to decarbonize.
“China will just pay the increased costs with the massive government subsidies they receive. They will continue to emit just as much carbon and will continue to have far lower costs,” a trader at the conference said during a panel discussion.
“Even with CBAM and all countries importing into Europe having to pay for the cost of their carbon footprint, they still remain more competitive because of cheaper energy costs and cheaper labor costs,” a second producer source from Europe said.
Seven key things Fastmarkets learned during Irepas Fall 2024 meeting
More than 490 delegates from around the world gathered in Paris on September 15-17 to network and to participate in this key event for long steel producers.
Here are the seven main topics that were discussed at the conference:
Chinese dominance
China’s dominance in the international steel market has strengthened over the past year amid a drop in domestic demand and insufficient production cuts, and it was highly likely to continue in 2025.
Yeoh Wee Jin, secretary general of the South East Asia Iron & Steel Institute (SEAISI), described this year’s events in China as “a third tsunami” during a panel at the Irepas event. He expected the country’s steel exports to exceed 100 million tonnes this year, compared with 89 million tonnes in 2023.
Fall in iron ore prices
The decrease in steel production in China resulted in a fall in iron ore prices, as well as the accumulation of a significant stock of iron ore. Wilhelm Alff, chairman of the Irepas traders’ committee, said that iron ore stocks at Chinese ports currently totaled 149 million tonnes.
Fastmarkets’ daily index for iron ore 62% Fe fines, cfr Qingdao, has averaged $91.87 per tonne so far in September, compared with an average of $135.03 per tonne in January this year.
Meanwhile, scrap collection in Europe and the US has slowed down, Jens Björkman, the chairman of the raw material suppliers’ committee, said. This helped to support prices for the product despite delayed demand in Turkey.
The Middle Eastern country has switched to purchases of Chinese steel billet since the summer, when prices for the material became low enough to make production of rebar from billet more attractive than from scrap.
Fastmarkets’ daily index for steel scrap, HMS 1&2 (80:20 mix), North Europe origin, cfr Turkey, has averaged $363.36 per tonne so far in September, compared with $414.12 per tonne in January 2024.
Consequently, iron ore prices fell by almost 32% in the period under consideration, while those for scrap fell by 12.23%, making the blast furnace steel production route more profitable.
“Everybody wants to be a blast furnace-based steel producer for the next six months,” Alff said.
Shift in Turkey
Chinese steel prices remained attractive, including those for billet, so it was highly likely that Turkey would continue to meet its needs through billet imports, which would result in lower steel output in the country.
This situation could also exert pressure on scrap prices.
Trade defense
Turkey itself was limited in its long steel export opportunities at the moment, considering the imposition of trade defense measures in the US and in Canada, the almost-complete take-up of import quotas in the EU for the third quarter of 2024, with tonnages already sold for delivery in the fourth quarter, and with recent restrictions on the supply of steel products to Israel.
Some countries that formerly procured long steel from Turkey – such as Egypt, Algeria and states in the Gulf region – have become exporters themselves, according to the chairman of the Irepas producers’ committee, Murat Cebecioglu.
Yemen, plus a few other countries in the Middle East, and Latin America were currently the key destinations for Turkish long steel exports, he added.
Regional differences
Looking at the EU, Cebecioglu said that business has seemed to be at a standstill in the region for more than a year, and little or no improvement was expected in the next six months or so, a point on which other delegates at the event agreed.
Gulf Co-operation Council (GCC) countries were currently in a slightly better position than those in other regions because their economies were moving in the right direction.
New projects in Saudi Arabia, for example, were creating demand in the region, with the construction and real estate sectors being the driving forces.
Yeoh said that ASEAN economies were also growing, albeit more slowly because of the generally unfavorable situation globally. He said that the construction sector was booming across the region, except in Thailand. Meanwhile, manufacturing was weakening, mainly due to soft external demand.
Earlier this year, he said that ASEAN steel demand was expected to reach 76.5 million tonnes in 2024, up from 73.5 million tonnes in 2023.
Overcapacity in Asia
Meanwhile, unsustainable overcapacity and de-greening were in prospect in Southeast Asia, with at least 104.4 million tonnes per year of new capacities expected to come onstream by 2030. These would push the region’s total capacity to 181.5 million tpy if they were all implemented, Yeoh said.
Around 83.6 million tpy of new capacity would be based on blast furnace-basic oxygen furnace technology, Yeoh said, while only 20.8 million tpy would be based on direct reduced iron (DRI) and electric-arc furnace (EAF) capacities, and this would lead to an “explosion” of greenhouse gas emissions by the region.
Decarbonization
At the same time, Europe’s imposition of its CBAM regulations and the global trend for decarbonization were other major topics at the Irepas event.
Since its start in October 2023, buyers of goods originating outside the EU must purchase certificates corresponding to the total volume of greenhouse gas emissions created by the production of the goods.
The costs of these certificates are calculated by the European Commission on a weekly basis, related to the average price of the closing EU Emission Trading System (ETS) carbon dioxide (CO2) allowance for each week.
By placing a fair price on the carbon emitted during the production of all carbon-intensive products entering Europe, European mills that currently must pay for carbon credits equivalent to their carbon emissions will be put on a more equitable basis with producers that operate in exporter countries that do not impose similar taxes.
Opinions were divided on the effects of the CBAM rules on the European market – and beyond it. Many delegates to the Irepas event felt that CBAM could help European mills to remain competitive when faced with economic challenges. Some sources, however, did not think that CBAM would either encourage global decarbonization or significantly rebalance global markets.
CBAM has put a cost on carbon, but it was not enough to counter the other factors which have resulted in a lack of balance in the global markets, these sources said.
These factors included foreign country subsidies, lower gas and electricity costs, lower labor costs, and fewer or no regulations in the construction sector, the sources added.
Global overcapacity was also expected to slow the decarbonization transition and to hamper innovation, Luciano Giua, economic and policy analyst at the Organisation for Economic Cooperation & Development (OECD), said during the event.
Published by: Vlada Novokreshchenova, India-Inés Levy
