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.

Mercedes bets on green aluminium from Norway's Hydro for next-gen CLA

Mercedes aluminium body

Mercedes is turning to green aluminium from Norway's Hydro to cut embedded emissions in its new CLA model. The green aluminium from Norway's Hydro is certified at just 3kg of CO₂ per kilogram of metal across mining, refining, smelting and casting. This compares with a global average of 16.7kg, giving Mercedes a meaningful reduction in material-related emissions. The alloy also contains 25pc post-consumer scrap, which further lowers its lifecycle footprint and supports circular-economy targets.

However, the company’s claim that CLA production is “net carbon-neutral” still depends on offsets. Mercedes powers the plant with 100pc renewable electricity, mainly externally sourced hydropower, which materially cuts scope 2 emissions. But scope 1 emissions from on-site processes and logistics, as well as upstream emissions from suppliers, remain. Therefore, the move to green aluminium from Norway's Hydro is a genuine step forward, even if the overall net-zero claim rests partly on controversial offset mechanisms that investors often scrutinise.

Green aluminium supports low-carbon steel and battery initiatives

The CLA’s use of green aluminium from Norway's Hydro forms part of a broader materials decarbonisation strategy. Mercedes says its latest battery cell design cuts emissions by about 30pc per cell through renewable energy in anode and cathode production. The company also relies on “net carbon-neutral” cell manufacturing at suppliers, since it does not produce cells in-house. As a result, the true impact depends on supplier practices and verification of their renewable power usage.

Meanwhile, Mercedes is layering in low-carbon steel to tackle emissions in chassis and body-in-white applications. The CLA incorporates steel from US producer Nucor’s Econiq-RE range, made using 100pc renewable energy. Mercedes also has a deal with Steel Dynamics for more than 50,000 t/yr of CO₂-reduced steel for its Tuscaloosa plant. Together with green aluminium from Norway's Hydro, these supply contracts show how OEMs are weaponising procurement to reduce embodied carbon ahead of incoming carbon border measures.

Demand for certified green aluminium rises faster than headline prices

Demand for certified low-carbon aluminium is rising as automakers prepare for tighter climate regulations and potential carbon border charges. Carmakers want to cut embedded emissions at the material level, especially for high-intensity metals such as aluminium and steel. This is likely to support growing premiums for Hydro’s Reduxa-style green aluminium grades and similar products from competitors. As a result, upstream smelters with renewable power and high scrap usage gain a strategic pricing advantage.

However, headline aluminium prices on global exchanges remain relatively stable despite bullish long-term forecasts. London Metal Exchange cash aluminium has traded in a narrow range over the past year, even as demand for differentiated “green” material accelerates. This suggests that the value is migrating into contract premiums and long-term offtake deals instead of the base price. Over time, producers unable to demonstrate low-carbon credentials may find themselves pushed into a discounted “grey” segment of the market.

The Metalnomist Commentary

Mercedes’ partnership around green aluminium from Norway's Hydro shows how decarbonisation is increasingly driven by procurement, not just tailpipe regulation. For metals producers, the message is clear: access to cheap renewable power and high-quality scrap streams will shape competitiveness more than pure tonnage growth. As carbon accounting tightens, the premium for verifiable low-carbon tonnes is likely to widen, rewarding early movers across the aluminium value chain.

EU CBAM Extension Could Cover 200 More Steel and Aluminium Products

CBAM

EU CBAM extension plans could widen the carbon border adjustment mechanism to around 200 additional downstream products that use significant volumes of steel and aluminium. The proposal goes beyond the European Commission’s earlier plan covering 180 product codes.

EU CBAM extension reflects growing concern that carbon leakage could shift from raw materials into manufactured goods. If downstream products remain outside the mechanism, overseas producers using higher-carbon steel or aluminium could gain a cost advantage over European manufacturers.

EU CBAM extension would therefore move the system deeper into industrial supply chains. The impact could reach fabricated steel products, aluminium-intensive components and other manufactured goods that compete directly with EU-made products.

The Council presidency also wants the list of covered customs codes to remain flexible, allowing future additions or adjustments as trade patterns and circumvention risks evolve.

Downstream Expansion Targets Carbon Leakage Beyond Raw Materials

CBAM initially focused mainly on carbon-intensive upstream materials, including iron and steel, aluminium, cement, fertilizers, electricity and hydrogen.

The next phase targets a structural weakness in that model. European manufacturers can face higher carbon costs when using domestically produced steel or aluminium, while competing imported finished products may avoid equivalent charges.

Extending CBAM downstream aims to close that gap. It would place more imported products under carbon-cost rules based on the emissions embedded in their metal content and production.

For European steel and aluminium producers, the change could strengthen demand for regional low-carbon material. Downstream manufacturers may have less incentive to substitute EU metal-intensive products with cheaper imports produced under weaker carbon constraints.

But the administrative burden could rise. Importers and overseas manufacturers will need more detailed emissions data, product classifications and supply-chain documentation.

The Council presidency is therefore trying to balance wider emissions coverage with manageable reporting requirements. Three medical-use customs codes have been proposed for removal from the expanded list, reflecting concerns over unnecessary complexity in sensitive sectors.

Aluminium and Steel Supply Chains Face Wider Compliance Pressure

The expansion could have important consequences for global metals trade. Exporters of fabricated steel and aluminium products into Europe may increasingly need to demonstrate embedded emissions and product origin.

This could influence sourcing decisions far beyond primary metal. Extrusions, fabricated components, steel structures and other downstream goods may face stronger pressure to use lower-carbon feedstock.

For aluminium producers, access to renewable electricity and recycled metal could become more valuable. For steelmakers, electric arc furnace production, scrap use and lower-carbon iron inputs could improve competitiveness.

The proposal also strengthens the role of customs classification. A continuously adjustable list of CN codes would allow the EU to respond as companies change product routes or trade patterns to avoid carbon costs.

That flexibility could make CBAM more effective, but it also increases regulatory uncertainty for exporters. Companies selling into Europe will need to track not only carbon prices but also changing product coverage.

The Council has broadly supported extending CBAM to more downstream products, although some member states have argued for a narrower approach. The final scope will therefore depend on negotiations between EU institutions.

The Metalnomist Commentary

CBAM is evolving from a raw-material carbon mechanism into a wider industrial trade tool. For steel and aluminium suppliers, competitiveness will increasingly depend on proving low-carbon production across the entire downstream value chain.

Outokumpu Pushes for Tighter EU Steel Safeguards

Outokumpu

Outokumpu is putting EU steel safeguards at the centre of Europe’s industrial and climate debate. The Finnish stainless producer argues that current EU steel safeguards are too weak in the face of Asian overcapacity, diverted imports and sluggish European demand. As a result, Outokumpu says stronger EU steel safeguards are now essential to protect strategic supply chains and the business case for green steel investment.

