PGM Demand from Hydrogen Sector to Grow in 2025, But at a Slower Pace

PGM

The hydrogen industry’s demand for platinum group metals (PGMs), particularly platinum and iridium, is set to increase in 2025, though at a slower rate than previously anticipated due to delays in hydrogen project development.

According to the World Platinum Investment Council (WPIC), demand for platinum in hydrogen applications surged by 123% year-on-year in 2023, albeit from a small base. A further 32% increase is expected in 2025 as proton exchange membrane (PEM) electrolysers and hydrogen fuel cells continue to drive PGM consumption. This new demand segment could help offset the declining use of PGMs in autocatalysts as the automotive sector transitions away from internal combustion engine (ICE) vehicles.

Hydrogen Economy’s Impact on PGM Market

Hydrogen-related demand for platinum, iridium, and ruthenium is also expected to support palladium demand, despite palladium not being directly used in hydrogen applications. As hydrogen-sector platinum demand rises, more palladium will be substituted for platinum in ICE vehicles, thereby increasing automotive palladium demand and lifting overall PGM prices.

The WPIC projects that 11% of global platinum demand will come from hydrogen applications by 2030, totaling 900,000 ounces (oz). By 2040, hydrogen energy production is expected to be the largest end-market for platinum, with projected demand reaching 3.5 million oz.

Hydrogen Investments and Policy Support Growing

Despite slow project development, global hydrogen investments have exceeded $300 billion through 2030, with 61 governments adopting national hydrogen strategies as of 2024.

According to Heraeus Precious Metals Germany head of trading Dominik Sperzel, declining costs and technological advancements will strengthen the hydrogen economy’s long-term viability.

The EU is actively supporting hydrogen infrastructure, having allocated over €100 million for hydrogen refueling stations across seven EU countries, including Poland. Additionally, in May 2024, the EU adopted its hydrogen and gas decarbonization package, creating a regulatory framework for dedicated hydrogen infrastructure.

In July 2024, the Hydrogen Council reported that six European hydrogen projects reached final investment decisions (FID). Globally, hydrogen projects reaching FID have increased sevenfold since 2020, from 102 committed projects to 434 in 2024.

Challenges Remain Despite Positive Outlook

While the long-term outlook for PGM demand remains strong, challenges persist. Many hydrogen projects lack financing, and infrastructure limitations have slowed development. Additionally, while hydrogen subsidies have grown from $50 billion to $300 billion since 2022, actual fund disbursement only began in mid-2024, slowing project acceleration.

Despite these hurdles, WPIC research director Edward Sterck remains optimistic, stating, "Now that subsidies are beginning to flow, development will accelerate quickly, driving consumer demand for fuel cell electric vehicles (FCEVs)."

EU Green Procurement Rules Face Industry Criticism Over Weak Steel and Fertilizer Demand

Hydrogen Europe

EU green procurement rules are drawing sharp criticism from Hydrogen Europe after leaked draft legislation reduced the proposed low-carbon steel requirement in public procurement to 25pc from an earlier 70pc. The industry group said the change weakens the demand signal needed to support green steel, hydrogen, and low-carbon industrial investment.

EU green procurement rules in the latest draft require steel used in buildings, infrastructure, and transport projects to include at least 25pc low-carbon steel by volume. Hydrogen Europe argues that this level is too low to create a bankable market for emerging producers such as Stegra, Hydnum Steel, Saarstahl, and Salzgitter.

The dispute highlights a central problem in Europe’s industrial transition. Producers are being asked to invest in low-carbon steel, hydrogen, and cleaner fertilizers, but public procurement rules may not create enough guaranteed demand to justify those investments.

Low-Carbon Steel Requirement Falls Short of Industry Expectations

The reduction from 70pc to 25pc changes the industrial meaning of the proposal. A higher procurement target would have created a stronger lead market for European green steel, giving producers clearer demand visibility and helping justify capital spending on hydrogen-based and low-emission production routes.

Hydrogen Europe said the current draft does little to improve competitiveness against Chinese steel and Russian fertilizer imports. This is important because European producers face higher energy costs, strict carbon rules, and heavy investment requirements, while import competition continues to pressure margins.

The Industrial Accelerator Act still recognizes energy-intensive sectors through greenhouse gas intensity classification systems. These include fertilizers, chemicals, rubber, paper, plastics, coke, refined petroleum products, cement, glass, steel, and aluminium. However, the draft does not set green public procurement requirements for most of these product groups.

Fertilizer Sector Waits for Stronger Demand Measures

The fertilizer sector appears to receive limited support in the current draft. Industry sources said the sector may need to wait for the Fertiliser Action Plan, expected in the second quarter, for more concrete demand-side measures.

Low-carbon fertilizers matter because they connect clean ammonia, hydrogen demand, agriculture, and food supply chains. However, procurement requirements are more politically complex because agriculture remains highly sensitive to cost increases and supply security concerns.

The final clean product procurement percentage will be negotiated over the next 12-18 months by the European parliament and EU member states. That process will determine whether EU green procurement rules become a serious industrial policy tool or remain a limited climate-labeling framework.

The Metalnomist Commentary

Europe’s problem is no longer only technology readiness; it is market creation. Without stronger demand rules for low-carbon steel, hydrogen, and fertilizers, the EU risks asking companies to invest in clean capacity without giving them a reliable customer base.

Heraeus and Mattiq Join Forces to Cut Iridium Use in Hydrogen Electrolysers

Heraeus

Partnership aims to boost zero-carbon hydrogen production with low-iridium PEM technology

Heraeus Precious Metals and Mattiq have partnered to develop low-iridium catalysts for proton exchange membrane (PEM) electrolysers. This collaboration targets the growing need for scalable solutions in zero-carbon hydrogen production.

The use of iridium in PEM electrolysers remains a major bottleneck due to its scarcity and cost. However, by lowering iridium content, Heraeus and Mattiq aim to make hydrogen production more commercially viable and sustainable. This initiative directly addresses one of the core material challenges in green hydrogen technologies.

Low-Iridium Catalysts to Unlock Scalable Hydrogen Tech

PEM electrolysers are vital in the push for clean hydrogen, yet their dependence on high-loadings of iridium, a rare platinum group metal (PGM), has constrained manufacturing scale. Currently, the global hydrogen economy struggles to meet projections, and the anticipated surge in PGM demand has been delayed—contributing to a 5.5% dip in iridium prices, now at $4,300 per troy ounce, as per Johnson Matthey data from February 5.

