- EU entities must buy CBAM certificates for FeCr, FeMn starting in Jan 2027
- European ferromanganese and ferrochrome producers likely to benefit
- Importers of high-carbon FeMn, FeCr will pay another 5%-10%
The EU Carbon Border Adjustment Mechanism is set to reshape the European metals landscape, aiming to address the long-standing issue of carbon leakage and carbon accounting.
The EU aims to price carbon emitted during the production of carbon-intensive goods entering the EU and to encourage cleaner production outside of the EU.
The EU’s CBAM is currently in the transitional phase, which means that companies are reporting on the quantity or material imported and declaring emissions embedded in imports expressed in CO2 equivalent.
From January 2027, European entities under scope must purchase the corresponding number of CBAM certificates and check if goods are carbon priced in the country of export or buy CBAM certificates.
Small and medium-sized enterprises are particularly vulnerable to these cost pressures, as they often lack the resources to absorb additional expenses.
Ferrochrome
Essential to the production of stainless steel, the inclusion of chromium in the CBAM taxation would likely drive the overall price of stainless steel up, according to market sources. Around 10.5% of chrome is necessary to produce stainless steel, but most grades contain superior concentration of chrome such as 304 austenitic stainless steel which would contain 18%, improving corrosion resistance.
Europe currently relies on imports of chrome ores and ferrochrome for its stainless-steel industry, mainly from South Africa and Zimbabwe, Kazakhstan, Turkey China and India. The only chrome ore mine in the EU is in Kemi, Finland, operated by Outokumpu, and ferrochrome production plants are located in Germany and Sweden, supplying domestic market in high-carbon ferrochrome.
During the transitional period between Oct. 1, 2023, and Dec. 31, 2025, the European Commission set a default value of carbon intensity of for ferrochrome at 2.07 mt of CO2e/mt direct emissions. Applying the default value to FeCr imports would imply on average, an increase of 5% of the costs of ferrochrome for importers.
European producers will most likely benefit from a comparative advantage from its competitors outside the EU as their production will not fall under CBAM. On April 3, Outokumpu declared its ferrochrome production in Finland to have 67% less carbon footprint than the world average, with resources ensured until 2050s without major investments.
In 2023 however, non-EU imports remained the principal supply of chrome and ferrochrome for European consumption.
Ferromanganese
Ferromanganese is used in the steel industry as a deoxidizing agent in steel production and as an alloying element to improve the strength, toughness, and wear resistance of steel in blast furnaces.
As an example, Platts assessed 76% Mn ferromanganese on a DDP NW Europe basis at Eur1,010-1,075/mt on April 23, Eur1,042.5/mt on the midpoint.
For this week, the previous week’s average cost of a CBAM certificate cost was Eur65.86/mt CO2 equivalent, times this by 1.44, which is the default value for ferromanganese, comes to a total cost per ton of Eur94.83/mt CO2 equivalent.
Using the midpoint of the assessment on April 23 and the CBAM cost, the total cost for import to a European end-user would be Eur1,138/mt, an increase of 9.1%.
“We benefit from CBAM, but there are a lot of question marks around it,” a European producer said. “Will the legislation be expanded to medium carbon ferromanganese, and will this be the final implementation of CBAM?”
The producer added that there is uncertainty in the market around the timelines for CBAM and whether it will be delayed, which is something that market participants have raised during discussions with Platts.
Generally, market participants told Platts that the market was in a state of uncertainty around CBAM and expected the new legislation to be delayed. Similarly to ferrochrome, European ferromanganese producers are likely to benefit from CBAM come 2026.
The winners and losers
Those importing high-carbon ferromanganese and ferrochrome will have to pay an additional cost of around 5%-10% on these raw materials.
There remains market uncertainty on whether CBAM will eventually cover other grades like medium-carbon ferromanganese, if default values will change, or ultimately, if CBAM will come into effect from January 2026.
While those European producers of ferrochrome and ferromanganese in Europe will likely be at an advantage to importers, the question remains whether importers of ferromanganese and chrome will remain competitive after the financial obligations begin.
Moreover, in light of productions cuts in South Africa — the latest one announced on April 29 — coupled with uncertain economic outlook, and the ongoing trade tensions between the US and China, market participants were uncertain about the definitive impact of CBAM on the ferroalloys market.
By Nathan Day and Teo Ngoma , S & P Global Platts