Outokumpu links safeguards to decarbonisation and strategic autonomy

Outokumpu warns that Europe faces a surge of low-priced Asian stainless imports just as demand remains weak. The company argues that US tariffs of 50pc on steel are pushing excess volumes away from the US and into the EU market. Therefore, it believes new EU steel safeguards must prevent Europe from becoming a dumping ground for surplus Asian stainless steel. The company frames stronger safeguards as vital for mobility, infrastructure, defence and clean-tech value chains.

Outokumpu also connects trade defence directly to climate policy and low-carbon steel investment. It highlights its own stainless footprint of 1.6kg CO₂e/kg, versus a global average near 7kg CO₂e/kg. That advantage relies on high scrap usage and low-carbon power, which also increase production costs. Without tougher EU steel safeguards, Outokumpu argues, higher-emission Asian material will undercut European producers and undermine decarbonisation.

A blueprint for stricter quotas and carbon-aware trade rules

Outokumpu has tabled a detailed proposal for the next safeguard regime after 2026. It wants global tariff-rate quotas with strict per-country limits based on low-demand years such as 2012-13. Under its plan, imports above quota would face a 50pc tariff, with origin defined by melt-and-pour to block circumvention. It also opposes any quota carry-over, which can create import surges at quarter-end and destabilise prices.

The company calls for regular reviews of quota levels and tariffs, plus an emergency mechanism for sudden demand shocks. That mechanism would allow the EU to react if steel demand rebounds or if geopolitical events reshape trade flows. Outokumpu says the goal is to restore sustainable capacity utilisation and profitability for European mills. It stresses that, if Asian production displaces European output, Europe’s carbon footprint will rise and valuable stainless scrap will remain under-used.

Outokumpu further warns of growing strategic dependence on Indonesia and China if Brussels fails to act. In its view, weaker safeguards risk eroding European melting capacity and hollowing out the region’s stainless value chain. That would leave downstream manufacturers more exposed to external shocks and politically driven export restrictions. Stronger EU steel safeguards, the company argues, are therefore not only about prices, but also about security of supply.

The Metalnomist Commentary

Outokumpu’s intervention shows how trade defence, scrap utilisation and decarbonisation are now tightly interconnected in stainless steel. Brussels will need to balance open markets with credible protection for low-carbon producers if it wants green steel investment to continue. How the next safeguard package is designed will shape Europe’s stainless landscape – and its climate credentials – for the next decade.

EU 2035 Car Emissions Target Faces Growing Political Divide

EU, ETS

EU 2035 car emissions target remains firmly backed by France, Spain and Sweden, while Poland is pushing for greater flexibility on vehicle rules and a slower rollout of the bloc’s emissions trading system for road transport and buildings.

EU 2035 car emissions target requires new passenger cars to reach 0g/km of CO2 from 2035. France says it has assembled enough support to block attempts to extend conventional internal combustion engine sales beyond that date.

EU 2035 car emissions target is becoming increasingly linked with industrial competitiveness. Policymakers are debating whether biofuels, e-fuels and low-carbon steel should help manufacturers meet emissions obligations without weakening overall climate targets.

The discussion also exposes widening divisions over ETS 2, electricity costs and how quickly Europe can electrify transport while preserving automotive manufacturing.

Car Rules Bring Steel, Fuels and Manufacturing Into the Debate

France, Sweden and Spain argue that weakening the 2035 target would undermine investment certainty for electric vehicles and associated supply chains.

Sweden has warned that slowing electrification could make European automakers more vulnerable against global EV competitors. Spain has also expressed concern that excessive flexibility would dilute the original target.

The European Commission has proposed allowing carbon-neutral biofuels and e-fuels to count toward up to 3% of vehicle CO2 targets.

More importantly for the metals sector, low-carbon steel credits could contribute up to 7% of manufacturers’ CO2 reduction requirements for cars and vans.

This creates a direct connection between automotive regulation and green steel demand. Carmakers using lower-emissions steel could gain additional compliance value beyond conventional material performance.

For European steel producers investing in electric arc furnaces, hydrogen-based ironmaking and lower-carbon power, such credits could create a stronger demand signal from automotive customers.

However, broader flexibility also creates policy risk. If compliance pathways become too generous, demand for battery electric vehicles could grow more slowly than expected.

That would affect not only automakers but also lithium, nickel, graphite, copper and battery manufacturing investment across Europe.

ETS 2 Reform Highlights Europe’s Cost and Competitiveness Problem

Poland is separately calling for another delay to ETS 2, which is already scheduled to begin in 2028 after being postponed from 2027.

The system will extend carbon pricing to road transport and heating fuels, potentially increasing costs for households and businesses using fossil fuels.

Warsaw is also seeking to transform the existing emissions trading system market stability reserve into a stronger price control mechanism.

The reserve currently absorbs excess allowances from the market, but Poland wants greater ability to prevent sharp carbon price increases.

Germany is taking a different approach, arguing that changes to the annual reduction rate for existing ETS allowances should only begin from 2036.

These positions show that Europe increasingly faces two competing priorities: maintaining credible decarbonisation targets while preventing carbon costs from damaging industrial competitiveness and consumer affordability.

The debate also extends beyond Europe. Turkey has proposed a global target for electricity to reach 35% of final energy consumption by 2035, reflecting the growing role of electrification in international climate policy.

For metals markets, faster electrification would support long-term demand for copper, aluminium, electrical steel and battery materials. But the pace will depend increasingly on whether Europe can manage power, carbon and manufacturing costs simultaneously.

The Metalnomist Commentary

Europe’s climate debate is shifting from whether to decarbonise toward how to distribute the industrial cost. The inclusion of low-carbon steel credits shows that automotive policy is increasingly becoming metals policy as well.

EU Car Emissions Policy Divides States as 2035 and ETS 2 Battles Intensify

EU, ETS

EU car emissions policy is becoming a major fault line between member states as governments debate how much flexibility automakers should receive after 2035 and how quickly carbon pricing should expand into road transport and buildings.

France, Spain and Sweden defended continued electrification, while Poland called for greater flexibility in vehicle CO2 rules and further changes to ETS 2. The European Commission’s current proposal would replace the existing 100% tailpipe-emissions reduction requirement for new cars and vans from 2035 with a 90% reduction, with the remaining emissions compensated through low-carbon steel, e-fuels or biofuels. 

EU car emissions policy increasingly matters for metals markets because the regulatory outcome will influence the pace of EV adoption, internal-combustion vehicle production and material demand across batteries, copper, aluminium and automotive steels.

At the same time, disagreements over ETS 2 show that Europe is still negotiating how quickly consumers and transport markets should absorb the cost of decarbonisation.

