19 December 2022 – EU member states and the European Parliament seem to have reached an agreement on ETS allowances and CBAM. Import industry achieves minimum level playing field vis-à-vis European steel producers? New EU sanctions hit Russian mining sector. And 40,000 MT nickel less than predicted for 2022?
ETS and CBAM: EU member states and parliament reach agreement
Already last week, the EU Council and the European Parliament reached a preliminary agreement on the Carbon Border Tax CBAM. Last weekend, a (provisional) agreement was also reached with regard to the future design of the ETS allowances.
Free ETS certificates or CBAM?
According to this agreement, there will still be a free allocation of ETS certificates for the biggest polluters in the EU, the steel, aluminum, cement and fertilizer producers, and thus subsidization of CO2 emissions beyond 2030.
But, and this is quite respectable, member states and parliamentarians do not seem to have agreed on a double protection by CBAM and free ETS certificates, contrary to the demands of e.g. EUROFER.
To the extent that ETS allowances are allocated free of charge in the future, the CBAM measure must be curbed accordingly. If only for reasons of conformity with the rules of the World Trade Organization (WTO).
EU import industry with minimum level playing field
We are pleased that not only our comments on the large CBAM gaps for hydrogen (H2) and Direct Reduced Iron (DRI), but also our concerns about the problematic double protection of EU steel producers through subsidies in the form of free ETS certificates and the simultaneous application of the market protection measure CBAM, have been taken into account. As a result, the European import industry has now also been granted a minimum level playing field in the areas of steel, aluminum, cement and fertilizer.
Raw materials: New sanctions against Russia
The EU member states agreed last week on new sanctions against Russia. Although the 9th sanctions package is seen by some as watered down, it hides a few powerful measures that could have a lasting impact in 2023.
In particular, with a few exceptions, extensive bans on investment in Russian mining and extraction have been enacted.
Russian raw material producers with procurement problems
Together with the export restrictions on products that can be used in the mining sector or for raw material production, Russian raw material producers are likely to have difficulty in acquiring the necessary investment capital and, on the other hand, the high-quality machines and products. The extreme climatic differences in Russia in particular contribute to massive wear and tear on cost-intensive mining equipment.
Underfunding, sanctions and restrictions
Goldman Sachs had recently predicted a major problem in the current underfunding of commodity mining and processing in 2023. This underfunding, together with a lack of investment in mining expansion and conservation, is expected to be met with a dramatic increase in demand in the coming year. The new EU sanctions will thus very likely contribute to a tightening of the procurement situation.
Will nickel surplus be significantly lower?
The figures of the International Nickel Study Group (INSG) have already raised eyebrows in the past. The latest INSG publication is likely to have raised some eyebrows. Whereas recently there was still talk of a significant nickel surplus for 2022, the latest figures from December 2022 indicate that there will probably be almost 40,000 MT less nickel than previously assumed.
Combined with the investment backlog in raw material production, EU sanctions on Russian mining investments, and export restrictions on machinery and equipment, this could be another predictive situation for nickel production in 2023.
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