The European Union’s Carbon Border Adjustment Mechanism (CBAM) is creating new competitive distinctions among metals suppliers. Product coverage, electricity sources, industrial emissions and verification capabilities are cited as factors influencing the position of exporters supplying the European market. The competitiveness of China, Indonesia, South Africa, Kazakhstan, Turkey and the Western Balkans depends not only on production costs and capacity, but also on which goods they export and whether they can substantiate associated emissions.
Covered products determine whether exporters face CBAM costs
The mechanism establishes an initial split between suppliers of covered and non-covered materials. Iron ore pellets, ferrochrome, ferronickel, steel and aluminium can fall within CBAM coverage. Copper cathodes, lithium carbonate, cobalt, graphite and rare-earth oxides are generally outside the current scope.
As a result, exporters from the same country can encounter different conditions in Europe based on product portfolios and customs classifications. The treatment of nickel products illustrates how product-level differences can affect exposure. Ferronickel is covered by CBAM, while several other nickel products are not.
Indonesian exporters may therefore see different European market economics depending on whether they ship ferronickel, matte, refined nickel or another intermediate product. For investors and trading companies, the precise customs code and a product’s position in the value chain are described as key considerations when assessing exposure to the mechanism.
China’s scale varies by region and facility emissions
China combines large-scale processing capacity with integrated supply chains, established infrastructure and industrial clusters. It is described as a major producer of steel and aluminium and a leading processing centre for numerous critical materials. The emissions profile of Chinese production is reported to vary between regions and individual facilities.
Coal-intensive electricity can increase the carbon intensity of covered goods, while additional renewable capacity and more efficient installations can support lower emissions. CBAM is described as not applying a uniform penalty across all production from a given country. Instead, treatment of covered goods is linked to embedded emissions, applicable calculation methodology and any carbon price paid that is recognised under the mechanism.
A Chinese manufacturer able to demonstrate low actual emissions may be better positioned than a competitor where emissions are assessed using higher default values. This difference is tied to how embedded emissions are calculated under CBAM rather than to country-level production alone.
Indonesia’s nickel processing depends on what is exported
Indonesia has developed domestic processing capacity through mineral policy and large-scale investment rather than relying solely on nickel ore exports. Coal-based electricity has supported much of this industrial expansion. The model is described as establishing a strong cost position in nickel units, while some production routes can carry high carbon intensity.
The implications for European trade depend on the specific material exported and whether it falls within CBAM’s existing product boundary. Producers, traders and investors assessing Indonesian nickel processing are therefore exposed to product-specific treatment under EU rules.
Different products from the same industrial base may receive different treatment under EU requirements. In that context, product classification is described as central to evaluating potential carbon costs and market access for exports into Europe.
Ferrochrome competitiveness hinges on power supply and verified emissions
South Africa holds an important position in ferrochrome and other mined materials. Ferrochrome is used in European stainless steel production and is included within CBAM coverage. South African smelters have faced persistent electricity-supply challenges, making the carbon intensity of their power supply a commercial variable.
Producers that secure renewable electricity or improve furnace efficiency may be able to demonstrate lower emissions for covered products. This could strengthen their position with European customers where covered goods are supplied under CBAM rules.
Kazakhstan combines mining with ferroalloy production and access to comparatively low-cost energy. The country is described as a major producer of ferrochrome and other metals with strategic geographic connections to Europe. For Kazakh exporters in covered categories, competitiveness depends partly on the emissions characteristics of the electricity system.
The ability of individual facilities to supply reliable, verified emissions information is also cited as important. Energy costs alone are described as insufficient to determine relative positioning among producers competing for European orders.
Turkey’s integration increases emphasis on MRV systems
Turkey has close industrial links with Europe and serves as a partner in steel and metal processing. Its integration into European supply chains provides an incentive for exporters to develop systems meeting CBAM monitoring, reporting and verification requirements. Geographic proximity can reduce transport costs and delivery times for shipments into EU markets.
Those advantages may be weakened where production relies on carbon-intensive electricity or where suppliers cannot provide robust emissions evidence. For Turkish manufacturers, establishing reliable emissions monitoring and documentation systems is described as relevant to maintaining access to European industrial customers as procurement requirements become more prominent.
Western Balkans suppliers tie renewable power procurement to export readiness
Serbia, Montenegro, Bosnia and Herzegovina, North Macedonia and Albania have differing combinations of steel, aluminium, ferroalloys, mining and electricity production. Their proximity to the EU provides opportunities to supply European customers with shorter logistics chains. Competitive positions vary with industrial structures and the carbon intensity of local electricity systems.
Renewable electricity is described as having direct commercial implications for covered exports in the region. Power procurement arrangements including renewable power purchase agreements (PPAs) can be connected to plant-level metering, industrial emissions monitoring and documentation needed to substantiate emissions claims under CBAM.
Where such arrangements support lower verified emissions, they may strengthen relationships with European buyers while reducing expected CBAM burden. The commercial value of electricity investment is described as depending not only on power purchased but also on evidence linking that supply to industrial production.
From 2026, default values versus verified emissions affect importer costs
The verification of embedded emissions creates another dividing line between third-country suppliers. From 2026, EU importers can use European Commission default values or verified actual emissions under the applicable CBAM framework. Default values for iron and steel and aluminium are described as carrying increasing mark-ups.
Suppliers without robust monitoring and reporting systems may expose European customers to higher carbon costs than competitors able to provide verified installation-level emissions data. These differences can affect procurement decisions and negotiations among exporters, traders and importers supplying covered goods into Europe.
European buyers may increasingly incorporate emissions-data requirements into tenders while trading companies may prefer suppliers capable of delivering complete supporting documentation. Financing arrangements may also be affected because banks supporting export-oriented industrial projects may require investment in metering equipment, data-management systems and independent verification.
A proposed 2028 downstream extension could broaden coverage beyond basic metals
A proposed 2028 extension would apply CBAM to downstream goods with the stated aim of reducing incentives to relocate fabrication outside Europe before importing finished products containing substantial quantities of steel or aluminium. Different institutional positions have been advanced regarding potential coverage figures for additional goods.
The European Commission proposed 180 additional goods; the Council’s position covered approximately 200; and the European Parliament’s position included 457. These figures are described as reflecting differing institutional positions rather than a single agreed final list.
If a broad extension is adopted, manufacturers in third countries producing machinery, electrical equipment, appliances and industrial components could become exposed even if they do not currently export basic metals directly into Europe. The potential change is described as relevant for global mining supply chains where projects purchase substantial quantities of equipment from China, Turkey and other manufacturing centres.
Manufacturers using locally produced steel and aluminium could face greater requirements to document metal inputs and associated emissions when supplying the European market if downstream coverage expands sufficiently. The final scope would determine which additional products become covered and how far CBAM extends into downstream industrial trade.
Procurement shifts toward contractual responsibility for documented carbon costs
The competitive landscape described in relation to CBAM places greater emphasis on electricity origin, production efficiency, product classification and credibility of emissions data alongside conventional measures such as labour costs and electricity prices. For EU importers, sourcing strategies may involve supplier diversification along with explicit contractual responsibilities for emissions documentation.
Audit rights are also cited alongside provisions governing allocation of unexpected CBAM costs between parties involved in trade flows into Europe. For third-country manufacturers, investment in decarbonisation and verification is described as potentially strengthening their position in European trade where actual emissions can be demonstrated.
The ability to show actual emissions provides an advantage over competing suppliers whose carbon exposure is assessed using higher default values under CBAM rules. Differences in market access are described as depending on individual installations, covered products selected for export into Europe and the emissions evidence available to European customers rather than solely on country origin or nominal production cost.