Serbia’s steel and aluminium exporters are entering a more difficult phase of competition in the European Union as weak industrial demand, high energy costs and the EU’s Carbon Border Adjustment Mechanism increasingly converge in the price European buyers are prepared to pay.
The pressure is already visible at Impol Seval, one of Serbia’s largest aluminium exporters.
The Sevojno-based producer reported a standalone first-half loss of RSD 346 million, around €2.9 million, more than four times the RSD 86.7 million loss recorded a year earlier.
Operating revenue increased to RSD 11.6 billion from RSD 10.5 billion, but costs rose faster to RSD 11.9 billion, as higher raw-material, energy and service expenses outweighed increased production and internal efficiency measures.
Impol Seval exports around 96% of its production, mainly to the EU, making its results a useful indicator of the commercial pressure building across Serbia’s metals industry.
The problem is no longer simply whether Serbian producers can manufacture steel or aluminium cheaply enough to compete with European suppliers.
From January 1, 2026, iron and steel and aluminium are among the sectors covered by the definitive CBAM regime. EU importers above the applicable threshold must account for embedded emissions in covered imports and ultimately surrender CBAM certificates linked to the EU carbon price. (Taxation and Customs Union)
The Commission’s first two quarterly CBAM certificate prices were €75.36 per tonne of CO₂ for Q1 and €75.28/t for Q2. (Taxation and Customs Union)
That turns carbon intensity into an increasingly visible component of the commercial relationship between Serbian factories and European customers.
Steel carries Serbia’s largest metals exposure
The implications are particularly significant for Serbia’s steel industry.
Trade estimates based on 2025 flows put Serbian exports falling within the existing CBAM iron and steel perimeter at around €912 million, making steel the country’s largest individual CBAM goods exposure.
Aluminium accounted for roughly another €519 million.
Together, the two metals therefore represented around €1.43 billion of Serbian exports exposed to the current CBAM framework before electricity, fertilisers and cement are added. (cbam.rs)
The steel exposure is centred on HBIS Serbia’s Smederevo steelworks, Metalfer Steel Mill and a wider network of producers and processors supplying rolled products, tubes, structures, fasteners and other steel products to European markets.
The EU is particularly important to this chain.
Broader 2025 trade data indicate that EU markets absorbed the large majority of Serbia’s combined primary iron and steel and steel-product exports, meaning European carbon and industrial policy increasingly becomes part of the commercial environment in which Serbian producers operate. (cbam.rs)
For those exporters, CBAM creates a second competitive calculation alongside the conventional delivered price of steel.
The European customer increasingly needs to know not only how much a tonne costs at the Serbian factory gate, but also the embedded emissions attached to that tonne and the resulting CBAM exposure.
EU importer pays, but Serbian exporter supplies the evidence
The legal responsibility primarily sits on the European side of the border.
The authorised CBAM declarant must declare embedded emissions and surrender the required certificates.
But the information needed to calculate actual embedded emissions originates largely with the non-EU producer.
That effectively pushes part of the compliance process back through the supply chain to Serbia.
For imports made during 2026, the first annual CBAM declaration is due by September 30, 2027. Where actual emissions are used instead of Commission default values, the non-EU producer must provide emissions information capable of supporting the required verification. (Taxation and Customs Union)
That creates a commercial distinction between Serbian suppliers.
One exporter may be able to provide an installation-level monitoring methodology, production data, precursor information, controlled allocation methodology and verified embedded-emissions figures.
Another may provide only incomplete data, forcing the importer to rely on applicable default values.
The physical product can be almost identical.
Its effective cost to the European buyer may not be.
This is why CBAM is moving beyond the environmental department and into sales contracts, procurement, pricing and supplier selection.
European buyers have a direct financial incentive to understand the carbon exposure attached to their Serbian supply contracts before the certificates ultimately have to be surrendered.
Electricity matters — but the distinction is important
Electricity sourcing is becoming another competitive issue for Serbian metals producers, although the current CBAM rules require an important distinction.
Under the definitive regime as currently structured, iron and steel and aluminium are subject to CBAM on direct embedded emissions, while indirect emissions from electricity consumed during production are not currently included in their CBAM certificate liability.
Cement and fertilisers are treated differently and include indirect emissions. (Publications Office of the EU)
That means purchasing renewable electricity does not automatically reduce the current CBAM certificate requirement for a Serbian steel or aluminium exporter simply because its electricity is greener.
But that does not make electricity irrelevant.
Far from it.
For aluminium in particular, electricity is a major industrial cost. For steel, electricity becomes increasingly important as production routes move toward greater electrification.
