Tag: CBAM

However, Italian rerollers expressed concerns about finalized CBAM figures, heard by Fastmarkets on Wednesday December 10, because of their heavy reliance on imported slab as feedstock and the high costs associated with default values, which must be used to calculate costs if actual emissions data from suppliers is not available.

Under CBAM, default values are standardized emissions estimates published by the European Commission that importers can use when they lack verified actual emissions data from suppliers.

Sources said slab feedstock purchases by rerollers have stalled because of uncertainties around future costs.

Italy
Prices in Italy moved up and producer sentiment was bullish in the week, with offers targeting €700 ($820) per tonne exw. However, deals were made in the range of €660-670 per tonne exw.

Fastmarkets’ weekly price assessment for steel domestic plate 8-40mm, exw Southern Europe was €660-680 per tonne on Thursday, up by €10-20 per tonne from €650-660 per tonne a week earlier.

Northern Europe prices widened upward amid upcoming CBAM cost pressures, although the range remained wide because some mills were still offering low prices to attract purchases, sources said.

Fastmarkets’ weekly price assessment for steel domestic plate 8-40mm, exw Northern Europe was €660-730 per tonne on Thursday, widening upward by €30 per tonne from €660-700 per tonne a week earlier.

Price movements in the European steel market have remained limited as of December, with market focus increasingly shifting toward the European Union’s Carbon Border Adjustment Mechanism (CBAM), which will enter its definitive phase in 2026.

Market sources indicate that uncertainties surrounding CBAM are having a direct impact on buyer behaviour, particularly slowing decision-making processes among companies planning to build inventories or enter into long-term supply agreements.

Scrap availability in Europe is reported to be below normal levels due to expectations surrounding CBAM’s implementation in 2026, providing limited upward support to scrap and flat steel prices. However, continued caution on the end-user side has prevented prices from establishing a clear upward trend.

CBAM Uncertainty Continues to Pressure Pricing and Contract Structures

According to market participants, CBAM continues to create pressure on pricing and contract negotiations. While goods will enter the EU in 2026, carbon payments are scheduled for 2027, making it difficult for importers to accurately project costs at this stage. In addition, the lack of verified, plant-level emissions data has pushed default values to the forefront of cost calculations, while fluctuations in EU ETS carbon prices have increased the risk associated with fixed-price steel contracts.

In this environment, a significant share of buyers has opted to postpone purchasing decisions until January. Although the EU CBAM Committee approved revised default and benchmark carbon intensity values on 9 December, sources say the impact on market activity has been limited. The continuation of the phased penalty mechanism—set at 10% in 2026, 20% in 2027 and 30% from 2028 onward—has reinforced the market’s cautious stance.

European Prices Remain Close to Stable Levels

As of December, flat steel prices across Europe are generally moving within a narrow range. In Germany, HRC prices are reported at €610–620 per tonne EXW, CRC at €710–720 per tonne EXW and hot-dip galvanized (HDG) at €710–735 per tonne EXW. In Italy, HRC prices are seen at €595–600 per tonne EXW, while CRC and HDG prices are reported in the €710–720 per tonne EXW range.

Market sources note that CRC prices in particular have found relative support due to tighter domestic availability and production schedules that are largely filled ahead of the year-end period. Nevertheless, high inventory levels and CBAM-related cost uncertainty continue to discourage buyers from committing to large-volume purchases, keeping price increases limited.

Import Offers Remain Competitive, but Transactions Are Limited

On the import side, prices continue to appear competitive compared with domestic European levels. Market sources report that offers for Turkish-origin hot-rolled coil to Italy are being quoted at $585–595 per tonne CFR, excluding anti-dumping duties.

Chinese-linked offers have also drawn attention, with Sumec reportedly offering hot-rolled coil to Northern Europe at $460 per tonne CFR, cold-rolled coil at $535 per tonne CFR and wire rod at $455 per tonne CFR, with shipment planned for 10 February. However, market participants stress that such low-priced import offers are being approached cautiously by buyers until CBAM-related costs become clearer, resulting in limited transaction volumes.