Despite current trends, industry experts like the World Platinum Investment Council predict a 32% rise in PGM demand in 2025, largely due to advances in PEM electrolysers and hydrogen fuel cells. This forecast makes the Heraeus–Mattiq collaboration especially timely, as it aligns with the market’s future trajectory.

Catalyst Innovation Poised to Accelerate Hydrogen Economy

Reducing the iridium content per unit will make PEM systems more cost-effective and accessible. As global interest in green hydrogen increases, industry players must optimize materials to ensure scalability. Heraeus brings deep expertise in precious metals, while Mattiq contributes cutting-edge chemical technology—together, they aim to redefine the catalyst market.

The success of this project could help stabilize long-term iridium demand while supporting the broader adoption of sustainable hydrogen technologies. Ultimately, the move benefits not only the hydrogen sector but also strengthens the case for clean energy transition globally.

Novelis Achieves Breakthrough Hydrogen Test for Aluminium Recycling at Latchford Plant

Novelis

Hydrogen Melting Furnace Cuts Carbon Emissions by Up to 90%

Net Zero Innovation Portfolio and HyNet Project Drive Industry Decarbonisation

Novelis, a leading US-based aluminium rolling and recycling company, has successfully tested hydrogen as a fuel for a recycling furnace at its Latchford, UK facility. The company reported that using hydrogen in the melting process can reduce carbon emissions by up to 90% compared to conventional methods.

Hydrogen Technology Supports Major UK Decarbonisation Initiatives

These tests were conducted under the UK’s Net Zero Innovation Portfolio and the regional HyNet project, both of which focus on low-carbon hydrogen production and industrial CO₂ capture. Novelis has participated in HyNet since 2017, supporting the shift to greener metals manufacturing across northwest England and north Wales.

The firm will now expand hydrogen-based, recycled alloy production processes at multiple European plants. Novelis also plans to publish results as part of the UK Industrial Fuel Switching programme later in 2024, sharing key findings with industry partners.

Latchford Expansion Doubles UBC Recycling and Cuts Emissions

In July 2023, Novelis announced a $90 million investment to more than double the Latchford plant’s used beverage can (UBC) recycling capacity. New equipment—including a dross house, shredding and melting systems—will boost recycling capacity by 85,000 t/year and lower annual carbon emissions by over 350,000 tonnes.

This hydrogen breakthrough supports Novelis’ broader push for sustainability and could drive innovation across global recycling operations. Latchford plant manager Allan Sweeney emphasized that these results will inspire further hydrogen research and deployment company-wide.

EU Unveils Green Industry Package with Raw Material Reforms and Decarbonisation Bank

EU

New Proposals Target Lithium Supply, Industrial Emissions, and Simplified Climate Compliance Across Europe

EU Launches Broad Economic and Climate Plan to Advance Clean Tech and Raw Material Security

The European Commission has introduced a comprehensive policy package aimed at strengthening the EU's clean energy transition and boosting industrial competitiveness. The new plan includes proposals for reducing energy costs, simplifying climate reporting, and scaling joint raw material procurement, with lithium among the targeted critical materials.

Demand aggregation schemes, originally designed for natural gas, will now extend to other strategic raw materials. A proposed EU Critical Raw Materials Centre would oversee joint purchasing for participating companies, helping to reduce import dependencies and improve supply chain resilience.

Decarbonisation Bank and CBAM Overhaul Reflect Deepening Industry Support

Climate Commissioner Wopke Hoekstra reaffirmed the EU's commitment to reducing greenhouse gas emissions by 90% by 2040, while stressing that decarbonisation must be economically viable for industry. As part of this approach, the Commission proposed a new EU Bank for Industrial Decarbonisation, which could mobilize up to €400 billion—including €20 billion from the Emissions Trading System (ETS)—over the next decade.

Meanwhile, updates to the Carbon Border Adjustment Mechanism (CBAM) promise to simplify procedures and offer temporary exemptions for 90% of currently affected firms. The revised CBAM will expand to include new products and eventually require carbon intensity labeling for steel (2025) and cement.

Clean Procurement, Hydrogen Incentives, and Corporate Sustainability Rules Updated

Public procurement rules will mandate the use of cleaner industrial products starting in 2026. However, the EU’s hydrogen industry has criticized the latest draft of state aid reforms for lacking the flexibility needed to stimulate demand and close cost gaps with fossil-based hydrogen.

Additionally, the Commission eased compliance rules for around 6,000 EU and 900 non-EU firms under the Corporate Sustainability Due Diligence Directive (CSDDD). The new guidelines require alignment with the Paris Agreement’s 1.5°C climate goal. While Qatari officials voiced concern over the directive’s impact on LNG exports, the Commission clarified that fines up to 5% of global revenue would apply only to extreme violations, such as human rights abuses.

PGM Technology Partnership Targets New Demand Beyond Catalytic Converters

Sibanye-Stillwater

The PGM technology partnership between Johnson Matthey, Sibanye-Stillwater, and Valterra Platinum signals a serious push to build new platinum group metals demand beyond traditional auto catalysts. The three companies will work on a multi-year, multi-million research and development programme covering the full PGM basket. The goal is to move new ideas from research to commercialisation. As a result, the PGM technology partnership could become one of the most important demand-side initiatives in the sector.

This matters because platinum group metals demand still depends heavily on catalytic converters for internal combustion engines. That market remains large, but electric vehicles are steadily taking share. Producers and refiners therefore need new end uses that can support long-term balance across platinum, palladium, rhodium, and the wider basket. Therefore, the PGM technology partnership is not just a research collaboration. It is a strategic response to a changing demand structure.

The mix of partners also gives the programme unusual weight. Sibanye-Stillwater and Valterra are major South African mining players, while Johnson Matthey brings refining, recycling, and advanced materials capability. That combination improves the odds that new PGM applications can move beyond lab work and into real industrial markets. Consequently, the PGM technology partnership has more commercial credibility than a typical standalone innovation announcement.

New PGM Applications Could Open Demand in Hydrogen, Electronics, and Advanced Materials

New PGM applications are central to the entire programme. The companies said they will explore uses in clean hydrogen, emissions detection and reduction, electronic materials, and high-performance alloys. These are not fringe categories. They are all large industrial themes with room for higher-value materials adoption. As a result, new PGM applications could help widen the demand base beyond automotive exposure.

Hydrogen is especially important in that context. PGMs already play a role in several hydrogen-related technologies, and deeper commercial penetration could create a more durable growth market. Electronics and advanced materials also matter because they can support more specialized and higher-margin uses. Therefore, the PGM technology partnership is aimed at sectors where technical performance can justify premium metal value.