2035 Flexibility Could Reshape Automotive Metals Demand

The Commission’s proposed flexibility would allow plug-in hybrids, range extenders, mild hybrids and some internal-combustion vehicles to remain in the market beyond 2035, provided manufacturers meet the wider emissions framework. 

That matters because the automotive material mix changes significantly depending on powertrain.

Battery electric vehicles typically require larger battery packs and more copper-intensive electrical systems. They directly support demand for lithium, graphite and selected nickel and manganese products depending on battery chemistry.

Hybrids require much smaller batteries, reducing battery mineral intensity per vehicle. However, they still consume more copper and electrical components than conventional combustion vehicles.

Continued ICE production would also sustain demand for metals and components linked to traditional powertrains, including speciality steels, aluminium castings and exhaust-system materials.

Low-carbon steel is becoming another strategic element. Under the Commission proposal, EU-made low-carbon steel could contribute to compensating the remaining emissions permitted after 2035. 

This could create a new commercial advantage for European steelmakers investing in lower-carbon production. Automotive decarbonisation would then depend not only on the vehicle powertrain but also on the embedded emissions of its materials.

The industrial argument is therefore becoming more complex than EV versus ICE. Europe is increasingly debating whether decarbonisation should be measured through tailpipe emissions alone or through a broader combination of powertrain, fuels and lower-carbon materials.

ETS 2 Debate Highlights Cost of Europe’s Transition

The political divide extends beyond cars to carbon pricing.

ETS 2 is designed to expand emissions trading to fuels used in buildings, road transport and additional sectors. Its full launch is currently scheduled for 2028, while EU institutions have also been strengthening its market stability reserve to reduce excessive price volatility. 

Poland is pushing for stronger mechanisms to control carbon prices and has argued for further flexibility around implementation.

The issue is important because ETS 2 could eventually increase the carbon cost associated with road fuels and heating. Governments are therefore balancing emissions objectives against household costs, inflation and industrial competitiveness.

For metals and manufacturing, carbon market design has indirect but significant consequences. Faster electrification supports grids, charging infrastructure and electrical metals demand. Slower implementation could extend fossil fuel consumption and delay part of that investment cycle.

Germany has meanwhile focused on the longer-term availability of allowances under the existing ETS, highlighting concern over how rapidly the emissions cap declines as Europe approaches its 2040 climate targets.

These debates show that Europe has broadly agreed on the direction of travel but not on the speed or industrial structure of the transition.

The eventual policy mix will influence where manufacturers invest, which automotive technologies survive and how quickly European material supply chains need to adapt.

The Metalnomist Commentary

Europe’s automotive debate is shifting from a simple ICE-versus-EV argument toward a contest over technology, carbon pricing and material origin. For metals markets, the final policy balance will determine how quickly demand moves toward batteries, copper and low-carbon steel.

China steel industry stabilisation plan targets growth, discipline and greener output

China Steel

China’s new China steel industry stabilisation plan signals a renewed push to manage growth, capacity and pricing discipline. The government aims for around 4pc added value growth in 2025-26 while phasing out inefficient mills and banning new crude steel capacity. As a result, Beijing is trying to balance supply and demand through market-based elimination rather than another blunt production crackdown.

The China steel industry stabilisation plan prioritises competitive, higher-quality producers over weaker players. Authorities will curb “unfair competition” and “disorderly” low-price behaviour that has weighed on margins across the sector. Therefore, the plan supports consolidation around strong mills and seeks a more sustainable pricing environment for both long and flat steel products.

At the same time, the plan highlights technological upgrading, high-grade steel, and raw material security as core pillars. It calls for expanded investment to modernise production lines, accelerate low-carbon technologies and deepen the green energy transition. This innovation agenda links the China steel industry stabilisation plan directly to national strategies on industrial upgrading and decarbonisation.

Market reacts as China steel industry stabilisation plan lifts sentiment

Steel futures and spot prices reacted quickly to the announcement, even as underlying demand stayed soft. January rebar futures rose by 0.85pc to Yn3,185/t, and more than 10 mills lifted ex-works rebar offers by Yn30-50/t. However, physical trading volumes in rebar and flat products remained subdued despite the firmer sentiment.

Coking coal markets showed a more cautious response. January coking coal on the Dalian exchange closed just 0.12pc higher at Yn1,217.5/t. Many participants are still assessing how strictly the China steel industry stabilisation plan will be enforced and what it means for blast furnace operating rates. For now, sentiment in domestic coking coal remains stable rather than bullish.

Recent production data underline why Beijing is acting now. China’s crude steel output in August fell by 0.7pc year on year to 77.36mn t. January-August crude steel output dropped 2.8pc to 671.81mn t, reflecting weaker construction and real estate demand. In 2024, the top five producing provinces saw crude steel output fall 3.2pc to 522.73mn t, still accounting for 52pc of national output.

Supply-side reform echoes and the road ahead for China’s steel sector

President Xi Jinping has already signalled a political push against “disorderly low-price competition” and outdated capacity. Many market participants see the new plan as an echo of the 2015-17 supply-side reforms that aggressively cut overcapacity. However, most small, inefficient mills were already removed in that earlier cycle, leaving fewer obvious targets today.

Therefore, the next phase will likely focus on quality, emissions and efficiency rather than headline tonnage cuts. The China steel industry stabilisation plan emphasises precise capacity and output control instead of blanket production caps. That approach favours large, integrated groups with the capital to invest in green technologies, premium steel grades and digitalisation.

At the same time, Beijing wants to maintain enough capacity to support infrastructure, manufacturing and strategic industries. Balancing overcapacity risks with growth and employment remains a delicate task. How effectively the China steel industry stabilisation plan navigates this tension will shape global iron ore, coking coal and finished steel flows over the next two years.

The Metalnomist Commentary

China is shifting from a crude tonnage focus to a curated steel ecosystem built around fewer, stronger, greener champions. For global metals markets, that means more policy-driven volatility in the short term, but a likely structural tilt toward higher-value steel exports and more disciplined capacity at home. Suppliers of iron ore, coking coal and low-carbon steel technologies should all watch how fast policy turns into enforcement on the ground.

CBAM to Add 15-25% Surcharge to EU Steel Import Costs Starting January 2026

EU Steel

The European Union's Carbon Border Adjustment Mechanism (CBAM) will impose 15-25% surcharges on CBAM steel import costs when full implementation begins January 1, 2026, according to Euranimi analysis. The European Association of Non-Integrated Metal Importers & Distributors warned that these additional costs will vary significantly depending on product type and country of origin. Steel importers face substantial cost increases as CBAM steel import costs rise through carbon pricing mechanisms designed to protect EU domestic steel producers from unfair competition.