Market Outlook: Transaction Volumes Under Pressure

Overall, as CBAM’s definitive phase approaches, the European steel market is experiencing a slowdown in transaction volumes rather than sharp directional price movements. While many buyers prefer to wait until January and February, when cost structures are expected to become clearer, producers are focusing on maintaining supply discipline and defending current price levels.

In the short term, the European steel market is expected to continue displaying a cautious, low-volume profile, with prices fluctuating within a narrow range and only limited upside or downside movements.

Default values relating to the impending definitive stage of the Carbon Border Adjustment Mechanism (CBAM) were approved by the European Commission’s CBAM committee in the week beginning 8 December, with a draft act on default values detailing the principles behind recent revisions. 

McCloskey exclusively and extensively covered the latest values in an article coinciding with the affirmative vote.

The draft implementing regulation “laying down rules […] as regards the establishment of default values” details the principles and processes behind these revisions, giving some clarity to what some industry participants characterize as “illogical” or “unrepresentative” data.

McCloskey previously outlined that the default values – speculated by market participants as due to insufficient emissions data collected during CBAM’s transitional stage – were based on a model from the EU’s Joint Research Centre (JRC), pulling from public datasets like those of the International Energy Agency (IEA), and industry associations in creating the now-revised and approved default values.

In reality, the CBAM regulation always intended to base the default values on publicly available data, as described in Annex IV:

“Default values shall be determined based on the best available data. Best available data shall be based on reliable and publicly available information”

As detailed in McCloskey’s aforementioned article, the originally circulated default values were almost unanimously criticised by steel market participants across the value chain, leading the Commission to update the dataset on the basis of what transitional stage data was available in the CBAM registry.

While there has been extensive debate on the default values for specific product categories and origins, the positions of the steel value chain in Europe can be relatively neatly summarised as ‘steelmakers thought they were too low,’ particularly for China, and ‘importers thought they were too high’ especially as relates to recently disruptive origins like Indonesia.

The review process seemed to favour the steelmaker position, as where more than 30 transitional stage data points could be consolidated for a product category origin, the value at the 90th percentile of the range was adopted as a new default value – where said value was higher than the JRC’s original default value, and the respective import market share exceeded 3%.

The draft implementing act on default values explains further – and is understood by McCloskey to have been approved via comitology in its current form – as to the principles dictating their formation.

The default values are subject to a phased-in mark-up of 10% in 2026; 20% in 2027; and 30% in 2028, which according to the draft act is “[t]o avoid immediate disproportionate impacts on prices of goods, and to give economic operators time to adapt.”

The Commission alludes to capacity issues with verifiers, stating “[t]his phase-in, is also necessary as the number of verifiers may increase in the first years following the end of the transition period, in particular in 2026,” and seems to anticipate heavy use of default values in the “first years” of the definitive stage:

“CBAM declarants should therefore be able to use default values in those first years, and rely on actual emissions subsequently.”

Also in the draft act is a new anti-circumvention provision relating to precursors where the country of production is not known – most relevant to mixed methodology CBAM declarations referencing a combination of actual and default values – intended to deter “operators that use a precursor produced in a third country for which a high default has been set from claiming that the country of production of a precursor is unknown in order to avoid being subject to that high default value.”

These default values for precursors of unknown origin are said at the default value of the origin with the “highest emission intensities for that precursor.”

Additionally, the draft act clarifies the Commission’s intended timeline for reviewing the default values and mark-ups as “December 2027 at the latest.”

The draft implementing act on default values states: “[t]he Commission should make all necessary efforts, in close collaboration with the Member States and based on a systematic and holistic review, to ensure that a revision of the default values can already be carried out in 2026.”

The JRC is currently conducting another two year study into global industrial emissions, which is scheduled to complete in June 2026. McCloskey’s sources are generally pessimistic about the likelihood of a revision of the default values in 2026, despite the Commission’s best efforts, and seem resigned to a culture of uncertainty in the EU steel markets for the foreseeable future.

