The European Commission’s latest guidance on the Carbon Border Adjustment Mechanism, published on 14 August 2026, sets out how embedded emissions must be calculated for iron, steel and downstream products during the CBAM definitive period. The sector-specific document shifts carbon accounting from technical reporting to a commercial requirement for Serbia’s steel industry. For Serbian producers, the focus becomes how much of the resulting cost can be managed through verified data, cleaner production and contract terms with European customers.
The scale of exposure is linked to trade flows. Serbia exported approximately $731 million of iron and steel and $834 million of iron and steel products in 2025. European Union buyers accounted for around $641 million of the first category and $573 million of the second. Using these broad trade chapters, the EU absorbed almost 78 per cent of Serbia’s combined exports across the two categories and close to 88 per cent of primary iron and steel exports.
These figures are described as an outer boundary rather than the precise CBAM tax base. Ferrous scrap is excluded, and some finished products within the wider iron and steel articles chapter are not presently covered. Even with those limitations, the mechanism extends across multiple product types including hot- and cold-rolled steel, coated products, bars, wire, tubes, pipes, structures, fasteners and fabricated components. The affected companies therefore extend beyond Serbia’s two principal steelmaking groups.
Serbia’s metalworking exports and employment linked to CBAM-covered products
The wider Serbian metalworking and electrical equipment sector generated exports of about €15.2 billion in 2025. This is equivalent to 46.1 per cent of Serbia’s merchandise exports. The sector employs roughly 197,300 people, including more than 54,000 in fabricated metal products. Steel is described as a key input supporting construction products, machinery, vehicle components and energy infrastructure across privately owned manufacturers in Vojvodina, Šumadija and central Serbia.
Within this export ecosystem, HBIS Group Serbia operates an integrated steelworks in Smederevo and a tinplate operation in Šabac. HBIS acquired the Smederevo assets in 2016 and has since become one of Serbia’s largest industrial exporters and employers. The company has capacity to produce approximately 2.2 million tonnes of finished steel per year and supports more than 5,000 jobs. Reported environmental investments exceed $300 million, while environmental compliance spending does not automatically reduce CBAM liability.
The Smederevo plant uses an integrated blast furnace and basic oxygen furnace route. Under CBAM requirements for embedded emissions calculations, this production pathway creates an accounting chain covering coke and other reducing agents, carbon contained in fuels and raw materials, carbonate use, graphite and electrodes, process gases, slag, waste streams and measurable heat flows. Emissions cannot be allocated by dividing total output across all exported products without process-level attribution.
Plant-level embedded emissions allocation for integrated producers
The Commission requires emissions to be allocated to defined production processes before being carried through relevant precursor materials. Sintered ore, pig iron, crude steel and rolled products must be connected through mass flows that reflect production losses and differences between product categories. Where one tonne of a finished product requires more than one tonne of crude steel or slab due to cutting, trimming, scale or rejects, embedded emissions associated with the larger precursor quantity remain attached to the saleable output.
This approach affects HBIS because it sells products across several customs classifications while operating different production and finishing stages. A hot-rolled coil from Smederevo, a cold-rolled product and tinplate processed in Šabac may share upstream emissions but do not necessarily yield the same CBAM result. Each route requires defensible production data, documented transfers between installations and a methodology designed to prevent omissions and double counting.
The Commission guidance allows a combined or “bubble” approach for installations producing two or more iron and steel product categories when internally produced precursors are not sold separately. Once a precursor is sold outside the defined production process, separate accounting is generally required. For an integrated business model, this makes the boundary between internal transfer and external sale a financial issue rather than only an organisational choice.
Waste-gas accounting examples under CBAM guidance
Waste gases are identified as another potential source of error in embedded emissions calculations. Blast furnace gases and coke oven gases may be consumed elsewhere within an installation to produce heat or electricity. Their carbon cannot be counted once in the originating production process and again when burned elsewhere.