CBAM Calculation Formula Creates Variable Cost Impact Across Origins

The CBAM surcharge calculation uses a specific formula measuring the difference between embedded emissions and 97.5% of EU benchmark standards multiplied by emissions trading system (ETS) pricing. This methodology ensures that steel imports face carbon costs comparable to EU domestic production under the emissions trading system. Meanwhile, Euranimi recommends that suppliers introduce separate CBAM surcharge lines in commercial offers, similar to existing alloy surcharge practices in steel trading.

Market participants anticipate significant import pattern changes as CBAM implementation approaches, with potential steel import surges in the fourth quarter of 2025. Importers may accelerate purchases before January 2026 to avoid initial CBAM steel import costs and associated compliance complexities. However, steel imports could decline sharply after January as buyers adjust to higher costs and new administrative requirements.

Implementation Timeline Creates Uncertainty for Steel Trade

Euranimi collaborates with the European Commission to develop "manageable" CBAM implementation procedures that minimize trade disruption while achieving environmental objectives. The association requests June publication of temporary benchmarks and default values for 2026 imports to provide market clarity. As a result, transitional benchmarks should be less strict initially while default values require reasonable levels to manage compliance costs.

Steel importers face significant uncertainty because verified emission data from non-EU suppliers won't be available until late 2026 at the earliest. Default values will play crucial roles in managing CBAM steel import costs during this transition period without verified supplier data. Therefore, appropriate default value settings prevent excessive financial exposure from unforeseen corrections and compliance adjustments.

The CBAM implementation represents a fundamental shift in global steel trade dynamics, creating competitive advantages for low-carbon steel producers while penalizing high-emission suppliers. European steel importers must adapt business models to incorporate carbon costs into pricing strategies and supplier selection processes. Consequently, CBAM steel import costs will reshape trade flows and encourage global steel industry decarbonization efforts through market mechanisms.

The Metalnomist Commentary

The 15-25% CBAM surcharge on steel imports marks a pivotal moment in global trade policy, potentially reshaping steel supply chains as importers seek lower-carbon suppliers to minimize carbon border costs. This mechanism could accelerate global steel industry decarbonization by creating economic incentives for cleaner production technologies, though it also risks disrupting established trade relationships and creating competitive disadvantages for developing country steel producers lacking access to clean technology.

UK Seventh Carbon Budget Sets 87% Emissions Cut Target for 2038-42

Climate Change Committee

The UK seventh carbon budget sets a legally binding ceiling of 535mn t of CO₂ equivalent for 2038-42, equivalent to roughly an 87% reduction in greenhouse gas emissions from 1990 levels. The target includes the UK’s share of international aviation and shipping emissions.

The UK seventh carbon budget gives energy-intensive industries a clearer long-term decarbonisation trajectory. Steel, aluminium, chemicals, transport and other industrial sectors will increasingly need to align capital spending with lower-carbon power, electrification and emissions reduction.

The UK seventh carbon budget follows the recommendation of the independent Climate Change Committee. The CCC identifies electrification and low-carbon electricity as the largest contributors to its pathway, accounting for around 60% of required emissions reductions by 2040.

The target strengthens the investment signal around renewable power, nuclear energy, grids and industrial electrification. It also reinforces the UK’s legally binding objective of reaching net-zero greenhouse gas emissions by 2050.

Industrial Decarbonisation Will Require More Clean Power and Metals

The new carbon budget has direct implications for UK manufacturing. Deep emissions reductions will require industry to replace fossil fuel consumption with electricity, low-carbon fuels and more efficient production processes.

For metals markets, that transition creates additional demand for copper, aluminium and electrical steel. Grid expansion, renewable power, electric transport and industrial electrification all require substantial quantities of conductive and structural materials.

The target can also increase pressure on high-emission materials producers. Steel and aluminium customers are increasingly tracking embedded carbon, while future investment decisions will depend more heavily on access to competitive low-carbon electricity.

Energy security is another part of the policy case. The UK government argues that greater reliance on domestic clean power can reduce exposure to volatile imported fossil fuel markets, while the CCC has similarly linked its recommended pathway with lower dependence on imported fuels.

This creates both risk and opportunity for industry. Companies with access to renewable power, recycling, efficient processing and lower-carbon technologies may gain an advantage as the emissions ceiling tightens.

Long-Term Target Gives Investors a Clearer Policy Signal

Carbon budgets cap total UK greenhouse gas emissions over five-year periods, giving companies a longer planning horizon than annual targets. The seventh budget extends that framework through 2042.

That certainty matters for infrastructure with long investment cycles. Power networks, nuclear projects, smelters, industrial plants and transport systems often require capital decisions many years before new capacity begins operating.

The government has said a specific delivery plan for the seventh carbon budget will follow, setting out how the target will be achieved. The existing Carbon Budget and Growth Delivery Plan covers earlier budgets through 2037.

The industrial challenge will therefore shift from setting the target to allocating the cost of delivery. Power availability, grid expansion, industrial support and technology investment will determine whether UK manufacturers can cut emissions without losing competitiveness.

The Metalnomist Commentary

The seventh carbon budget gives UK industry a clear direction, but the real test is whether clean electricity and grid capacity expand fast enough to support it. For metals producers, lower-carbon power could become as important to competitiveness as raw material cost.

EU Steel Industry Faces Key Policy Shifts: A Call for Concrete Measures

EU Steel

The mood among European policy makers regarding the steel industry has notably shifted, with increasing support for the sector’s future. According to Axel Eggert, director-general of Eurofer, the European steel industry association, policymakers are beginning to recognize the importance of addressing the growing challenges in global steel production. However, while this shift in mood is encouraging, Eggert emphasized that these positive words must be followed by tangible actions.

Rising Political Support for EU Steel Industry

Eggert pointed out that there is more political backing for the European steel sector, especially as lawmakers become increasingly aware of the massive overcapacity in global steel production, particularly CO2-intensive steel. The Organization for Economic Cooperation and Development (OECD) predicts that global steel capacity will grow by 157 million tons over the next three years, which will likely negate the decarbonization efforts of the EU steel industry.

In response, the European Parliament has called for a European steel action plan, which has been embraced by European Commission President Ursula von der Leyen. However, Eggert stressed that while these statements are promising, they must be followed by concrete measures to ensure the long-term sustainability of the industry.

Green Steel and Public Procurement as Key Measures

One of the critical measures that Eggert advocates for is the implementation of public procurement for green steel. With the EU's ambitious decarbonization targets — a 55% reduction in CO2 emissions by 2030 and carbon neutrality by 2050 — Eggert emphasized that EU governments should lead by example. This means prioritizing green steel in public sector construction, vehicles, and other products, which would support European producers committed to decarbonizing their operations.

Global Overcapacity and Trade Distortions Impacting EU Steel

The steel industry crisis is largely driven by global overcapacity and low demand in Europe, exacerbated by high energy costs. Compounding this issue is the low-priced steel being exported by countries like China, Japan, and India, which depresses global markets. China’s exports, in particular, have been an issue for EU steel producers, as the country benefits from state subsidies, leading to significant trade distortions.