While steel industry sources close to the drafting and approval process for the CBAM default values understand that the data has been approved in its latest form, McCloskey’s review of the acts and annexes reveals some discrepancies, as Thailand and Vietnam are missing CN code listings for stainless steel products, North Macedonia lacks a production route classification, and not all origins have iron and steel listings at all – though the unanimous availability of iron and steel default values across origins has never explicitly been suggested as intended, and relevant origins would instead reference fallback data for “Other Countries and Territories.”

These measures lay down the rules for the practical application of the CBAM regulation as of January 2026.

It’s important to note that, as of December 10, the CBAM steel benchmark values and default values have not yet been published in the EU Official Journal.

Market sources circulated draft annexes and technical implementing acts earlier this week, outlining these benchmarks and default values.

The European Commission CBAM Committee has voted today to accept the final revisions to these documents, sources said.

Sources familiar with the matter told Fastmarkets that these benchmarks and default values are considered technically final and will become legally binding as of January 1, 2026.

“Vote was positive on benchmarks and defaults. So all data confirmed,” a source familiar with the matter said.

The Commission is expected to publish the final, legally binding benchmarks before December 25, Fastmarkets heard.

Benchmarks
The Commission used the same approach as in leaked drafts seen by Fastmarkets in November.

Benchmarks for different steel products vary depending on production route — blast furnace-basic oxygen furnace (BF/BOF), direct reduced iron/electric-arc furnace (DRI/EAF), and scrap-based EAF. Importantly, benchmarks also vary depending on whether actual emissions data or default emissions values are used.

Therefore, for each product, the benchmark is expressed in tonnes of CO2 equivalent (tCO2e) per tonne of steel produced, with separate values for different production routes. For example, flat-rolled products and semi-finished products have distinct benchmarks for BF/BOF, DRI/EAF and scrap-EAF routes, reflecting the differing carbon footprint of each process. Where actual emissions data is available and verified, it can be used to determine the specific embedded emissions for a given import. If not, default values — often set at the higher end of the range — apply.

It’s important to note that the finalized benchmarks are lower than those seen by Fastmarkets in November. For example, in the November leaked drafts, steel hot-rolled coil carried benchmark values of 1.530 tCO2e per tonne of steel for BF/BOF production, 1.033 tCO2e per tonne of steel for DRI/EAF and 0.288 tCO2e per tonne of steel for scrap-based EAF routes. These have been revised to 1.370 tCO2e per tonne of steel for BF/BOF, 0.481 tCO2e per tonne of steel for DRI/EAF, and 0.072tCO2e per tonne of steel for scrap-based EAF in the finalized document.

Default values by country
The document seen by Fastmarkets also established default emissions values that importers must use under CBAM when actual emissions data is not reported and/or cannot be verified. It applies to all CBAM goods except electricity and provides a harmonized, country-specific and product-specific framework to calculate embedded emissions for customs declarations.

The document also clarifies how default values must be selected: if a country is not listed, importers must use the “other countries and territories” table; if a country is listed but no value is provided for a particular CN code, the “other countries” figure still applies, Fastmarkets understands.

This is supposed to ensure that no imported CBAM good enters the EU without an emissions reference point.

For each CN code, the document provides default values for:

• Direct emissions,
• Indirect emissions (electricity-related),
• Total emissions

It also includes future annual mark-ups for 2026, 2027 and 2028-onward. Notably, default values generally rise annually through 10% (2026), 20% (2027) and 30% (2028-onward). These mark-ups reflect CBAM’s phase-in and the declining availability of free allowances in the EU Emission Trading System (ETS).

Using the information from the documents’ drafts, Fastmarkets has calculated CBAM costs for a range of steel products.

Calculations were made without the 10% markup.

Market reaction
Sources noted that, for some origins, default values were set at higher levels compared with previous leaked drafts, pushing costs of these products significantly upward.

