EU CBAM: Will Indian steel become up to 35% more expensive?
EU CBAM: Will Indian steel become up to 35% more expensive?

23 March 2023 – Things are not going well for Indian steel at the moment. Latest challenge: EU CBAM. India would like to have a free trade agreement with the EU, but the Carbon Border Tax CBAM could make Indian steel up to 35% more expensive to import into the EU. Trafigura CEO warns that LME nickel benchmark does not reflect reality and calls for reforms. And is the reintroduction of EU base prices for stainless steel on the horizon?

Will Indian steel become up to 35% more expensive?

The EU Carbon Border Tax CBAM is scheduled to start on 1 October 2023. Even though many questions remain unanswered, a final regulation between the EU Parliament and member states has not yet been decided and there is not even a competent authority, forms, a digital platform or a calculation key.

India’s production to CO2 intensive for CBAM?

The EU border tax on imports of CO2-intensive products, such as cement, fertiliser, aluminium or steel, is increasingly causing headaches for Indian companies. The European Union and India have been trying for some time to reach a free trade agreement that, with the introduction of CBAM, could turn into a disaster for Indian industry.

Will India’s steel exports fail because of the EU Carbon Border Tax?

Indian experts currently believe that the introduction of CBAM could increase the price of Indian products by up to 35%. India’s main problem is that it generates almost all its electricity from coal. And alternatives are not yet in sight.

Thus, the free trade agreement between India and the European Union would be nice, but the products of key Indian industries like steel and cement would no longer be interesting for the EU market if up to 35% of CBAM tax will be added.

Trafigura CEO calls LME nickel contract unsustainable

We have been confirmed by one of the leading experts, Jeremy Weir, CEO of Trafigura, one of the largest commodity traders in the world. Speaking to the FT, Jeremy Weir warns that the London Metal Exchange (LME) global nickel benchmark does not reflect the reality of nickel trading and that the contract needs urgent reform.

Nickel products increasingly differentiated

For months we have been pointing out that the nickel traded on the LME is a high-purity product and is of only minor importance for the battery market, for example. This differs significantly in composition from nickel sulphates and other derivatives for battery production.

Also, the nickel traded on the LME is different from that used in the production of stainless steel, for example. And yet it is used by the large EU plants as the basis for calculating their alloy surcharge.

The market has also been further complicated in recent years by Chinese nickel producers in Indonesia. Which has led to products that cannot be supplied against the LME contract.

Time for a fresh start?

It is becoming increasingly clear that there needs to be a complete reboot for global nickel benchmark value. Probably even outside the LME. Too many scandals, too much lack of transparency, too much loss of confidence. The only question is: Who is brave enough for such a new start?

Is the base price for EU stainless steel lurking on the horizon?

It is becoming increasingly obvious that the US derivatives of the major European stainless steel producers have now clocked their April 2023 alloy surcharges at the same level as those of their parent companies.

“Well are you going to play with base prices again soon, looks like it or?” Thorsten Gerber, CEO of Gerber Group, posed this question this morning.

EU-US alloy surcharges differ significantly in some cases

This is because the EU and US alloy surcharges have been diverging for months, sometimes significantly, although they use the same benchmark prices for raw materials on both sides of the Atlantic in most cases and the stainless steel grades are almost identical in composition.

Is the EU Base Price now coming back?

The current adjustments in alloy surcharges could thus be the preparation for a reintroduction of base prices for stainless steel in Europe. Or what do you think?

Latest news

Receive all the latest news once a week

Receive all the latest news once a week

Make it easy for yourself: we will remind you once a week about the latest news.

Join our mailing list to receive the latest news and updates from our team.

You have Successfully Subscribed!