Eggert discussed how the EU has implemented anti-dumping measures on stainless steel from Indonesia, but Indonesia has circumvented these by exporting processed steel to third-party countries like Taiwan, Vietnam, and Turkey, which then re-export the products back to the EU. This tactic, along with the support from Chinese investments in Indonesia’s steel industry, has made Indonesia’s steel sector one of the largest globally.

EU Trade-Defense Measures: Need for Improvement

Eurofer has called for enhanced EU trade-defense measures to tackle issues such as dumping and excessive capacity from third countries. Eggert emphasized the need for improved steel safeguards and more effective enforcement of existing trade defense instruments. Currently, anti-dumping duties on Chinese steel are too low, undermining the efficacy of EU trade policies.

Carbon Border Adjustment Mechanism (CBAM) Concerns

The EU’s carbon border adjustment mechanism (CBAM) has been another point of contention. Third countries are already looking to export steel from their lowest CO2-emitting plants to avoid paying CBAM costs. Eggert advocated for including indirect CO2 emissions (Scope 2 emissions) in the CBAM, particularly for stainless steel, which is a major contributor to indirect emissions.

Scrap Export Concerns and India's Decarbonization Challenge

Finally, Eggert addressed concerns from India regarding the potential for a European export ban on scrap metal. While the EU does not currently have a scrap export ban, Eggert pointed out that India itself has export restrictions on scrap and needs to focus more on decarbonizing its domestic steel sector. He also warned that if India delays its decarbonization efforts until 2070, the EU will face a significant disadvantage in the global steel market.

EU probe MMG Anglo American nickel deal puts ferro-nickel supply at risk

MMG Anglo American

The EU probe MMG Anglo American nickel deal signals deep concern over European ferro-nickel security and stainless steel costs. Regulators fear the acquisition could divert low-carbon Brazilian ferro-nickel away from EU buyers and tighten an already fragile supply chain. As a result, the EU probe MMG Anglo American nickel deal sits at the intersection of antitrust, decarbonisation policy and China-related resource security.

EU probe MMG Anglo American nickel deal and ferro-nickel access

The EU probe MMG Anglo American nickel deal focuses on Anglo’s Barro Alto and Codemin ferro-nickel complexes in Brazil. These assets supply low-carbon ferro-nickel that European stainless mills increasingly value under upcoming CBAM rules. However, Brussels fears that MMG, controlled by China Minmetals, could redirect tonnages to Chinese or affiliated buyers.

The commission’s initial review found the business holds substantial market power in low-carbon ferro-nickel. European stainless producers have limited alternative options that meet both technical and carbon-intensity requirements. Therefore, any post-merger supply squeeze could raise input costs, compress margins and weaken EU mills against Asian competitors.

Market power, Chinese ownership and rejected remedies

Regulators rejected MMG’s first remedy package, which relied mainly on behavioural commitments and a supply agreement. Officials argued that these measures lacked structural guarantees and could be hard to monitor over time. Meanwhile, European industry groups warned that the deal would deepen Chinese influence over the nickel value chain.

European buyers also link the case to wider CBAM and decarbonisation pressures. They fear losing access to low-carbon ferro-nickel just as carbon costs rise and imports from Asia intensify. As a result, the EU probe MMG Anglo American nickel deal has become a test case for how Brussels balances open markets with strategic metals security. The commission now has until 20 March to clear, block or condition the acquisition, with possible timeline extensions.

The Metalnomist Commentary

The EU probe MMG Anglo American nickel deal highlights how nickel and ferro-nickel have moved into the heart of Europe’s strategic calculus. Antitrust scrutiny now intertwines with carbon policy and China risk, raising the bar for deals involving critical alloy feedstocks. Stainless producers that rely on low-carbon Brazilian ferro-nickel should prepare contingency sourcing strategies, regardless of the eventual ruling.

Indonesia Carbon Market CBAM Strategy Targets Green Nickel and Stainless Steel Future

Indonesia Carbon

Indonesia is accelerating its carbon market development in coordination with the European Union ahead of the 2026 CBAM rollout. The Indonesia carbon market CBAM strategy aims to help domestic producers avoid punitive tariffs by establishing a mandatory emissions trading system (ETS) and promoting decarbonization.

ETS and Green Industrial Strategy in Development

Indonesia’s Ministry of Industry is working with the European Commission to design a carbon market aligned with the EU’s Carbon Border Adjustment Mechanism (CBAM). According to Apit Pria Nugraha, Head of the Centre for Green Industry, the goal is to use carbon credits to offset CBAM tariffs for sectors like stainless steel. Although nickel is not directly included in the CBAM, it faces indirect exposure through downstream products.

Indonesia is upgrading furnaces, enhancing ESG standards, and preparing export-focused green incentives. These include preferential treatment for certified green products and financing tools to support innovation. Nugraha emphasized that companies meeting CBAM and ESG targets early will benefit from price premiums and stronger global partnerships.

Nickel Industry Prepares for ESG-Driven Market Shift

Indonesia’s nickel sector, vital to the EV battery supply chain, is adapting quickly to ESG scrutiny. Nickel Industries, a major producer, announced plans to reduce its carbon footprint by deploying solar power and heat recovery systems in high-pressure acid leaching operations. The company’s carbon intensity is projected at 6.97 tonnes of CO₂ per tonne of nickel, nearly half the industry average.

M. Muchtazar, Head of Sustainability at Nickel Industries, noted that ESG is now a top competitive factor. Compliance with EU carbon regulations is no longer optional as automakers demand cleaner supply chains for EV materials.

CBAM to Reshape Global Trade Dynamics

CBAM will act as a de facto import tariff on high-emission goods entering the EU. Simon Goess of Carboneer estimated that importers of 85,000 tonnes of pig iron, ferro-nickel, and crude steel could face up to €40 million in charges by 2034. As CBAM expands to include Class 1 nickel and indirect emissions, producers must lower carbon intensity to remain globally competitive.

Nugraha concluded that “green nickel” is more than a buzzword—it’s a strategic imperative for Indonesia’s industrial future.

The Metalnomist Commentary

Indonesia’s proactive stance on carbon pricing and ESG compliance signals a significant policy shift. By integrating CBAM-aligned mechanisms and promoting low-carbon nickel, Indonesia positions itself as a preferred supplier in the evolving global metals supply chain.

India's Tata Steel Tests Biomass at Ferro-Chrome Plant

India's Tata Steel has carried out a trial using charcoal as a feedstock at its domestic ferro-chrome unit, with it also open to importing the biomass product. It said it finished the trial on 20 July, in which it replaced conventional reductants such as coke in the Athagarh ferro-chrome plant in east India's Odisha state with carbon-neutral biomass charcoal, made from the low-temperature burning of wood in an oxygen-starved atmosphere. The carbon released during the ferro-chrome production process was balanced by carbon absorbed by the trees from which wood for the charcoal was taken, it added.