For China, for example, December review default values for steel slab were set at 3.167 tCO2e per tonne produced, compared with 1.75 tCO2e per tonne outlined in the previous documents. That will push CBAM costs for Chinese slab to around €144 ($168) per tonne — “quite unmanageable,” according to market sources.

For Brazil, defaults were only slightly higher, which makes it a “manageable” supplier under the CBAM regulation.

For Indonesia and India, very high defaults were confirmed in the documents.

“Recently big cargoes of Indian and Indonesian hot-rolled coil were booked to Europe. I wonder how those can be custom-cleared, considering the CBAM update,” a buyer in Italy said.

Notably, a deal for Indonesian HRC was reported at €490 per tonne CFR earlier in December.

A transaction for a large tonnage of India-origin HRC was heard around $510 per tonne CFR recently, for first-quarter 2026 arrival.

“The price was extremely low, with CBAM risks on the buyer side, but with [CBAM] costs for Indian HRC over €200 per tonne — the final price doesn’t look so sexy anymore,” a second buyer said.

Another source noted the “punitive nature” of default values markups.

“If you have default value of over 3 [tCO2e per tonne of steel], it’s quite impossible to move to under 2 [tCO2e per tonne of steel] within a year. These [high default values and mark-ups] are supposed to stimulate countries to report and verify actual emissions,” a buyer in the Benelux area said.

The European Commission’s Carbon Border Adjustment Mechanism (CBAM) Committee has accepted the final revisions to technical implementing acts core to calculating CBAM costs – part of the EU comitology process – laying vital foundations for the instrument’s definitive, fiscally-liable stage, from January.

After multiple revisions, the implementing acts outlining the technical application of CBAM benchmarks and default values have passed comitology with sufficient member state votes, and are now expected to be official presented for adoption before end of year.
Despite formal recognition, these calculation values still exist on a provisional basis, and will see further review post-adoption, as CBAM proceeds through its definitive stage.

McCloskey exclusively broke details on CBAM’s core calculation values back in November, which detailed higher-than-expected costs potentially faced by EU importers,when calculating CBAM liabilities on default values.

Since then, the “worst-case scenario” faced by steel importers has – if anything – gotten even worse, with default values increased for a number of origins (such as China); and benchmark values revised downward following overall decreases to account for projections for underlying EmissionsTrading System (ETS) benchmarks 2026-2030, and reductions to direct-reduced iron (DRI) related benchmark values.

For example, McCloskey learned of a fresh deal for a full vessel (40-50kt) of Indian-origin carbon hot-rolled coil (HRC) to a single Italian buyer at the dollar equivalent of around EUR430/t CFR Italy, 10 December, that if declared on default emissions values, would incur a per ton CBAM cost of around EUR270/t – almost EUR13.5m across the full shipment.

McCloskey has calculated potential CBAM costs for a range of product categories, as initially demonstrated for imports of carbon HRC across core origins:

CBAM declarations and calculations

CBAM is best thought of as a mirror of the EU ETS, imposing carbon costs at the border in line with what a third country installation would pay if operating domestically in the EU.
Simplified formulae for calculating CBAM’s additional import costs are below:

Carbon Price Already Paid
Little is yet known about how any Carbon Price Already Paid will be recognised and accounted for in the CBAM framework, though the European Commission has committed to publishing ‘default’ carbon price deductions for respective origins later in the definitive stage.
Cross-Sectoral Correction Factor (CSCF)
The CSCF reduces free allocations uniformly across the ETS where demand exceeds supply, but is not yet known for the 2026-2030 period. The CSCF was previously set at 100% for 2021-2025.
Free Allocation Adjustment
The ‘Free Allocation Adjustment’ is a deduction to balance CBAM liabilities against ‘free allowances’ received by domestic producers via the ETS,and is calculated in reference to specifically designed CBAM benchmarks. CBAM benchmarks are themselves derived from ETS benchmarks, and are multiplied by a ‘CBAM factor’ that increases CBAM liabilities as ETS free allocations are phased-out at an increasing rate between 2026-2034. The CBAM factor starts at 97.5% in 2026.