Competitive renewable electricity can therefore improve operating economics even where its indirect emissions are not presently included in the CBAM charge.
It can also strengthen a Serbian supplier’s position with European industrial buyers pursuing their own decarbonisation targets and product-carbon-footprint requirements.
And the regulatory direction remains important.
The European Commission is already examining how indirect emissions could be extended to additional CBAM sectors, including the conditions under which actual electricity emissions might be recognised through mechanisms such as direct technical connections, power purchase agreements and verification. (Taxation and Customs Union)
For Serbian metals producers, electricity strategy is therefore becoming both a cost-management decision and a hedge against future carbon regulation.
Green electricity alone will not solve the problem
The commercial temptation will be to reduce the issue to buying renewable electricity or certificates.
That would be too simple.
For steel and aluminium, CBAM competitiveness depends on the emissions profile of the production route itself, relevant precursor emissions, reliable production and emissions data and the ability to demonstrate those figures through the required verification process.
A green power contract cannot erase direct emissions from a carbon-intensive production process.
Nor can a certificate substitute for incomplete installation-level CBAM evidence.
The stronger strategy is therefore broader: reduce physical emissions where economically possible, improve energy efficiency, secure competitively priced lower-carbon electricity, establish a robust monitoring system and prepare verified emissions data that can travel with the product through the EU importer.
The European Commission reinforced that direction in August when it issued definitive-period guidance specifically for iron and steel and aluminium, alongside separate guidance on calculation methodology and verification. (Taxation and Customs Union)
CBAM becomes a procurement issue
This changes the negotiating relationship between Serbian exporters and European customers.
Previously, a buyer could primarily compare price, specification, quality, delivery reliability and payment terms.
Carbon exposure is now another economic variable.
A Serbian producer capable of documenting lower actual embedded emissions can give its European customer greater certainty over future CBAM costs.
A producer unable to provide reliable verified information creates uncertainty that the importer may seek to compensate for through lower purchase prices, contractual protections or a different supplier.
The financial obligation remains with the EU declarant, but commercial markets are unlikely to leave the cost there.
Importers can attempt to transfer CBAM exposure upstream through procurement negotiations.
That makes verified emissions data increasingly similar to another product specification.
For Serbia, this is especially important because the EU remains the country’s dominant merchandise-trade partner, accounting for 58.6% of total Serbian goods trade in January-July 2026. (Statistika Srbije)
Steel and aluminium producers cannot easily treat CBAM as a peripheral export requirement when their principal customers operate inside that market.
Impol Seval shows the margin problem
Impol Seval’s first-half results illustrate why the timing is difficult.
The company increased output to 26,119 tonnes, up 1.4% year on year, while revenue also increased.
Yet profitability deteriorated because input costs rose faster.
The company has responded by increasing prices and shifting more production toward its foundry, including less processed and lower-value products.
That may protect utilisation, but it also exposes the weakness of competing primarily through volume.
CBAM adds another reason for Serbian metals producers to move in the opposite direction — toward products where processing, technical specification, traceability, lower emissions and verified data support higher value per tonne.
The same argument applies to steel.
Serbia’s long-term competitiveness in the European market will depend less on simply exporting additional tonnes and increasingly on whether those tonnes can be delivered with a competitive combination of price, carbon intensity and verifiable evidence.
That creates opportunities as well as costs.
Serbian steel and aluminium producers that establish credible emissions monitoring, improve energy efficiency and secure predictable lower-carbon electricity can potentially differentiate themselves from higher-carbon suppliers competing for the same European customers.
The strongest commercial proposition would not be “green steel” or “green aluminium” as a marketing label.
It would be measurable: a named installation, documented production route, controlled precursor data, calculated embedded emissions and a verification conclusion that allows the EU buyer to understand the carbon exposure attached to the shipment.
For Serbia’s metals industry, CBAM is therefore becoming something larger than another EU compliance requirement.
Impol Seval’s widening loss already shows what happens when revenue and tonnage rise but production economics deteriorate.
The next competitive test for Serbia’s steel and aluminium exports will be whether producers can combine lower operating costs, cleaner electricity and verified emissions data strongly enough to protect margins when European buyers start pricing carbon into the contract itself.
The key positioning is now sharper: green electricity is a competitive advantage, but not a shortcut around CBAM. For steel and aluminium in 2026, the immediate CBAM liability focuses on direct embedded emissions; electricity sourcing matters through cost, buyer requirements and preparation for potential future inclusion of indirect emissions.
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