A worked blast furnace example described by the Commission shows that correcting such double counting removed almost 479,000 tonnes of CO₂ from reported direct emissions for that example installation. The example is stated as illustrative rather than representative of Smederevo but used to demonstrate how accounting structure can change results. The same example reports total embedded emissions of 1.567 tonnes of CO₂ per tonne of finished steel.
In that worked example calculation, total embedded emissions include 1.539 tonnes of direct emissions plus 0.028 tonnes associated with electricity used for sinter production. After free-allocation adjustment is applied in the example scenario, an import of 10,000 tonnes of rails required 3,690 CBAM certificates or 0.369 certificates per tonne. The figures are not presented as default assumptions for HBIS because actual plant emissions may vary with fuel efficiency, burden composition, yields, waste-gas treatment and product mix.
Scrap-based electric arc route at Metalfer Steel Mill
Serbia’s other major steelmaking route is represented by Metalfer Steel Mill in Sremska Mitrovica. The privately held producer operates an electric arc furnace with rolling facilities sized at annual capacity in the range of 0.5 million to 0.6 million tonnes. It produces reinforcing bar, rebar in coils and wire rod using steel scrap sourced within Serbia.
Metalfer’s scrap-based model creates a different emissions profile under CBAM calculations compared with integrated routes using blast furnaces. Scrap generally enters CBAM calculations with zero embedded precursor emissions; however its carbon must still be included in the installation’s carbon mass balance. Direct emissions continue through fuels, electrodes, carbon additions, alloys and other materials. Scrap origin, grade and pre-consumer content must also be documented.
The guidance notes that electric arc furnace production is electricity-intensive but highlights a distinction within current CBAM rules for goods listed in Annex II. For those goods, only direct emissions are normally included while indirect electricity emissions are currently counted for sintered ore but not as a separate charge on most final steel products. Renewable electricity can reduce operating costs and exposure to power-price volatility but does not automatically reduce certificate obligations on every tonne exported as rebar or wire rod.
Financing for renewable energy at Metalfer
Metalfer has secured development financing intended to support renewable energy deployment alongside other measures affecting energy use and emissions reduction. Austria’s Development Bank provided a €25 million facility in 2022 followed by another €20 million in 2023. The funding supports renewable energy projects including solar capacity as well as wastewater treatment, energy efficiency improvements and emissions reduction activities.
The combined €45 million package is presented as an example of financing Serbian steel companies may increasingly require: longer-tenor capital linked to measurable environmental and operational improvements rather than general corporate borrowing alone. The financial advantage from electric arc routing remains dependent on record quality under CBAM guidance requirements for weighted averages when combining different production routes or precursor sources across reporting periods or electricity supplies.
The guidance also requires disclosure of parameters including scrap consumption per tonne, share of pre-consumer scrap, alloy composition plus carbon and metal content of ferroalloys used in production inputs. A low-carbon claim without auditable material flows is described as having limited value under the definitive CBAM regime because verification depends on documented inputs rather than assertions.
Downstream fabricators face procurement-linked embedded emissions
The downstream implications are illustrated by Unipromet, a family-owned manufacturer based in Čačak founded in 1989. Unipromet employs around 650 people and reports annual turnover of approximately €102 million while operating facilities in Čačak and Kraljevo. Its portfolio includes road safety barriers, welded steel pipes, noise barriers, traffic signs as well as steel structures for solar installations and carports.
Unipromet recently supplied around 65 kilometres of steel safety barriers for the Vrnjačka Banja–Vrba section of the Morava Corridor. This type of activity places Serbian fabricators between domestic infrastructure demand and export markets while extending CBAM considerations beyond furnace operations into procurement decisions upstream from fabrication steps.
For producers making pipes, structures or fasteners, most embedded emissions can sit in purchased steel rather than within fabrication processes alone. Commission worked examples place precursor shares at more than 90 per cent of total embedded emissions for certain fasteners and at 94.3 per cent in one stainless-steel electric arc furnace example cited in guidance materials.
