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| Chinese HRC |
CBAM Impact on Chinese Steel Competitiveness
Chinese steel exporters will face rising costs in Europe due to the Cross-Border Carbon Adjustment Mechanism (CBAM). According to Jingzhe Liu, Chinese HRC direct emissions reach 2.1 tons CO₂ per ton, exceeding the EU free allowance benchmark of 1.494 tons. As a result, CBAM payments will increase Chinese HRC prices by approximately €65/t, reducing competitiveness despite a current net spread of €100/t compared to European prices. Meanwhile, market participants initially underestimated this effect, assuming only a minor 2.5% allowance reduction would matter.
Comparative Effects on Global Steel Exports
Indian steel will see higher CBAM-related costs, increasing export prices by €85/t in 2026, due to direct emissions of 2.3 tons CO₂ per ton. In contrast, Turkish producers using electric arc furnaces will face only €12/t additional costs. Therefore, CBAM implementation will make Turkish steel imports more economically attractive than Chinese steel, despite higher energy expenses. The price advantage for Chinese steel in Europe will last only through 2026–2027, after which rising carbon prices and reduced allowances will eliminate it entirely.
Strategic and Market Implications
The introduction of CBAM signals a structural shift in European steel markets. Chinese exporters will lose their cost leadership, prompting potential supply chain adjustments and contract renegotiations. In parallel, EU cooperation with China and Brazil aims to harmonize carbon market practices, potentially influencing global emission accounting standards. Investors and traders must consider CBAM effects when evaluating European steel import strategies and long-term market positioning.
ScrapInsight Commentary
CBAM will sharply reduce Chinese steel competitiveness, forcing price adjustments and market realignments. European importers may shift toward Turkish or local suppliers, affecting global trade flows. This mechanism emphasizes carbon cost internalization, reinforcing circular economy and emission-reduction incentives.