The emphasis on the full basket is also notable. The programme is not focused on only one metal or one application family. That reflects a broader industry need to improve supply and demand balance across multiple PGMs at the same time. Meanwhile, it suggests the partners are thinking in portfolio terms rather than chasing one headline technology.

PGM Innovation Strategy Reflects a Bigger Industry Shift

PGM innovation strategy is becoming more urgent as the auto market evolves. Around 60pc of global PGM supply still goes into catalytic converters. That share remains important today, but it cannot be the only long-term demand pillar. Producers now need stronger growth channels that can absorb metal units in a more diversified way. Consequently, the PGM technology partnership reflects a much wider strategic shift across the industry.

This also matters for South Africa’s mining sector. Major PGM producers need a healthier long-term demand profile if they want more stable pricing and investment conditions. New applications can help support that by reducing dependence on a single dominant sector. Therefore, PGM innovation strategy is not just about technology leadership. It is also about future market resilience.

The comment from Sibanye-Stillwater’s chief executive makes that clear. The focus is on the entire basket and on creating a better supply-demand balance. That is ultimately the core commercial purpose of the programme. As a result, the PGM technology partnership should be viewed as a demand-defense strategy as much as an innovation platform.

The Metalnomist Commentary

This partnership matters because the PGM industry can no longer rely on catalytic converters alone to carry long-term demand. The most interesting part is not that the companies announced research. It is that miners, refiners, and recyclers are now aligning around commercialization. If this expands with more partners, it could become a real turning point for PGM demand strategy.

Enduring Reliance Amid Sanctions: Europe’s Russian Titanium Dilemma

VSMPO Titanium

Introduction: A Supply Chain Unbroken in Wartime

Despite sweeping economic sanctions imposed by the West following Russia’s invasion of Ukraine in February 2022, one supply chain has proved remarkably resilient: Russian titanium sponge. Europe’s quandary over this advanced material—indispensable to aerospace, defense, and medical-device manufacturing—has only deepened.

Russia’s Command of Titanium

Russia ranks among the world’s largest titanium producers. VSMPO-AVISMA, the country’s flagship producer, accounts for 90% of Russia’s titanium output and exports to some 50 countries. The company is estimated to control up to 30% of the global titanium market and nearly half of aerospace-grade supply.

Russia’s dominance rests on abundant raw-material reserves and comparatively low energy costs. Because titanium smelting is energy-intensive, commercial viability depends on cheap power and gas—conditions Russia has historically met.

Airbus A380

Trade that Continues Despite Sanctions

On 7 March 2022, Boeing announced it would halt purchases of Russian titanium used in aircraft manufacturing. Rolls-Royce and Boeing subsequently suspended procurement from VSMPO-AVISMA indefinitely.

Europe, however, charted a different course. Airbus urged the European Union to keep Russian titanium outside future sanctions packages. As Airbus chief executive Guillaume Faury argued, titanium represents a small share of Russia’s total exports, so sanctions would inflict little pain on Moscow while dealing a heavy blow to Europe’s aerospace industry.

Today, Airbus still sources roughly half of its titanium from VSMPO-AVISMA. Boeing, by contrast, once relied on Russia for about one-third of its titanium but has since stopped buying Russian material.

The Limits—and Exceptions—of EU Sanctions

Notably, while the EU has restricted imports of Russian steel and coal, titanium has not been sanctioned. The metal remains a strategic material used in fuselages, turbine blades, satellites, and other critical systems.

Dependence on Russian metals endures in other segments as well. From March to June 2022, combined EU-US imports of Russian aluminum and nickel rose to $1.98 billion—more than 70% above the prior-year period.

Washington and Brussels have generally refrained from designating industrial metals as sanction targets. Europe continues to import large volumes of Russian natural gas, and Russia supplies about 40% of global palladium—vital for semiconductors—implicating everything from automobiles to smartphones.

CBAM

CBAM: A New Variable

The EU’s Carbon Border Adjustment Mechanism (CBAM), introduced in October 2023, adds another layer of complexity. CBAM initially covers cement, electricity, fertilizers, iron and steel, aluminum, hydrogen, and certain downstream products in steel and aluminum. After a transition phase through 2025, full implementation begins in 2026, imposing carbon costs on imports equivalent to those borne by EU producers.

While fertilizers, cement, hydrogen, and non-exported electricity may see limited near-term impact, aluminum stands out as a key target sector. Most exports to the EU beyond steel and aluminum are not yet covered, though the European Commission has signaled possible expansion to high-leakage categories such as organic chemicals and plastics.

Russia is structurally disadvantaged under CBAM. Steel production in Russia, Ukraine, and Türkiye tends to be more carbon-intensive, implying higher embedded-carbon costs at the border.

Ambiguities in Sanctions and Industry’s Dilemma

The United States placed VSMPO-AVISMA on its “military end-user” list, restricting access to advanced technologies, but stopped short of a direct ban on titanium sales—an acknowledgment of global industry’s reliance on the material.

Indeed, during the early stages of the war, VSMPO-AVISMA avoided sweeping US and European sanctions. Although Washington temporarily listed the company in December 2020, the measure was later rescinded.

Recent moves, however, suggest a tightening environment. In April 2024, a joint US-UK action prompted the CME and LME to prohibit trade in newly produced Russian aluminum, copper, and nickel dated after 13 April—an effort widely read as constraining Russia’s influence in metals markets.

Ukraine Titanium Mine

Ukraine: A Viable Alternative?

Against this backdrop, Ukraine has emerged as a potential alternative. Until 2020, the country supplied 90% of Russia’s ilmenite—the feedstock for titanium sponge. With that supply chain severed by war, Ukrainian resources could help challenge Russia’s dominance.

US companies have begun talks with Kyiv on a joint venture anchored by the Zaporizhzhia Titanium-Magnesium Plant (ZTMP). Such partnerships could forge a new titanium hub in Eastern Europe, strengthening Ukraine’s economic footing for decades.

The risks are significant. Ongoing conflict and occupation threaten both Donbas deposits and the ZTMP facilities, which remain exposed to shelling and sabotage.

Aviation’s Growth—and Its Dilemma

The aerospace-titanium market was valued at roughly $100 million in 2022 and is projected to grow at a CAGR exceeding 5% from 2023 to 2032—reflecting the rebound in air travel and a pipeline of commercial aircraft programs.

Despite supply-chain turbulence from war, energy constraints, and labor shortages, passenger traffic continues to recover, lifting titanium demand. In October 2022, Airbus announced plans to deliver more than one aircraft per week to India, persisting with expansion despite engine-supply challenges and domestic carrier capacity constraints—developments that further complicate titanium sourcing.