The trial was part of Tata Steel's sustainability drive to cut emissions from its operations. Athagarh has a ferro-chrome production capacity of 55,000 t/yr. The use of 5pc of biomass in production is expected to lower carbon dioxide (CO2) emissions by 0.08/t of ferro-chrome, Tata Steel said, which is about 6pc of total CO2 emissions from the plant.

The company is carrying out more trials and feasibility studies to stabilize the use of biomass in ferro-chrome production, it said, adding that plans to commercialize biomass use as a feedstock have not been finalized yet. Tata Steel might also consider imports of charcoal if it is commercially and technically feasible.

Tata Steel is also working with Australian resources firm BHP to adopt low-carbon iron and steel production. This includes using biomass and carbon capture and utilization technology, which could cut emissions by up to 30pc for integrated steel mills.

EPCG divests Thyssenkrupp Steel Europe stake as Jindal bid reshapes future

Thyssenkrupp

Thyssenkrupp Steel Europe stake negotiations have shifted sharply as EPCG exits and Jindal emerges as the preferred partner. The Thyssenkrupp Steel Europe stake will now likely anchor a new strategic direction focused on low-emission steel. As a result, the evolving ownership of the Thyssenkrupp Steel Europe stake will influence Europe’s decarbonisation trajectory and regional steel competition.

EPCG steps aside to clear path for Jindal Steel

EPCG agreed to divest its 20pc holding in Thyssenkrupp Steel Europe and withdraw from all joint-venture talks. The investment firm will return its Thyssenkrupp Steel Europe stake and receive full reimbursement of the purchase price. This move reflects Thyssenkrupp’s decision to concentrate negotiations on a single strategic bidder.

Previously, EPCG had planned to lift its stake from 20pc to 50pc and form a 50:50 joint venture. However, the situation changed once Indian producer Jindal Steel submitted an indicative bid for the business. Therefore, Thyssenkrupp is now prioritising a potential deal that couples ownership change with major green-steel investment.

Jindal promises decarbonised steel platform in Europe

Jindal Steel’s bid includes a commitment to complete the DRI project in Duisburg and add new EAF capacity. The group has signalled a financial commitment of more than €2bn to build this low-emission production base. Although the offer remains non-binding, Jindal says it aims to transform the company into Europe’s largest integrated low-emission steelmaker.

This pathway would align Thyssenkrupp Steel Europe with EU decarbonisation policy and future carbon cost pressures. At the same time, Thyssenkrupp is also exploring the sale of its 50pc stake in HKM, further reshaping its steel portfolio. Together, these moves point to a deep restructuring of German steel assets and ownership.

The Metalnomist Commentary

This pivot from EPCG to Jindal underlines how strategic buyers now link ownership with decarbonisation capital. For European steel, the key question is whether promised DRI and EAF investments materialise fast enough to preserve competitiveness. If executed, Jindal’s plan could turn Thyssenkrupp into a flagship low-emission hub, but integration and policy risks remain significant.

Novelis Opens Aluminium Recycling Facility in South Korea to Boost Low-Carbon Supply

Novelis

Ulsan Plant Increases Novelis’ Regional Recycling Capacity by 100,000 t/yr

Novelis has opened a new aluminium recycling facility in Ulsan, South Korea, increasing its regional capacity by 100,000 tonnes per year. The facility, fully funded by Novelis with a $65 million investment, is a joint venture with Japan’s Kobe Steel. This expansion underscores Novelis commitment to low-carbon aluminium and a circular economy across Asia’s industrial sectors.

The new Ulsan aluminium recycling facility complements Novelis' existing Yeongju plant, bringing total Korean capacity to 470,000 t/yr. It will recycle used beverage cans, as well as automotive and industrial scrap, producing sustainable aluminium sheet ingot.

As a result, the project is expected to reduce carbon emissions by approximately 470,000 t/yr, aligning with global decarbonization goals.

Sustainable Aluminium Demand Rising in Asia

Novelis Asia president Sachin Satpute emphasized that the Ulsan aluminium recycling centre is a response to growing demand for sustainable materials. Key sectors such as beverage packaging, automotive, and specialty products increasingly require low-carbon aluminium supply chains. Meanwhile, regional policy and ESG pressures are accelerating investment in closed-loop recycling infrastructure.

The aluminium recycling facility in South Korea highlights Novelis’ strategic intent to lead in sustainable aluminium production. With Asia as a major consumption base, this move positions Novelis competitively in both environmental and industrial performance.

The Metalnomist Commentary

Novelis’ investment in Ulsan reflects the industry's pivot toward regionalized, sustainable aluminium production. With policy and market aligning on carbon goals, such facilities are not just environmental assets—they're strategic imperatives.

Britain Prioritizes Employment in Tata Steel Negotiations : Minister

Tata, Britain’s biggest steel producer, started closing one of its carbon-intensive blast furnaces on Thursday while the shutdown of its other one is slated for September. (File photo: Reuters)

In the ongoing negotiations with Tata Steel, the United Kingdom’s newly established government is placing a paramount focus on safeguarding employment. Business Minister Jonathan Reynolds emphasized on Sunday the administration's commitment to preventing job losses while negotiating government support for Tata Steel’s transition to lower-carbon technologies.

Tata Steel, the largest steel producer in the UK, commenced the closure of one of its high-carbon-emission blast furnaces on Thursday. The second furnace is scheduled to shut down in September, potentially leading to the loss of up to 2,800 jobs at the Port Talbot site in South Wales.

The new government is required to ratify the £500 million ($635 million) support package previously agreed upon with Tata Steel to facilitate the construction of a low-carbon electric arc furnace. However, unions are advocating for an enhanced agreement with Tata Steel that could mitigate some of the anticipated job losses.

"This is a major priority for us," Reynolds stated during an interview with the BBC. "I am determined to ensure that job guarantees are integral to the ongoing negotiations."

JSL stainless steel fabrication unit anchors India’s downstream growth

JSL stainless steel

The new JSL stainless steel fabrication unit marks a strategic shift into value-added manufacturing for India’s largest stainless producer. Jindal Stainless (JSL) is moving closer to end users by fabricating bridge girders and structural components for the country’s expanding infrastructure sector. The JSL stainless steel fabrication unit is designed to capture demand for sustainable, durable and high-quality solutions as India builds roads, rail, ports and urban transport systems.

JSL stainless steel fabrication unit targets India’s infrastructure boom

The new facility will produce 4,000 t/yr of fabricated stainless steel in the 2025-26 fiscal year. Capacity at the JSL stainless steel fabrication unit is then expected to rise to 18,000 t/yr in the following year as orders scale up. This rapid ramp-up signals confidence in long-term stainless demand from bridges, metro structures and public works.

