Ukrainian steel producers will suffer from the Carbon Emissions Management Mechanism

According to a recent study by the Ukrainian GMK Center, pig iron and rolled products production in Ukraine will suffer large losses due to the Carbon Management Mechanism (CBAM) in Europe from 2026.

According to the study, almost 93% of Ukrainian exports subject to CBAM regulation are from the metallurgical sector.

“In Ukraine, 89% of steel is produced by the open-hearth or oxygen-converter method, which means a fairly high average carbon intensity - 2.3 tons of CO2 per ton of steel. This indicator applies to both billets and rolled products such as rebar, wire rod and other types of rolled products,” it adds.

GMK Center suggests that Ukraine may lose all exports of billets and rolled products as a result of the introduction of CBAM. The reason is that Ukrainian billets and rolled products will not be competitive compared to products produced by the electric steelmaking process in the EU, where the average carbon intensity of the electric steelmaking process is 0.3-0.4 t CO2 per tonne of steel, he argues.

“Iron sales could also stall as CBAM iron supply payments could reach $160 per tonne in 2030, which would mean the iron segment could be largely replaced by imported HBI, which is booming in the Middle East and North Africa.” , the study notes. “Ukrainian companies export 55,000–60,000 tons of steel products to the EU every year, and not all of them have initial production of iron or steel. Since steel products are subject to CBAM regulation, they must also provide data to EU importers for CBAM reporting.”

The study concludes that collecting such data can be difficult, especially if the company is not directly involved in the production of iron or steel, and CBAM can become a new technical barrier to trade and increase administrative costs for small and medium-sized exporters and importers.

Difficulties in providing data will negatively affect the prices of exported products, it adds. In addition, it is emphasized that CBAM will be distributed throughout the world, so access to export markets for Ukrainian goods is at risk.

In the first year of full implementation of CBAM, in 2026, Ukraine will lose $202 million in exports, and in 2030 this figure will increase to $1.44 billion per year, calculated the GMK Center.

Earlier, the Ukrainian metallurgical association Ukrmetallurgprom called on the Ukrainian government to begin negotiations with the EU regarding the transfer of CBAM for Ukraine, regarding the war as a force majeure circumstance