Verification requirements for customs codes and reporting records
The guidance indicates that cutting losses can affect allocation even when some fabrication steps fall outside defined process boundaries for certain goods categories under CBAM rules. If 1.18 tonnes of steel input are needed to deliver one tonne of fasteners then embedded emissions tied to the full input quantity are allocated to the tonne sold as finished output under CBAM accounting logic described by the Commission examples.
Selling scrap generated during fabrication does not remove upstream carbon already attributed to purchased material used before cutting losses occur during manufacturing operations described for downstream cases like fasteners production.
A company such as Unipromet must know customs classification for each exported product along with origin details plus embedded emissions associated with its steel inputs used during precursor periods covered by reporting requirements. It also needs confirmation that supplier emissions reports have been verified by an appropriately accredited verifier since generic certificates stating that steel is “green” do not meet evidentiary standards described under Commission guidance.
Monitoring plans language rules; record retention period
The Commission guidance requires monitoring plans and emissions reports to be available in English while supporting records must be retained for six years after reporting obligations apply during CBAM implementation timelines described by the document framework referenced here.
Actual precursor data from another installation can be used only when accompanying verification matches the correct sectoral scope and reporting period relevant to each calculation instance under CBAM rules referenced by the guidance materials discussed here.
If verification does not match required scope or timing then European importers may have to apply default values instead of verified actual data supplied by exporters or their upstream suppliers.
Contracting risk: default values versus verified product-level data
The document describes concentration risk for smaller Serbian fabricators when European customers demand standardized data formats plus contractual warranties tied to calculation outcomes under CBAM requirements.
Larger European customers can request data submissions structured according to customer compliance processes while passing calculation errors back through supplier contracts where responsibility is assigned contractually between parties involved in supply chains.
This can lead to a two-tier supply chain where companies able to provide verified product-level embedded emission information retain access to high-quality customers while those relying on default values compete through discounts tied to lower price offers relative to certificate obligations faced by importers.
CBAM liability sits with EU importers; costs flow through contracts
CBAM formal liability rests with authorized European importers under the mechanism design referenced here even though economic costs migrate through commercial contracts between buyers and suppliers exporting from Serbia into the EU market.
Bidders can reduce ex-works prices or introduce carbon adjustment clauses based on certificate outcomes while also demanding security for future corrections or switching suppliers where embedded emission records are considered more reliable by buyers during compliance reconciliation processes after imports occur.
Serbian exporters may also face longer payment cycles while European customers reconcile certificate requirements against monitoring reports submitted under CBAM rules during definitive period operations described here.
Illustrative cost sensitivity using €80 per tonne CO₂
The scale of risk is illustrated without forecasting future EU carbon prices using €80 per tonne of CO₂ as a reference value applied within Commission guidance on assessing unreasonable monitoring costs under CBAM implementation materials referenced here.
Under that reference value framework every 0.1 tonne increase in certifiable emissions per tonne of steel corresponds to €8 per tonne product cost difference described here based on how monitoring cost reasonableness is assessed within guidance materials cited by this account.
Across annual sales volume cited at 500,000 tonnes this difference becomes €4 million while a gap of 0.5 tonnes CO₂ per tonne between verified actual data versus an adverse default assumption would imply €20 million impact according to this illustration method presented here using only values stated within Commission guidance references cited above.
Tighter EU quota rules from July 2026; melt-and-pour origin checks
CBAM is described as arriving alongside tighter conventional trade protection measures affecting Serbian exports into the EU market from mid-2026 onward based on safeguard arrangements referenced here.
From 1 July 2026, the EU reduced its tariff-free steel import quota to 18.3 million tonnes per year, about 47 per cent below volume allowed under a previous safeguard arrangement cited here; imports above quota face a 50 per cent tariff, double the former rate described here.
The new regime introduces a “melt-and-pour” origin requirement intended to identify where steel was originally produced rather than where it received final processing steps before import into the EU market under implementation timetable referenced here pointing toward detailed implementation by end August with application from 1 October 2026.
Elevated by CBAM.Clarion.Engineer