European steel procurement is increasingly tied to the link between mill-level emissions, carbon costs and delivered prices. Under the EU Carbon Border Adjustment Mechanism (CBAM), exporters in Türkiye, Serbia, India and other non-EU markets must compete on more than factory-gate prices because covered production emissions feed into the import cost calculation.
For European buyers, comparing offers requires product-specific emissions information, the applicable adjustment for EU ETS free allocation, and any eligible deduction for carbon prices paid in the country of origin. The use of national emissions averages may not reflect the position of an individual installation, which can affect comparisons between steel suppliers.
CBAM free-allocation adjustments and certificate price effects
The CBAM free-allocation adjustment is determined using a relevant benchmark and factor rather than a uniform percentage charge on embedded emissions. In an explanatory example, the European Commission applies 1.2 tonnes of CO2 equivalent per tonne of goods with a benchmark of 1 tonne.
For 2026, applying the 97.5% factor results in 0.225 tonnes of CO2 equivalent per tonne of goods before other adjustments. This figure is described as approximately 19% of the original embedded emissions.
At a third-quarter 2026 certificate price of €82.32/tCO2e, the remaining quantity corresponds to about €18.52 per tonne of goods before any eligible deduction for carbon pricing paid in the country of origin. The example is presented as a demonstration of methodology rather than a CBAM quotation for a specific steel grade or installation.
Actual exposure depends on product parameters, verified emissions data and the applicable adjustments. The emissions-related calculation therefore varies with the evidence available for each shipment and production chain.
Verified emissions differences versus factory-gate price gaps
The financial impact can be larger when two suppliers have substantially different verified emissions. If both suppliers face the same applicable adjustment and carbon-price deduction but their covered emissions differ by 0.8 tCO2e per tonne, the illustrative liability difference at €82.32/tCO2e reaches €65.86 per tonne of steel.
Under those assumptions, a factory-gate price advantage of €40 per tonne would not offset the emissions-related cost difference if freight and other commercial terms were identical. Procurement comparisons therefore depend on how emissions values translate into CBAM-related costs.
Beyond carbon exposure, procurement decisions also reflect additional variables such as steel grade, delivery schedules, transport costs, credit periods and applicable trade measures. Production economics remain relevant as well, including cases where an electric-furnace mill has lower covered carbon liability but higher manufacturing costs due to expensive electricity or limited scrap availability.
Precursor emissions and documentation across production chains
The emissions profile of finished steel can include production stages preceding rolling or finishing. A processing facility with relatively low site emissions may still use slabs, billets or other relevant precursors that carry emissions from upstream production.
Buying those inputs through a trader does not remove the need to account for the relevant production chain under the applicable CBAM methodology. Buyers therefore need information that links materials to their production sources and supports the required emissions calculation.
Suppliers that provide consistent records covering installations, quantities and relevant precursor emissions can increase certainty for European customers when comparing import costs. If information is incomplete, it may undermine a purchasing calculation based on an emissions value that cannot later be substantiated when preparing the import declaration.
Contract clauses for expected carbon costs and post-delivery reconciliation
Supply agreements need to specify whether quoted prices include expected carbon costs, how emissions records must be provided, and how parties will respond if the importer must use a different emissions value. A fixed steel price does not necessarily settle who bears carbon-related expenditure if the supporting emissions clause remains unresolved.
The disagreement can arise months after physical delivery when the importer completes the calculation and determines applicable liability. For manufacturers in Germany, Italy and other European markets, supplier diversification therefore involves both delivery security and comparability of carbon costs.
Longer-term agreements may provide more predictability where production routes and emissions documentation remain stable. Shorter purchasing arrangements can leave buyers more exposed to differences between quoted assumptions and the final calculation used for import purposes.
Installation-level data in EU sourcing comparisons
The commercial position of individual mills increasingly depends on how verified emissions interact with product specifications, reliability and total delivered cost. Lower covered emissions can support a more competitive offer but do not automatically outweigh differences in electricity costs, scrap availability, transport costs, financing terms or product quality.
For exporters serving the EU, competitiveness is assessed by whether their prices remain competitive after importers apply the appropriate CBAM calculation using available production and precursor evidence. For European buyers, consistent installation-level data supports comparisons between suppliers without relying solely on national averages or headline factory-gate prices.