The Carbon Border Adjustment Mechanism (CBAM) applies to selected industrial goods entering the European Union, while China supplies a large share of several processed critical-mineral inputs. Eurostat data for 2025 indicate that EU reliance on Chinese supply varies across mineral markets. The difference between dependence on Chinese processing and CBAM’s current product coverage is relevant to both industrial sourcing and carbon regulation.
In 2025, China accounted for 92% of EU magnesium imports by value. It also supplied 77% of gallium imports and 68% of ferro-tungsten imports. For natural graphite, China provided 43% of EU imports by value, and it was also the EU’s leading supplier of rare-earth products.
CBAM coverage includes some industrial inputs, not many critical minerals
CBAM requirements apply when certain covered goods enter the EU market, including Chinese aluminium imports, covered steel products and certain ferroalloys. Several other critical materials are outside the mechanism’s current scope, including magnesium, gallium, graphite supplies, rare-earth products and ferro-tungsten. As a result, CBAM addresses only part of Europe’s dependence on Chinese processing capacity.
These materials support multiple industries across the economy. Aerospace and defence manufacturers use specialised metals and rare earths, while graphite is important for battery production. Magnesium, ferro-tungsten and other processed materials also serve steelmaking, electronics and renewable energy technologies.
The source materials highlight that supply-chain disruptions could affect several sectors at once. The mechanism’s product boundaries therefore intersect with industrial input availability in ways that do not cover all critical minerals used in downstream production. This creates a gap between carbon-border compliance coverage and the broader set of inputs tied to Chinese processing.
Different carbon-border obligations apply depending on the product exported
The CBAM framework places different requirements on Chinese producers depending on which goods they export to the EU. For covered products such as aluminium entering the European market, an aluminium smelter must account for emissions associated with those covered goods. Under the current framework, producers of magnesium metal, rare-earth oxides or natural graphite generally do not face the same direct carbon-border mechanism.
The mechanism can therefore create different incentives for emissions reductions across product categories. For manufacturers exporting covered goods, reliable emissions reporting and lower carbon intensity can matter for competitiveness in Europe. Producers supplying materials outside CBAM’s scope face different market pressures even if their inputs are important to European industrial supply chains.
The source also notes that Europe’s dependence on China extends beyond extraction of raw minerals. Processing capacity, refining expertise and established industrial networks give Chinese suppliers a strong position in markets where alternative sources may be limited. CBAM can influence the carbon performance of covered imports but does not automatically drive equivalent changes across the critical-minerals supply chain.
Diversifying mineral supply requires measures beyond carbon pricing
Carbon pricing cannot replace raw-material diversification in the source account. Extending CBAM to additional products could change trade incentives but would not immediately create new mines, processing plants or commercially viable substitute technologies. Alternative supply chains require investment, infrastructure, skilled labour, access to energy and long-term demand commitments.
The requirements are described as particularly demanding for specialised minerals and processing operations. Establishing competitive capacity can take considerable time when compared with shorter-term policy adjustments. The Critical Raw Materials Act (CRMA) and related industrial policies are presented as remaining important parts of the EU strategy in this context.
The source further links diversification efforts to international partnerships and recycling. Recycling is described as a way to reduce reliance on newly extracted materials. It also points to strategic stockpiles and procurement arrangements as tools intended to strengthen resilience against supply disruptions.
A proposed downstream expansion could broaden CBAM relevance for manufactured goods
The evolving carbon-border framework is described as relevant to Chinese manufacturers beyond goods already covered under CBAM. A proposed extension to certain downstream goods from 2028 could bring additional industrial equipment and fabricated products within CBAM’s scope. Any change would depend on the final scope and implementation details of that proposal.
If implemented as described, the extension could increase the importance of carbon intensity for steel and aluminium used in goods manufactured for the EU market. Suppliers with reliable emissions data and demonstrably lower-carbon inputs could be better positioned than competitors relying on default emissions values. The proposed change is also described as not resolving Europe’s reliance on Chinese supplies of critical materials that remain outside CBAM.
The direction of EU policy is described as giving Chinese producers an incentive to strengthen emissions monitoring and documentation where their products or downstream customers are exposed to CBAM requirements. The potential effect on trade would depend on how the downstream extension is ultimately designed.
Competitive dynamics depend on processing capacity and supply-chain security
The source describes broader strategic competition between China and Europe as increasingly shaped by carbon policy, processing capacity and supply-chain security. It states that China’s position draws partly on depth in its processing industry and its role in supplying materials used in advanced manufacturing. Europe is seeking to combine carbon pricing with efforts to develop alternative sources and reinforce its domestic industrial base.
CBAM is described as changing competitive conditions for selected imports, particularly covered steel and aluminium products. However, its reach remains limited in areas where European reliance on Chinese suppliers is especially pronounced. The policy challenge is presented as extending beyond whether to expand the carbon border toward how climate measures align with investment, recycling, strategic procurement and diversified sourcing.
The source concludes that reducing emissions associated with covered imports will not necessarily reduce vulnerability to concentrated supplies of critical minerals without a broader industrial framework focused on those inputs.