‘Actual’ vs ‘Default’ Benchmarks
CBAM’s benchmarks are split between ‘actual’ and ‘default’ listings. Default benchmarks in particular are then further split by production route, in recognition of the independent emissions profiles of blast furnace-basic oxygen furnace (BF-BOF); direct-reduced iron to electric arc furnace (DRI-EAF); and scrap to electric-arc-furnace steelmaking (scrap-EAF). Some ‘actual’ benchmarks, namely those relating to semi-finished steel products,are also split by production route.
Despite this split, the vast majority of origins have been assigned benchmark classifications of BF-BOF for their steel products, meaning they must use BF-BOF route benchmarks when calculating CBAM costs on default values, regardless of the actual production route of the import. To calculate CBAM liabilities with data corresponding to the actual production route, ‘actual’ emission data and benchmarks must be used.

There are essentially three ways to declare CBAM liabilities once certificates are surrendered in September 2027:

Actual Values
Importers can calculate their imported embedded emissions using ‘actual’ values and benchmarks – provided by and specific to each exporting installation’s production process. This requires calculating the emissions liability for each process and precursor recursively up the production chain, and can quickly become sophisticated, especially given the complexity of steel goods.
‘Actual’ CBAM benchmarks are thus generally lower than ‘default’ benchmarks for the same CN code, as they do not account for embedded upstream emissions, which must be separately calculated and combined to derive the total emissions liability.

Default Values
Where emissions data is not available, or cannot be verified, importers must resort to ‘default’ values and benchmarks. These values make assumptions as to the carbon embedded in an origin’s steel products, and include a punitive element to incentivise the disclosure and use of actual values. The Commission has introduced a gradual phase-in for the punitive mark-up of steel products, starting at 10% in 2026; then 20% in 2027;and at 30% from 2028.
The Commission has committed to revise the default values and mark-ups “by December 2027 at the latest,” though “all necessary efforts” will be made such that a revision “can already be carried out in 2026.”

Mixed Values
If some precursors cannot be verified, then a mixed methodology can be used, assigning actual values downstream in the production process and using default values for some precursors. Where a default value is used, actual values cannot be used for upstream precursors connected to that default value, as their emissions have already been assumed.
In the finalised implementing acts, a new annex of provisional default values has been introduced for precursors for which the origin cannot be identified – most relevant to mixed values declarations. These defaults adopt the highest available value for each product listing across other origins, before applying the same 10-30% phased mark-up.
‘Actual’ and ‘default’ CBAM benchmarks for core steel products are illustrated in the table below.

Actual Values – Verification
Verification rules – compliance with which is necessary for CBAM declarations on ‘actual’ values – were released earlier in November, essentially imposing strict ETS-level criteria for third country installations to account, process, and subsequently verify their emissions data.
Verifications will commence from 2027, requiring emissions data averaged across calendar year 2026, meaning accredited verifiers cannot conduct necessary site visits or substantive verification activities until 2026 concludes.
The latest CBAM rules set 2026 as the minimum reporting period for CBAM declarations, so even material produced in 2025, and imported in 2026 will have to reference calendar year 2026 emissions data.
In light of this requirement, McCloskey has discussed the steel trade’s verification-readiness with a number of verifiers or related entities across Europe, Asia, and South America – all of which evidence a common theme: uncertainty.