The company invested about 1.25bn rupees ($14mn) in the plant, located at Washivali, Patalganga near Mumbai. Its 400,000 square foot footprint gives JSL room to add new product lines, automation and modular fabrication cells. As a result, the facility can support complex designs and tighter project schedules for engineering, procurement and construction contractors.

The JSL stainless steel fabrication unit is operated by Jindal Stainless Steelway, a wholly owned subsidiary. This structure integrates service centres, distribution and fabrication under one group, improving margins and delivery reliability. Meanwhile, fabricated output also deepens JSL’s relationships with infrastructure clients, shifting the business mix from commodity coil sales toward engineered stainless solutions.

Moving up the stainless value chain with sustainable components

The unit focuses on components that offer long life and low maintenance in harsh conditions. Stainless bridge girders, structural members and precision assemblies can cut lifecycle costs versus carbon steel in coastal or polluted environments. Therefore, the JSL stainless steel fabrication unit aligns with India’s push for resilient, low-maintenance infrastructure assets.

Downstream fabrication also supports more efficient use of stainless steel through optimized cutting, welding and design. This reduces waste and supports sustainability goals alongside durability and corrosion resistance. At the same time, domestic fabrication capacity helps Indian projects reduce dependence on imported components, improving supply security and project cost control.

The Metalnomist Commentary

JSL’s move into stainless fabrication is a logical next step for India’s largest producer as infrastructure spending accelerates. By combining scale in flat products with project-ready components, JSL can capture more value per tonne and differentiate on service, not just price. The key question now is how quickly the market absorbs 18,000 t/yr of fabricated capacity as India’s bridge and transport pipeline matures.

Sakura Ferroalloys FeMn expansion accelerates sinter plant and converter investment in Malaysia

Sakura Ferroalloys

The Sakura Ferroalloys FeMn expansion marks a major upgrade of its Sarawak ferro-manganese operations. The company has opened a new sinter plant and started building a converter for refined FeMn products. As a result, the Sakura Ferroalloys FeMn expansion will improve raw material efficiency and diversify carbon grades for global steel customers.

The Sakura Ferroalloys FeMn expansion also reflects a strategic shift in ownership and technology. Assore now holds 54.36pc of Sakura Ferroalloys after acquiring Assmang’s stake in June. Meanwhile, ore from Assmang continues to feed the plant, while Sumitomo and JFE help secure international sales channels. Therefore, the Sakura Ferroalloys FeMn expansion combines South African ore, Japanese trading muscle and Asian steel demand.

New sinter plant boosts furnace stability and ore utilisation

The new sinter plant is central to Sakura’s plan to lift efficiency and stability. The 141mn ringgit facility, completed after 22 months, prepares more consistent feed for smelting. This consistency should improve furnace performance, energy efficiency and metallurgical recovery rates.

By sintering ore fines and optimising feed size, Sakura can use a broader range of manganese raw materials. This flexibility matters as ore quality varies across mines and market cycles. As a result, the sinter plant supports more stable high-carbon FeMn output from Sakura’s existing 250,000 t/yr capacity.

The project also underpins environmental and cost performance. Better furnace stability usually reduces specific energy consumption and slag generation. Therefore, the sinter plant strengthens Sakura’s competitiveness against other Asian and global FeMn suppliers. It helps secure long-term contracts with steel mills that demand reliable quality and delivery.

Project Salamander moves Sakura into refined ferro-manganese

Project Salamander is the second pillar of the Sakura Ferroalloys FeMn expansion. The 346.5mn ringgit converter project will produce medium-carbon and low-carbon ferro-manganese. These refined grades are essential for high-quality steel, including automotive, structural and special steels.

Construction is planned over 21 months, with hot commissioning targeted for April 2027. Full production ramp-up is expected by mid-2027, adding 70,000 t/yr of refined FeMn capacity. Meanwhile, high-carbon FeMn output will continue to serve bulk steel applications worldwide. This product diversification reflects evolving customer demand for tighter alloy specifications and cleaner steels.

JFE Mineral & Alloy’s acquisition of a 7.5pc stake in Sakura in July was a key enabler. The deal gives Sakura access to JFE’s refining technology and process expertise. Therefore, the Sakura Ferroalloys FeMn expansion is not only about hardware, but also about advanced know-how transfer. Over time, this should lift product quality, yield and margins across Sakura’s FeMn portfolio.

The Metalnomist Commentary

Sakura’s combined sinter and converter investments show how ferro-alloy producers move up the value chain under margin pressure. By pairing ore-flexible sintering with refined FeMn capability and Japanese technology, Sakura positions Sarawak as a regional ferro-manganese hub. Market participants should watch contract terms and utilisation after 2027, as these will signal how quickly higher-value FeMn displaces basic grades in Asian steelmaking.

Nationalisation Could Prolong Surplus Steel Capacity

Nationalisation and Its Impact on Surplus Steel

Worldsteel warns that nationalisation may keep surplus steel capacity alive despite market inefficiencies and decarbonisation pressures. At the Global Steel Dynamics Forum in New York, director general Edwin Basson said governments have increasingly intervened in struggling steel mills across Europe and the UK. He stressed that nationalisation or quasi-nationalisation often prioritises employment and national interests over economic efficiency, preventing the natural closure of redundant capacity.

Decarbonisation and Regional Challenges

Steel decarbonisation remains critical, but regional energy access will shape strategies. Basson noted that half of global steel will still rely on blast furnaces in the next 20 years because of limited scrap supply and insufficient high-quality direct-reduced iron feedstock. In the EU, decarbonisation is especially pressing as mills face mounting carbon taxes and high energy costs. Scandinavian producers benefit from renewable energy and quality feedstock, while southern and northern Europe face challenges related to energy and raw material access.

The Future of Efficiency and Technology

Worldsteel believes technological innovation could help blast furnaces remain relevant in a low-carbon future. Exponential advancements could reduce emissions from blast furnaces to levels comparable with gas-fed direct-reduced iron and electric arc furnace processes. Basson suggested that Europe may soften its policies to allow current production routes to remain competitive while breakthrough technologies mature.

The Metalnomist Commentary

Nationalisation risks delaying the rationalisation of surplus steel capacity, adding inefficiency to an industry already burdened by decarbonisation costs. However, innovation in blast furnace technology may provide a pragmatic pathway, balancing national interests with climate commitments. The steel sector’s future will depend on aligning environmental priorities with economic realities.

CBAM Article 27a Deletion Would Tighten EU Carbon Border Rules

CBAM

CBAM article 27a deletion would make the EU carbon border adjustment mechanism more rigid, predictable and difficult to suspend. The European Parliament’s environment committee is preparing to propose removing the clause that would allow temporary exemptions from CBAM under serious and unforeseen circumstances.