The Reality of Diversification

Boeing reportedly began diversifying away from Russian titanium after the 2014 annexation of Crimea. Airbus, by contrast, remains heavily reliant on Russian supply.

Globally, China produced around 100,000 t of titanium in 2013—twice the combined output of Russia and Japan at the time—making it the world’s largest producer. Japan ranked third, with Osaka Titanium Technologies standing as the world’s second-largest producer of titanium sponge.

The Metalnomist Commentary: An Unfinished Dilemma

Europe’s struggle over Russian titanium sponge epitomizes the knotty realities of modern supply chains. Between economic sanctions and security imperatives, between industrial competitiveness and moral principle, Europe has yet to find a definitive answer.

With CBAM’s full force arriving in 2026, higher carbon-cost pass-throughs on Russian metals seem likely, intensifying pressure to rewire supply. Yet, as Airbus’s position illustrates, displacing Russian titanium in the short term remains daunting.

The gap between industrial necessity and political sanction endures—witness VSMPO-AVISMA’s August 2025 statement that it stands ready to resume cooperation with Boeing. For now, Europe must navigate this dilemma with prudence: balancing sanction principles, industrial realities, and emergent environmental rules—while accelerating the use of recycled titanium wherever feasible.

China's Magnesium Sector Faces Oversupply and Price Challenges Despite Rising Output

China's Magnesium

China’s magnesium industry, which accounts for a staggering 83% of the world’s magnesium production, is grappling with challenges of oversupply and volatile prices, according to insights shared at the 27th annual conference of the China Magnesium Association (CMA) held in Xi'an.

Decade-Long Capacity and Utilization Issues

Over the past decade, China’s magnesium production capacity has ranged between 1.3 million and 1.5 million tonnes per year (t/yr). However, actual output has lagged behind at 800,000 to 1 million t/yr, resulting in an average utilization rate of just 63%, according to data from the China Nonferrous Metals Industry Association (CNMA).

Dependence on Traditional Sectors

The sector’s primary consumption is still tied to traditional industries like aluminium alloys, steel, and titanium sponge. Attempts to diversify into new applications, such as magnesium alloy construction sheets, consumer electronics, and new energy vehicles, have been slow. This limited innovation has contributed to an oversupply and pushed magnesium prices to near production costs.

Shifting Trends in Titanium Sponge Production

The use of magnesium in titanium sponge production has declined due to its environmental impact and price volatility. According to Jiang Baowei, lead engineer at Pangang Vanadium and Titanium Resources, many producers now use in-house magnesium obtained through electrolysis of titanium tetrachloride residue, reducing environmental pollution and stabilizing costs. In 2023, China’s titanium sponge production capacity reached 220,000 t/yr, supported by 250,000 t/yr of in-house electrolytic magnesium production.

Rising Production Amid Challenges

Despite these hurdles, China’s magnesium production rose to 702,900 tonnes during January-September 2024, an 18% year-on-year increase, fueled by resumed production in Shaanxi, the country’s largest magnesium-producing region. Output in Shaanxi grew by 14%, while neighboring Shanxi saw a 10% rise. Shaanxi alone houses 50 producers with a combined capacity of 678,000 t/yr, including 34 producers in Fugu County.

CMA’s Call to Action

Ge Honglin, CNMA president, urged the industry to emphasize magnesium’s benefits as a light structural metal and explore emerging markets like hydrogen storage and new energy vehicles. He also called for price stabilization to ensure affordability and reduce market volatility.

Sustainable Production Gains

The industry has made strides in energy efficiency, reducing the energy required to produce 1 tonne of magnesium from 5.2 tonnes of standard coal in 2012 to just 4 tonnes in 2023. Over the same period, magnesium consumption in structural materials more than doubled to 192,100 tonnes, contributing to a sharp rise in overall consumption, up by 76% since 2012.

China’s magnesium sector continues to grow in global prominence, but it faces an urgent need to diversify its applications, reduce environmental impacts, and stabilize pricing to maintain its leadership in the global market.

EU CBAM export support moves to the top of Brussels agenda

EU CBAM

EU CBAM export support is moving closer as the European Commission considers a two-step aid mechanism. EU CBAM export support would offer “immediate” transitional relief for energy-intensive exporters facing rising carbon costs. As a result, EU CBAM export support is emerging as the key political trade-off between climate ambition and industrial competitiveness.

EU CBAM export support to start with transitional measures

The commission is preparing EU CBAM export support that begins with short-term, transitional tools. Officials indicated that a first phase of support would arrive “immediately,” ahead of a more permanent scheme. However, they have not clarified whether support will take the form of direct payments or carbon cost refunds.

Meanwhile, Brussels wants any EU CBAM export support to be WTO-compatible and legally robust. Industry groups argue that exporters cannot plan while details remain vague and timelines unclear. Fertilizers Europe is pushing to retain free ETS allocations for exports until 2030 as the “easiest solution.”

Debate deepens over free allocation and exporter ‘fairness’

The debate around EU CBAM export support centres on fairness for EU exporters under rising carbon prices. The commission is exploring using a share of CBAM revenues to finance long-term export support schemes. As a result, future CBAM cash flows could be recycled back into hard-pressed energy-intensive sectors.

However, fertilizer producers warn that simultaneous CBAM implementation and fast ETS phase-out could trigger widespread bankruptcies. They point to structurally higher EU energy prices that have already pushed margins to zero or below. Industry leaders now openly call for pausing the ETS reduction for CBAM-covered sectors until a final export mechanism is defined.

Politics, timing and the risk of policy fatigue

The political path for EU CBAM export support remains uncertain and highly contentious. Any legal act must pass the European Parliament and member states amid tight legislative calendars. Officials admit that securing agreement on all CBAM amendments before end-2025 would be “highly ambitious.”

At the same time, policymakers acknowledge that the fertilizer sector’s situation is “dire” and cannot absorb more shocks. Yet they are reluctant to dilute CBAM’s climate integrity or delay broader decarbonisation targets. This creates a narrow window where support must be generous enough to retain industry, yet disciplined enough to survive legal and political scrutiny.

The Metalnomist Commentary

Brussels is effectively trying to retrofit a CBAM export leg that was politically postponed during the original negotiations. The eventual shape of EU CBAM export support will signal how far Europe is willing to go to protect its mid- and downstream metals, fertilizer and hydrogen value chains. If delays continue, we should expect more calls for ETS pauses, higher import prices, and accelerated de-industrialisation risk in exposed sectors.

