The European Union’s proposed expansion of the Carbon Border Adjustment Mechanism (CBAM) could increase carbon-related scrutiny for Chinese exports of fabricated metal products and machinery components. The initiative would extend emissions accounting beyond basic steel and aluminium, reaching further into industrial supply chains that link Chinese manufacturers with European customers.
The European Commission has proposed adding 180 steel- and aluminium-intensive downstream products to CBAM from 2028. In September 2026, the European Parliament backed a broader scope, while the Council adopted its own negotiating position in June. These positions are not yet a final regulation, and the commercial effect will depend on which customs classifications are included and how emissions from precursor materials are attributed.
Carbon accounting would extend deeper into metal supply chains
China supplies European industry across multiple stages of the metal value chain. Its exports include steel and aluminium inputs as well as finished fasteners, metal mountings, components, and industrial equipment.
Under the current framework, certain upstream materials fall within CBAM coverage, while some finished products remain outside its scope. If the proposed downstream expansion is adopted, European buyers could increasingly evaluate suppliers based on carbon-adjusted delivered cost rather than invoice prices alone.
Embedded emissions could also become a factor in sourcing decisions alongside quality, reliability, and conventional production costs. For Chinese fabricators, the origin and production history of the metal used in a component could be relevant to emissions outcomes.
A part manufactured from purchased steel may have a different emissions profile from an otherwise comparable item made using material from another steel mill. Production records, bills of materials, purchase contracts, and precursor-emissions calculations could therefore become more important for demonstrating compliance under any future requirements.
Evidence of renewable electricity use or low emissions at a final fabrication facility would not by itself replace upstream documentation required under the eventual rules. The approach to embedded emissions reporting could also affect how suppliers substantiate their calculations for covered products.
EU downstream changes coincide with rising Chinese finished-steel shipments
The proposed downstream CBAM changes are being considered as Chinese finished-steel shipments to the EU increase. EUROFER recorded a 40% rise in Chinese shipments in the first half of 2026.
That increase brought China’s share to 12.3% of EU finished-steel import volume. These figures relate to current finished-steel trade and do not indicate how much trade in Chinese machinery or fabricated goods would be affected under the proposed downstream legislation.
Although supply chains connect markets commercially, the available trade data cover different product groups. Importers may therefore need to treat the steel shipment figures as separate from any assessment of downstream manufactured goods potentially entering an expanded CBAM scope.
Growth in covered steel shipments does not establish how much downstream trade would ultimately fall within CBAM after expansion. The outcome would depend on which customs codes and products are included in the final legislative text.
Steel quotas and duties apply alongside CBAM negotiations
The EU has also introduced tighter steel import measures that operate separately from the proposed downstream CBAM expansion. Since July 2026, these include steel import quotas and a 50% out-of-quota duty on relevant steel products.
Chinese exporters and their European customers may need to distinguish between commodity steel shipments already subject to applicable trade measures and manufactured products that could enter an expanded CBAM scope from 2028 or later. The timing and final coverage for downstream products remain subject to negotiations.
Traceability and precursor records may affect supplier documentation
The ability to provide reliable emissions evidence could become a differentiating factor among Chinese exporters. Producers with traceable inputs and installation-level data may be better positioned to substantiate lower embedded emissions where reporting is permitted under the rules.
Exporters unable to obtain precursor records could face less favourable assumptions where applicable. They may then consider alternative materials or absorb part of additional costs to maintain their position in the European market.
The potential impact would extend beyond administrative reporting tasks related to emissions. Differences in documentation, contractual arrangements, and treatment of embedded carbon could affect net margins for otherwise comparable products.
The proposed expansion does not necessarily mean a stop to European imports of Chinese manufactured goods. It could alter how suppliers compete as carbon-related costs become more closely linked to materials used and evidence available for emissions calculations.
For China’s industrial exporters, traceability and access to upstream production data could become increasingly important alongside manufacturing scale, product quality, and price. The extent of any shift would depend on the final EU legislation and implementation rules governing CBAM coverage for downstream products.