Verification readiness
While importers are generally satisfied that larger or more modernised suppliers should be able to meet emissions data requirements when verification activities commence from 2027, both the capacities of accreditation bodies, and verifiers, as well as the willingness of third country installations to subject themselves to foreign scrutiny, are potential concerns that could see importers pushed onto default values.
“[National Accreditation Bodies] are already at high-capacity, so I really doubt they are going to start accrediting third-country verifiers on-mass, ”said an EU accredited ETS verifier. “Not only that, but what does this look like in practice? The reality of accessing and inspecting a plant from the ground can be difficult, opaque, and subject to resistance from personnel – I’m not sure this will all go as smoothly as the Commission hopes.”
A Chinese emissions and CBAM consultant agreed, stating that foreign verifiers may be unable to identify circumvention tactics once on-site, undermining physical visitation requirements. Chinese companies could also fall foul of China’s strict security frameworks if offering unrestricted physical or digital access to foreign verifiers.
More generally, the consultant considered that “data preparedness is not defined by a country’s size or level of development. It boils down to the willingness of the specific factory to collect and calculate said data.”
According to Mexican sustainability consultancy Sustainluum – “for many global companies, especially leaders in the […] steel sectors, this type of process is not unfamiliar. They have long been accustomed to receiving on-site audits, submitting their data to independent review, and working under formal emission measurement and reporting schemes. They have also developed exercises like EPDs (Environmental Product Declarations), which require a level of traceability and methodological coherence very close to what CBAM requires.
“This does not mean that the adjustment is automatic. CBAM requires verifiable information per facility, specific calculation methods according to Annex IV, and sufficiently robust traceability to allow external verification. To reach this level, facilities will have to strengthen the quality of their records, standardize factors, improve integration between their operational and environmental areas, and, in general, consolidate a more rigorous monitoring structure that allows the reconstruction of the information used in the calculation of embedded emissions.”

‘Looking behind’ EPDs
Sustainluum rightfully value possession of an EPD, but importantly clarify that EPD status and CBAM verification are not one and the same – an idea McCloskey commonly encounters across the global steel markets.
For example, China’s Iron and Steel Association (CISA) recently celebrated a milestone number of EPDs issued to its domestic steelmakers, with Chinese market participants said to beconnecting EPD possession with CBAM-compatibility.
Unfortunately, while an installation’s EPD is good evidence that the required primary emissions data at least exists, the nuance of mapping site-level process emissions to specific product outputs is a particularly complex task, as described by a Turkish consultancy performing carbon accounting services.
“Turkish producers generally have no problem with primary data availability, and as with other exporting origins we incentivised to meet EU requirements due to the high default values for Turkey versus what can be achieved on actual values,” said the consultant.

“It will take some time to adjust to the level of CBAM, however, as many producers can make mistakes when tying direct or indirect emissions to specific products, or properly allocating process emissions. What poses greater difficulty [than data availability] is the expertise required to map emissions to specific processes and products, even before verification activities commence.”
Separately, European traders have estimated that as many as 80% of imported emissions could be forced onto default values due to verification frictions. This is somewhat evidenced by the lack of actual emissions data collected during the transitional stage, which McCloskey understands motivated the Commission’s original use of public datasets to inform CBAM’s default values.
As such, there is a risk that despite their best efforts, European importers could become subject to worst-case CBAM cost scenarios on default values through verification failures – potentially devastating to an importer’s bottom-line.

Default Values – Calculations
McCloskey has calculated CBAM cost exposure from the finalised provisional default benchmarks and values, referencing dominant origins within each product category on the basis of import data (Global Trade Tracker) for the last year.
Calculated values are presented per ton of steel in the tables below, and assume a CBAM certificate price of EUR80.
Where relevant benchmark or default values overlap within a product category, a proxy CN Code has been selected, as derived values are very often consistent across these CN Codes groupings (e.g. all CN Codes under Heading 7208 list the same default benchmark and value for respective origins).

Iron Ore

Source: McCloskey by OPIS © 2025 Dow Jones Energy Limited

Pig Iron

Source: McCloskey by OPIS © 2025 Dow Jones Energy Limited

Direct Reduced Iron (DRI)

Source: McCloskey by OPIS © 2025 Dow Jones Energy Limited

Ferroalloys

Source: McCloskey by OPIS © 2025 Dow Jones Energy Limited

Semi finished slab/billet

Source: McCloskey by OPIS © 2025 Dow Jones Energy Limited

Hot-rolled Coil (HRC)/Heavy Plate

Source: McCloskey by OPIS © 2025 Dow Jones Energy Limited