Indian Stainless Steel Sector Faces Headwinds from Imports and Raw Material Volatility

ISSDA

India’s stainless steel sector may face short-term turbulence amid rising imports and fluctuating input costs, says the ISSDA.

Rising Imports and Raw Material Volatility Challenge Growth

The Indian Stainless Steel Development Association (ISSDA) warns that the domestic stainless steel sector could face challenges in early FY2025-26. Volatile prices for nickel and ferro-chrome, coupled with low-cost imports from China and Vietnam, are pressuring Indian producers. According to ISSDA president Rajamani Krishnamurti, these imports threaten local manufacturers’ margins and growth momentum.

However, India’s strong domestic demand and supportive government policies may offer some market stability. Still, the industry remains vulnerable to global supply chain disruptions and raw material dependency, particularly on Indonesian nickel.

Capacity Expansion and Infrastructure Demand Drive Optimism

Despite the headwinds, India’s stainless steel industry remains optimistic for FY2025-26.

The country’s installed capacity of 7.5 million t/yr remains underutilized, with 40% unused, but new investments aim to close this gap. Growth drivers include infrastructure development, urbanization, and Make in India initiatives.

The railways, construction, and public-private infrastructure projects are expected to boost stainless steel consumption. Additionally, renewable energy technologies such as solar panels and wind turbines present promising applications for stainless steel. The sector also sees long-term growth potential from green hydrogen and smart city development projects.

The Metalnomist Commentary

India’s stainless steel sector sits at a crossroads. Structural demand remains intact, but trade dynamics and global price shifts threaten stability. How India balances domestic capacity utilization, import regulation, and supply chain resilience will shape the industry’s mid-term outlook.

High-Purity Iron Plant Targets US Rare Earth Magnet Supply Gap

Hertha Metals

High-purity iron is emerging as a hidden bottleneck in the US rare earth magnet supply chain as new defense sourcing rules approach. Houston-based Hertha Metals plans to build a 10,000 t/yr plant in Texas to produce high-purity iron used in neodymium-iron-boron permanent magnets.

The project targets a less visible vulnerability in magnet manufacturing. US policy has focused heavily on rare earth elements such as neodymium and praseodymium, but NdFeB magnets also require high-purity iron. Hertha Metals says about 90% of this material is currently produced in China.

The timing is strategically important. Updated Defense Federal Acquisition Regulations are set to take effect on 1 January 2027, restricting Chinese-origin rare earth magnets and constituent materials in covered US defense systems. That rule could force defense contractors, magnet makers and upstream material suppliers to rebuild supply chains around non-China sources.

Hertha Metals plans to break ground later this summer. The company says its Texas plant will become the first domestic producer of high-purity iron for this application, positioning the project at the intersection of magnet security, steelmaking technology and US industrial policy.

DFARS Rules Put Magnet Inputs Under Supply Chain Pressure

The 2027 DFARS deadline changes the strategic value of upstream magnet materials. Compliance will not depend only on where final magnets are assembled. It will also depend on the origin of constituent materials used in defense-related systems.

This creates a direct opportunity for domestic high-purity iron. NdFeB magnets require neodymium, praseodymium and often dysprosium or terbium for performance, but iron remains the major base component. If high-purity iron remains China-dependent, US magnet supply chains could still face compliance risk even if rare earth oxides or metals are sourced elsewhere.

Hertha Metals is trying to address that gap with its FLEXHERS process, short for flexible fuel hydrogen electric reduction smelting. The process combines electric arc furnace technology with natural gas or hydrogen to produce iron and steel.

The company says the technology can use lower-grade ores and iron ore fines that are difficult to process economically through conventional blast furnace routes. This could widen the domestic feedstock base and reduce dependence on imported high-purity iron.

Hertha currently operates a one-tonne-per-day demonstration plant in Conroe, Texas. It describes the site as the largest demonstration-scale single-step steelmaking facility in the US. Ore is sourced domestically from Minnesota, and the pilot facility is already producing material that meets customer specifications.

The planned high-purity iron facility will also produce trial steel products. Hertha sees the project as a stepping stone toward broader iron and steelmaking capacity, with a target of reaching roughly 500,000 t/yr of production within four to five years.

Cost competitiveness will be critical. Hertha says it does not plan to rely on a domestic supply premium. Instead, it aims to compete economically by replacing metallurgical coal with natural gas and electricity while using lower-cost ore feedstocks.

This claim matters because strategic materials projects often struggle when policy support is stronger than market economics. If Hertha can produce competitively without relying on premium pricing, the company could build a more durable position in both defense and commercial supply chains.

Hertha Metals CEO Laureen Meroueh

Domestic Iron Production Links Magnets, Electrical Steel and Clean Manufacturing

High-purity iron has strategic importance beyond NdFeB magnets. The material can also support electrical steel used in transformers, electric vehicle motors and other electromagnetic applications. These sectors are becoming more important as grid investment, electrification and domestic manufacturing policy expand.

The project also fits a wider shift in iron and steel markets. Traditional blast furnace production depends heavily on metallurgical coal and higher-emission processing routes. Meanwhile, demand for higher-grade iron inputs suitable for lower-carbon steelmaking is expected to rise as producers shift toward cleaner technologies.

Hertha’s process aims to sit inside that transition. By using electricity, natural gas or hydrogen, the company is positioning FLEXHERS as a lower-carbon alternative to legacy ironmaking. The ability to process lower-grade ore and fines could also help revive domestic iron production without requiring only premium feedstocks.

The US steel industry has increasingly focused on scrap-fed electric arc furnaces. That model supports recycling and lower emissions, but it does not fully solve domestic iron supply for high-purity applications. Magnets, electrical steel and advanced components often need controlled chemistry that scrap alone cannot easily provide.

This is where Hertha’s strategy becomes industrially relevant. The company is not only proposing another steel plant. It is targeting a specific materials gap between critical minerals policy, rare earth magnet manufacturing and advanced steelmaking.

Competition from subsidized overseas producers remains a risk. Hertha says it can compete on cost, but Chinese industrial support and below-cost exports could still challenge domestic producers. This is why policy, procurement rules and long-term customer commitments may become important even if the production technology works.

The company has not disclosed financing details, future fundraising plans or offtake agreements. That leaves open questions about capital structure, customer readiness and the pace of commercial scale-up. However, the 2027 DFARS deadline gives the project a clear market catalyst.

The broader implication is that rare earth magnet supply security cannot be solved by rare earth mining alone. The full chain includes ore, separation, metal conversion, alloying, magnet manufacturing and supporting inputs such as high-purity iron. Any weak link can create dependence.

