European steel procurement increasingly links mill-level emissions data, 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 affect the import cost calculation.
For European buyers, the financial comparison depends on product-specific emissions information. It also requires the applicable adjustment for EU ETS free allocation and any eligible deduction for carbon prices paid in the country of origin. National emissions averages may not reflect the position of an individual installation, which can affect comparisons between steel suppliers.
CBAM free-allocation benchmarks and certificate-price effects
The CBAM free-allocation adjustment is determined using a relevant benchmark and factor. It does not apply a uniform percentage charge to all embedded emissions. In an explanatory example, the European Commission uses 1.2 tonnes of CO2 equivalent per tonne of goods and a benchmark of 1 tonne.
Applying the 97.5% factor for 2026 results in 0.225 tonnes of CO2 equivalent per tonne of goods before other adjustments. This is described as approximately 19% of the original embedded emissions. At the third-quarter 2026 certificate price of €82.32/tCO2e, that remaining quantity corresponds to approximately €18.52 per tonne of goods.
The example is intended to illustrate methodology rather than provide a CBAM quotation for a specific steel grade or production installation. Actual exposure depends on applicable product parameters, verified emissions data and the relevant adjustments. The calculation also depends on whether eligible deductions apply for carbon pricing paid in the country of origin.
Verified-emissions differences can exceed 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 delivered pricing interacts with covered-emissions calculations rather than on factory-gate figures alone.
Other variables also affect purchasing decisions, including steel grade, delivery schedules, transport costs, credit periods and applicable trade measures. Production economics remain relevant as well; for example, an electric-furnace mill may have lower covered carbon liability but higher manufacturing costs due to expensive electricity or limited scrap availability.
Upstream precursor emissions influence CBAM calculations
The emissions profile of finished steel can include production stages preceding rolling or finishing. A processing facility with relatively low emissions at its own site may still rely on 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 CBAM methodology. Buyers therefore need information linking materials to their production sources so that emissions calculations can be supported.
Suppliers able to provide consistent records covering installations, quantities and relevant precursor emissions can improve certainty when European customers compare import costs. If information is incomplete, a purchasing calculation based on an emissions value may not be substantiated when the import declaration is prepared.
Contract clauses determine responsibility for carbon-cost outcomes
Supply agreements need to specify whether quoted prices include expected carbon costs. They also need to define how emissions records must be provided and how parties will respond if the importer must use a different emissions value during CBAM assessment.
A fixed steel price does not necessarily settle who bears carbon-related expenditure when an emissions clause remains unresolved. Disagreements may 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 offer more predictability where production routes and emissions documentation remain stable, while shorter arrangements can leave buyers more exposed to differences between quoted assumptions and final calculations.
Installation-level data becomes central to supplier 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 competitiveness, but they do not automatically outweigh differences in electricity costs, scrap availability, transport costs, financing terms or product quality.
For exporters serving the EU, the commercial test is 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 without relying only on national averages or headline factory-gate prices.