The proposal comes from a draft legal report prepared by Dutch centre-left MEP Mohammed Chahim. It signals that parliament may push for a tougher CBAM framework than some member states or industrial importers would prefer.

CBAM article 27a deletion matters because exemptions could weaken the market signal behind the carbon border system. If importers believe CBAM can be paused during disruption, the mechanism may lose some of its pricing certainty and investment value.

The draft instead proposes a narrower system for exceptional cases linked to prolonged military conflict. In those situations, the European Commission would assess whether affected operators can still comply with CBAM requirements.

This approach keeps the mechanism intact while recognising that war can disrupt reporting, verification, logistics and administrative compliance. It also avoids creating a broad exemption channel that could be used during ordinary market stress.

The proposal shows how CBAM is shifting from launch-stage implementation toward legal hardening. The EU is now debating how much flexibility the system should allow without undermining its role as a carbon-cost equalisation tool.

Parliament Seeks Fewer Exemptions and Rejects Article 6 Credits

The most important legal change is the proposed removal of article 27a. That article would allow goods to be temporarily exempted from CBAM during serious and unforeseen circumstances.

The environment committee draft argues that this flexibility could weaken CBAM’s strength and predictability. Predictability is central to the mechanism because importers, exporters and industrial buyers need to know how carbon costs will apply over time.

A broad exemption article could also create lobbying pressure during periods of high energy prices, trade disruption or geopolitical tension. Once a suspension route exists, affected industries may push to use it whenever CBAM costs become commercially painful.

CBAM article 27a deletion would therefore protect the mechanism from becoming too politically adjustable. That is important as the EU begins phasing down free allowances under the emissions trading system and shifting more carbon-cost exposure toward imports.

The draft does not ignore exceptional disruption entirely. It proposes a replacement article focused on prolonged military conflict and its impact on affected regions.

This is a narrower and more defensible framework. A military conflict can prevent companies from collecting emissions data, meeting verification requirements or maintaining normal trade documentation. But that is different from giving broad exemptions whenever market conditions become difficult.

The draft also proposes removing language that would allow the EU to consider carbon credits issued under Article 6 of the Paris Agreement as part of the carbon price already paid on CBAM-covered goods.

This is strategically significant. Article 6 credits could, in theory, reduce CBAM liabilities if foreign producers claim they have already paid a carbon price through internationally recognised credits. But the draft calls this premature and counterproductive.

The concern is credibility. International carbon credits can vary widely in price, quality and environmental integrity. Allowing them into CBAM too early could weaken the mechanism and create disputes over whether credits represent real emissions reductions.

This is especially important for heavy industry. Steel, aluminium, cement, fertilisers and other CBAM-covered sectors need clear rules on what counts as a paid carbon cost. If low-cost or low-integrity credits reduce CBAM exposure, EU producers may argue that the system fails to protect them from carbon leakage.

By rejecting Article 6 credits, the draft keeps CBAM tied more closely to direct carbon pricing and verifiable emissions. That would make the system stricter, but also simpler for enforcement.

The legal direction is clear. Parliament’s environment committee appears to favour a CBAM model with limited exemptions, cautious treatment of offsets and stronger predictability for industry.

For exporters into the EU, this raises the compliance threshold. They will need credible emissions data, verified reporting and direct carbon-cost evidence rather than relying on broad exemptions or international credit claims.

Sector Expansion and Indirect Emissions Could Widen CBAM’s Industrial Reach

The draft also points toward a broader CBAM after the next review, scheduled by the end of 2027. It says the EU should consider expanding the mechanism’s sectoral scope to additional industries.

The sectors identified include organic chemicals, polymers and scrap materials from pulp, paper and glass. These areas have already been assessed as technically feasible for inclusion by the Commission.

This matters because CBAM currently focuses on a narrower set of carbon-intensive sectors. Expanding into chemicals and polymers would move the mechanism deeper into industrial supply chains and downstream manufacturing.

Organic chemicals and polymers are especially important because they sit inside a wide range of finished goods. If CBAM expands into these materials, the mechanism could affect packaging, automotive parts, consumer goods, industrial components and many other value chains.

Including scrap materials from pulp, paper and glass would also widen the mechanism’s reach into recycling and secondary raw materials. This could create new reporting challenges because scrap flows often involve mixed origins, complex supply chains and variable embedded emissions.

The draft also calls for CBAM to gradually cover indirect emissions in more sectors. Indirect emissions are already included for fertilisers and cement, but not across all covered products.

This could become one of the most important future changes. Indirect emissions reflect the carbon intensity of electricity used in production. For sectors such as aluminium, steel and chemicals, power sourcing can materially change total embedded emissions.

If indirect emissions are added more broadly, exporters using coal-heavy power systems could face higher CBAM costs. Producers using renewable, nuclear or lower-carbon power could gain a competitive advantage.

This would sharpen CBAM’s industrial effect. The mechanism would no longer focus mainly on direct process emissions. It would also reward cleaner electricity systems and penalise high-carbon power inputs.

The draft asks the Commission to present a proposal by the end of 2027 after assessing technical and policy options. This creates a clear timeline for companies to prepare.

For metals producers, the direction is important. Aluminium and ferro-alloy production are highly electricity-intensive. If indirect emissions become more widely included, power procurement, renewable energy contracts and verified electricity data will become central to EU market access.

For chemical and polymer exporters, CBAM expansion could introduce carbon reporting into supply chains that have not yet faced the same level of scrutiny. This may force producers to improve emissions measurement well before formal inclusion.

The parliamentary timeline is also taking shape. The environment committee is expected to consider the proposed changes on 4-5 May and vote on whether to advance them on 6 July.

If approved, an indicative plenary vote is scheduled for 14 September. That vote would formalise the European Parliament’s position before negotiations with EU member states on the final legal text.

The draft follows a compromise proposed by the EU Council presidency, which had already suggested changes to article 27a. This means both parliament and member states are now actively shaping the flexibility, scope and legal strength of CBAM.

The key issue is balance. Industry wants clarity and workable compliance. Policymakers want to preserve the environmental and competitiveness purpose of the system. Exporters want flexibility during disruption. EU producers want strong protection against carbon leakage.

CBAM article 27a deletion sits at the centre of that debate. It would reduce the risk of temporary exemptions weakening the mechanism, but it would also make compliance more demanding during periods of market stress.

For global suppliers, the message is straightforward. CBAM is unlikely to become a soft or easily suspended regime. The EU is moving toward tighter verification, fewer loopholes and possible expansion into more industrial sectors.

The Metalnomist Commentary

CBAM article 27a deletion would make the EU carbon border system more credible, but also less forgiving. The bigger strategic signal is that Brussels is preparing to expand CBAM from a narrow carbon-pricing tool into a wider industrial competitiveness framework.