- China ranks 6th among EU’s major steel suppliers in 2024, shipping 1.97 mnt
- CBAM costs of Chinese HRCs estimated to be 3rd highest among major origins
Mysteel Global: After a two-year transitional period (2023-2025), the European Union’s Carbon Border Adjustment Mechanism (CBAM) formally entered its definitive regime on 1 January 2026. Payments for carbon certificates for covered goods imported during this year will start in 2027.
The EU imported 27.4 million tonnes (mnt) of finished steel products in 2024. Among these, flat steel products accounted for a 79.2% share, while long steel took 20.8%, according to data released by the European Steel Association (EUROFER) in late June 2025.
China ranked sixth among the EU’s major steel suppliers in 2024, shipping 1.97 mnt of steel products directly into the region, the EUROFER data showed.
For Chinese steel suppliers exporting to the EU, the rising costs incurred by the CBAM are a happening reality that they have to deal with now. So, how much will the CBAM likely cost EU steel importers and Chinese steel suppliers?
CBAM cost calculation for steel
The fundamental formula for calculating the CBAM costs is the number of CBAM certificates multiplied by the certificate price.
The number of CBAM certificates to surrender is mainly determined by the volume of imported goods and their specific embedded emissions, reduced by the specific emissions covered by the EU Emissions Trading System (ETS) free allocation. The price of a CBAM certificate reflects the quarterly or weekly average price of EU ETS auction prices, Mysteel Global understands.
Based on the analysis above, the cost for steel products can be calculated as follows: CBAM cost = steel import volume * (embedded carbon emission volume per tonne – free carbon emission allowance per tonne) * EU ETS carbon price.
If part of the carbon cost has been paid in the country of origin, it can be further deducted from the final cost.
CBAM costs for Chinese HRCs
As an example, the CBAM cost for Chinese hot-rolled coils (HRC) under the EU’s CN code of 72081000 is presented below.
The default emission value for the product in 2026 is 3.506 tonnes of CO2 per tonne of HRC produced, including a 10% mark-up.
For the free emission allowance for this flat steel product, the Annex to the Implementing Act on Free Allocation Adjustment shows the preliminary free emission value for HRCs based on the BF/BOF route is 1.370.
Besides, the free emission allowances are designed to decrease at a fixed rate from 2026 onwards, and they will finally fall to zero by 2034, as the table below shows.
In 2026, the free emission allowance for every tonne of HRC imported under CBAM would be calculated as follows: 1.370*(1-2.5%) = 1.33575 tonnes of CO2.
As for the carbon price, this will be based on the auction price of EU ETS allowances expressed in EUR/tonne of CO2 emitted, as a quarterly average in 2026 and as a weekly average from 2027 onwards, according to the EU website.
By 9 January 2026, the EU carbon emissions allowances prices settled at EUR 89.56/t ($104.4/t), according to Trading Economics, a New York-based global financial data provider.
Assuming the carbon price is EUR 80/t, HRC is produced using the BF-BOF route, the applier uses the default emission value, and no carbon tax has been paid in China, the calculation is as follows: 1*(3.506-1.33575)*80 = 173.62.
So, the CBAM cost incurred for importing one tonne of Chinese HRC into the EU in 2026 would be EUR 173.62 based on the provided assumptions. Such a high cost will undoubtedly be an additional burden for European importers as well as Chinese steel suppliers exporting to the EU.
Chinese steel price competitiveness at stake in EU market
The cost of CBAM could make Chinese steel less competitive in the EU market, particularly compared to suppliers from countries that have lower carbon emissions or are covered under free carbon allowances.
Using the method outlined above, Mysteel has calculated the CBAM costs for HRCs from major steel-supplying countries and regions to the EU as follows:
The results indicate that China ranks third in CBAM costs among the top 10 steel-exporting markets to the EU, which could erode its steel products’ competitive edge in Europe.
In addition, the carbon costs for steel-manufactured products such as railway materials, containers and pipes are significantly higher than those for basic steel products, with some manufactured products’ carbon costs exceeding EUR 400/t, well above the typical range of EUR 100-200/t for steel products.
This cost disparity between product categories is expected to affect the export structure as well.
As a result, it is crucial for Chinese steel manufacturers and exporters to enhance their carbon management systems, improve emissions calculations, and accelerate efforts towards low-carbon transformation so as to maintain competitiveness and effectively manage future export costs.
Note:
- EU’s current implementing act on free allocation adjustment is only a draft version released on 17 December 2025, with the final version to be released in the first quarter of 2026.
- CBAM declarants are to surrender the CBAM certificates that correspond to the declared embedded emissions for the first time in 2027 for the year 2026.
- The CBAM scope currently only covers direct emissions in the steel sector.
Note: This article has been written in accordance with a content exchange agreement between Mysteel Global and BigMint.
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