Hertha Metals is betting that the next phase of US critical materials policy will recognise that reality. If the company can scale production, secure customers and maintain cost discipline, high-purity iron could become a small but essential piece of the domestic magnet supply chain.

The Metalnomist Commentary

Hertha Metals highlights a critical point often missed in rare earth policy: magnet security depends on more than rare earths. High-purity iron, electrical steel and alloy inputs will become strategic materials if US defense and electrification supply chains must move away from China.

Global Average Temperature Rise Reinforces Urgency of Industrial Decarbonisation

WMO(the World Meteorological Organisation)

Global average temperature in 2025 reached 1.43°C above pre-industrial levels, reinforcing the urgency of industrial decarbonisation and faster deployment of low-carbon energy systems. The World Meteorological Organisation said 2025 was either the second- or third-hottest year in the 176-year observational record.

The finding keeps the world close to the 1.5°C threshold pursued under the Paris climate agreement. The WMO’s estimate includes a margin of uncertainty of 0.13°C, meaning 2025 may have temporarily exceeded 1.5°C above the pre-industrial average.

Global average temperature data also show a clear long-term trend. The past 11 years were the 11 warmest on record, while 2023, 2024, and 2025 were the three hottest years across all nine datasets reviewed by the WMO.

Greenhouse Gas Levels Keep Pressure on Energy and Industrial Policy

Greenhouse gas concentrations continued to rise, increasing pressure on governments and heavy industry to accelerate emissions reduction. CO2 reached 423.9 parts per million in 2024, its highest level in at least two million years.

The annual rise in CO2 concentration in 2024 was the largest since modern measurements began in 1957. The WMO linked the increase to continued fossil fuel emissions and weaker absorption by land and ocean carbon sinks.

Methane and nitrous oxide also reached record levels in 2024, standing at 1,942 parts per billion and 338 parts per billion, respectively. These gases add further pressure on agriculture, energy, chemicals, mining, and industrial sectors to reduce emissions across supply chains.

Climate Targets Depend on Metals, Grids, and Clean Manufacturing

Global average temperature trends have direct implications for metals and mining. Faster decarbonisation will require larger volumes of copper, aluminium, nickel, lithium, rare earths, silicon, electrical steel, and other materials used in renewable power, grids, storage, electric vehicles, and efficient industrial systems.

The transition also increases pressure on producers to cut the carbon intensity of mining, smelting, refining, and manufacturing. Low-carbon aluminium, recycled metals, renewable-powered refining, green hydrogen, and electrified process heat will become more important as customers and regulators tighten emissions standards.

At the same time, climate stress raises operational risk for the materials sector. Extreme weather can disrupt mines, ports, power supply, shipping routes, and water availability, making resilience a core part of future industrial competitiveness.

The Metalnomist Commentary

The climate data confirm that decarbonisation is no longer a distant policy theme. It is becoming a materials, infrastructure, and supply chain challenge that will define the next investment cycle in energy and industry.

ADNOC’s Al-Jaber Shifts Tone on Climate: “Energy Is the Solution”

ADNOC

From Cop-28 climate diplomacy to Houston’s energy realism, al-Jaber emphasizes hydrocarbons’ future and new U.S. investments.

ADNOC chief executive Sultan al-Jaber, speaking at CERAWeek by S&P Global in Houston, presented a new stance on the climate-energy debate. Just two years after urging oil executives to embrace decarbonization, al-Jaber declared, "Energy realism is taking center stage" and framed the energy industry as “the solution, not the problem.”

Al-Jaber’s remarks mark a notable shift from his 2023 statements, when he stressed the oil and gas sector’s responsibility to cut emissions and aid in global decarbonization. Back then, as president of the UN Cop-28 climate summit in the UAE, he promoted a call to “transition away” from fossil fuels.

From Responsibility to Realism

In Houston, al-Jaber described his earlier climate warnings as part of a strategy to bring “realism and pragmatism” into climate dialogue. He also claimed the climate narrative had been “hijacked” and required correction. “We succeeded in making the energy industry part of the solution,” he said, reflecting a broader effort to reframe hydrocarbons as essential to the global energy transition.

At Cop-28, instead of endorsing a fossil fuel phase-out, al-Jaber led a compromise that called for a gradual transition. Now, he suggests the sector is driving climate solutions, not delaying them.

ADNOC’s XRG Targets U.S. Natural Gas and Petrochemicals

Al-Jaber also introduced ADNOC’s new energy investment arm, XRG, as a vehicle for major U.S. investments. He called U.S. energy markets an “absolute imperative” and revealed that XRG will soon announce large-scale investments, especially in natural gas infrastructure and petrochemicals.

Last year, ADNOC took a 35% stake in ExxonMobil’s hydrogen project at Baytown, Texas. Al-Jaber said similar deals are on the table, suggesting a strategic expansion of ADNOC’s low-carbon portfolio via U.S. partnerships.

The policy shift in Washington, where climate change was recently described as a “side effect” of development by U.S. energy secretary Chris Wright, has created a more favorable investment climate for fossil fuel-focused ventures.

Al-Jaber’s evolving rhetoric signals a realignment of climate ambition and hydrocarbon strategy, positioning Middle Eastern producers as both investors and influencers in the next phase of energy transition.

EU Russian Energy Imports Ban Holds Firm Despite New Energy Crisis

EU Russian Energy

EU Russian energy imports will not return under the European Commission’s current policy direction, even as the bloc faces renewed energy pressure from the Middle East conflict. EU energy commissioner Dan Jorgensen said Brussels will continue phasing out Russian gas and still plans to cut Russian oil imports.

EU Russian energy imports have become a strategic red line for Brussels. The Commission argues that returning to Russian supply would recreate the dependency that exposed Europe after Russia’s full-scale invasion of Ukraine in 2022.

EU Russian energy imports are again being debated because higher oil and gas costs are hitting parts of the European economy. However, Brussels is treating the current disruption as a reason to accelerate energy diversification, not reopen Russian supply channels.

The position links energy security directly to industrial resilience. Europe now wants less exposure to both Russian energy and Middle East supply disruption, while shifting more demand toward domestic, renewable and alternative energy systems.

Russian Oil Phase-Out Remains Politically Sensitive

The Commission has not yet presented new legal measures to phase out Russian oil imports. It delayed a proposal originally scheduled for 15 April and has not set a new publication date.

Still, Brussels says a permanent Russian oil ban remains a priority. That matters because Hungary and Slovakia remain the only EU importers of Russian crude, keeping pipeline supply through Druzhba at the centre of political negotiations.

Hungary had opposed blocking Russian oil imports under Viktor Orban. His successor, Peter Magyar, has acknowledged that Hungary cannot end Druzhba imports immediately, but has pledged to eliminate dependence on Russian energy by 2035.

Slovakia has also linked Russian oil flows to its support for further sanctions against Moscow. Bratislava has indicated it could support another sanctions package once Russian oil reaches Slovakia through the Druzhba pipeline.

This shows the difficulty of EU energy policy. The bloc wants a unified strategic position, but member states still have different infrastructure, refinery configurations and supply dependencies.

The Druzhba pipeline therefore remains more than a crude route. It is a political lever in sanctions, energy security and Ukraine-related financing discussions.

Energy Crisis Reinforces Clean Supply Strategy

The current Middle East energy crisis has intensified the EU’s focus on supply security. Jorgensen said the disruption is comparable in seriousness to the 1973 oil crisis and the 2022 Russian energy shock.

The Commission expects LNG prices to take years to stabilise. It also expects oil capacity to need months to normalise after the war ends, showing that energy disruption can outlast military events.

This strengthens the EU case for domestic and clean energy. The Commission wants to reduce import dependence through renewables, electrification, storage, hydrogen and alternative fuels.

For industry, the implication is clear. Europe’s energy security strategy will increasingly affect metals, grids, chemicals, transport fuels and clean technology supply chains.

Lower Russian energy dependence also raises demand for infrastructure. Europe will need more copper, aluminium, electrical steel, transformers, batteries, renewable equipment and grid materials to replace fossil fuel exposure with domestic power systems.

The policy challenge is execution. Europe must cut Russian dependence while managing fuel prices, refinery supply, LNG volatility, industrial competitiveness and political pressure from member states.

The Metalnomist Commentary

Europe’s refusal to return to Russian energy shows that energy security has become an industrial sovereignty issue. The next test is whether the EU can replace fossil dependency with real domestic energy infrastructure fast enough to protect industry from repeated external shocks.

US Senate energy and tax bill threatens clean energy incentives

US Senate

The US Senate energy and tax bill is set to reshape the country’s energy landscape. Senate Republicans introduced measures that slash clean energy tax credits, expand fossil fuel leasing, and extend trillions in tax cuts. The vote could pass as early as today, with deep consequences for renewable investors. The US Senate energy and tax bill also introduces excise taxes on wind and solar projects sourcing equipment from "prohibited foreign entities."

Major cuts to clean energy programs

The bill eliminates most climate provisions from the Inflation Reduction Act, including $7,500 EV tax credits and wind-solar incentives. Renewable industry leaders warn of mass job losses and halted investment. Meanwhile, biofuels, nuclear, and geothermal maintain partial support under adjusted credit structures. The new hydrogen credit deadline is January 2028.

Fossil fuels gain momentum

Oil and gas benefit heavily from the bill. It mandates Gulf of Mexico lease sales, reduces royalty rates, and restores tax deductions worth hundreds of millions. As a result, domestic drilling will accelerate. President Trump has demanded Congress finalize the bill before 4 July, framing it as a cornerstone of US energy independence.

The Metalnomist Commentary

The bill represents a decisive shift toward fossil fuel prioritization at the expense of renewables. For metals and critical minerals investors, reduced clean energy incentives may slow downstream demand, but fossil fuel expansion could sustain industrial inputs tied to oil and gas infrastructure.

EU and UK Move Toward Linking Carbon Markets

EU and UK

The EU and UK have formally agreed to work toward linking their carbon emissions trading systems (ETS), a move expected to benefit both industries and climate policy alignment. The announcement, made during a summit in London, emphasized that a EU and UK carbon markets link would support fair trade and reduce carbon leakage between jurisdictions. According to the joint statement, such a link would also exempt both regions from their respective carbon border adjustment mechanisms (CBAM), providing a more level playing field for domestic industries while maintaining environmental ambition.

ETS Link Could Unlock Significant Economic Gains

The linking of the EU and UK carbon markets could generate significant cost savings. UK Prime Minister Keir Starmer claimed British businesses could save £800 million in EU carbon taxes, while a recent industry-commissioned study projected up to €1.2 billion in savings from lower hedging costs due to improved market liquidity. While there is no timeline for implementation, market participants note that linking the Swiss ETS to the EU’s system took nearly a decade. Still, the potential economic efficiency and regulatory clarity have made the EU and UK carbon markets discussion a top priority for energy-intensive sectors across Europe.

Shared Climate Goals, Independent Ambitions

The agreement stressed that neither side should be constrained from pursuing more ambitious climate goals. The UK’s ETS remains guided by the legally binding Climate Change Act and its Paris Agreement commitments. The UK targets a 68% GHG reduction by 2030 and 81% by 2035, compared to 1990 levels. The EU aims for a 55% net reduction by 2030 and is still shaping its 2035 benchmark. Despite regulatory differences, both jurisdictions reaffirmed their commitment to net-zero emissions by 2050. The agreement also includes cooperation on hydrogen, CCS, biomethane, and a potential UK entry into the EU’s internal power market—further aligning EU and UK carbon markets within a broader clean energy framework.

The Metalnomist Commentary

The potential linkage of EU and UK carbon markets signals a return to pragmatic climate diplomacy. While structural alignment will take time, the economic and environmental incentives suggest both sides are committed to meaningful integration—setting a precedent for future carbon market collaborations globally.

Russia EU CBAM Dispute Challenges Carbon Border Mechanism at WTO

Russia, EU CBAM

Russia EU CBAM dispute escalated to formal World Trade Organisation proceedings as Moscow challenges the European Union's carbon border adjustment mechanism. The Russia EU CBAM dispute claims the carbon pricing system violates multiple WTO agreements including the General Agreement on Tariffs and Trade 1994, potentially disrupting global metals trade and climate policy implementation across aluminum, steel, and iron sectors.

WTO Challenge Targets Multiple Trade Agreement Violations

Russia EU CBAM dispute allegations encompass comprehensive trade agreement breaches affecting critical industrial sectors. Moscow claims the carbon border mechanism violates the Agreement on Import Licensing Procedures and the Agreement on Subsidies and Countervailing Measures. Additionally, Russia targets specific WTO accession protocols for Bulgaria, Croatia, Estonia, Latvia, and Lithuania, broadening the dispute's scope beyond core EU institutions.

Meanwhile, the CBAM implementation schedule spans 2026-34 with carbon pricing applied to goods imported from aluminum, cement, iron, steel, electricity, fertilizers, ammonia, and hydrogen sectors. This phased approach affects major Russian export commodities, particularly metals and fertilizers that constitute significant portions of bilateral trade with European markets.

Export Subsidy Claims Challenge Free Allocation Calculations

However, Russia's primary objection centers on alleged "prohibited subsidies contingent upon export performance" within CBAM's design framework. Although the mechanism lacks specific provisions for EU export sectors, Russia considers free allocation calculations that include export values as discriminatory trade practices. This interpretation challenges fundamental CBAM architecture and carbon pricing methodologies.

Therefore, the dispute highlights tensions between climate policy implementation and international trade law compliance. Russia argues that EU domestic industry receives preferential treatment through free allocation systems while foreign competitors face carbon pricing burdens. This asymmetry allegedly creates unfair competitive advantages violating WTO non-discrimination principles.

Consultation Process Shapes Future Climate Trade Policy

Furthermore, mandatory 60-day consultations between Russia, the EU, and member states will determine dispute resolution pathways. If negotiations fail, Russia can request WTO panel adjudication, potentially creating precedent-setting rulings on carbon border mechanisms. The outcome influences global climate policy implementation and international trade law interpretation.

As a result, the Russia EU CBAM dispute represents broader conflicts between environmental regulations and trade liberalization principles. Major economies worldwide monitor these proceedings as they develop similar carbon border mechanisms. The WTO ruling could significantly impact future climate policy design and international carbon pricing coordination.

The Metalnomist Commentary

The Russia-EU CBAM dispute represents a critical test case for international trade law's intersection with climate policy, potentially establishing precedents that influence global carbon border mechanism development. While Russia's challenge primarily reflects economic interests in preserving metals and fertilizer export competitiveness, the dispute's resolution will significantly shape how nations balance environmental objectives with WTO compliance requirements.

Argentinian Midterm Elections: A Pivotal Moment for Critical Minerals

Argentina midterm elections

Argentinian midterm elections are approaching. These elections will significantly shape President Javier Milei's economic reforms. Crucially, they will also influence key energy and mining plans. The outcome on October 26th is critical for the nation's future.

Milei's reforms began in December 2023. They successfully reduced annualized inflation to 31.8pc by September. The economy also expanded by 5.2pc. However, progress has recently slowed. Inflation remains above 2pc monthly. Growth in August was the slowest in almost a year.

The US Treasury offers a $40bn "bridge" package. This package supports the Argentinian peso. It includes a $20bn currency swap. A $20bn private capital facility is also part of the plan. International lenders pledged an additional $42bn in April. This support aims to stabilize Argentina's economy.

Energy Legislation and Investor Confidence at Stake

The election's results will impact legislative actions. Congress must decide on a new renewable energy law. The current law, 27191, expires this year. It mandated 20pc renewables by 2025. Renewables already hit 22pc in September. A new green hydrogen bill is also progressing.

Investor confidence in Argentina's energy ambitions is vital. The nation aims to be a major oil and gas exporter. It targets 1mn b/d of oil exports. LNG exports could reach 30mn tonnes/yr. These goals require over $50bn in investment. Therefore, the Argentinian midterm elections are crucial for these plans.

The Metalnomist Commentary

The upcoming Argentinian midterm elections hold immense implications for the global critical minerals and energy sectors. A strong mandate for Milei's reforms could unlock significant investment. This would accelerate Argentina's resource development. Conversely, a setback might introduce policy uncertainty. This could delay crucial projects. Therefore, industry stakeholders will closely monitor the results.

Hyundai Motor and LGES Jointly Complete EV Battery Plant in Indonesia

This photo provided Hyundai Motor Group shows an aerial view of HLI Green Power, an EV battery plant built jointly with LG Energy Solution in Indonesia

Hyundai Motor Group announced the completion of its electric vehicle (EV) battery plant in collaboration with LG Energy Solution in Indonesia. This development marks a significant step in establishing a fully-integrated EV production system in the Southeast Asian nation. The Hyundai LG Indonesia Green Power (HLI Green Power) battery plant, located in Karawang New Industry City, will supply battery cells for the mass production of the KONA Electric EV at Hyundai's local manufacturing plant starting this month.

The establishment of this plant enables Hyundai to leverage a local, integrated production system, enhancing its strategic position in the Southeast Asian EV market. Production at HLI Green Power began in the second quarter of this year.

A grand completion ceremony was held, attended by 300 dignitaries, including Indonesian President Joko Widodo and key officials from both nations. Hyundai Motor Group's executive chair Euisun Chung highlighted the collaboration’s success in his speech, emphasizing the joint efforts in shaping the future of the EV ecosystem globally.

HLI Green Power, spanning 320,000 square meters, boasts advanced facilities with an annual output capacity of 10 gigawatt-hours, supporting over 150,000 EVs. The battery cells will be utilized not only in Hyundai’s Indonesian plant but also in various Hyundai and Kia models worldwide. Following the Ioniq 5, the KONA Electric is expected to significantly impact the Indonesian EV market.

Indonesia aims to achieve carbon neutrality by 2060 and plans to produce 600,000 EVs by 2030. Hyundai Motor Group is committed to furthering cooperation with Indonesia in other innovative areas, including hydrogen solutions and future air mobility.

UK Narrows Scope of Carbon Border Adjustment Mechanism

CBAM

The UK government has announced a scaled-back version of its planned Carbon Border Adjustment Mechanism (CBAM), which will now only apply to a select group of sectors. The measure, designed to level the playing field for UK industries and encourage decarbonization in other countries, will come into effect on January 1, 2027.

Initially, the CBAM was set to cover a wider range of sectors, including glass and ceramics. However, after careful consideration, the government has decided to exclude these sectors due to their lower carbon intensity and reduced risk of carbon leakage.

The revised CBAM will now impact the following sectors:

• Aluminium
• Cement
• Fertiliser
• Hydrogen
• Iron and steel

The mechanism will impose a carbon price on imported goods from these sectors, taking into account both direct and indirect emissions. The government will establish a default emissions value for each product, which will be used in cases where verified emissions data is unavailable.

The CBAM rates will be determined quarterly based on the UK Emissions Trading Scheme (ETS) price, adjusted for carbon price support and free allowances. Imported goods will be subject to the CBAM rate, even if they have already been subject to a carbon price in their country of origin.

To mitigate the potential impact on small and medium-sized businesses, the government has raised the value threshold for CBAM application to £50,000 per year. Additionally, a criminal offense will be introduced to deter CBAM evasion.

The UK government plans to establish an industry working group to engage with affected sectors and an international group to collaborate with relevant exporter governments.