UK CBAM to impact stainless steel imports
Plans to introduce Carbon Border Adjustment Mechanism (CBAM) import regulations in the United Kingdom may have cost implications for the nation’s stainless steel supply.
The UK is already reliant on stainless steel imports and, as such, currently imposes no safeguard measures or other trade defence restrictions on overseas material. However, tariffs based on steel products’ embedded carbon emissions are likely to be introduced by CBAM, which will come into force by 2027.
A total of 282,212 tonnes of stainless steel imports entered the UK in 2022. That figure has declined by 7% in five years. Year-to-date to the end of October, UK stainless steel imports were down 11.6%, ISSB data shows. However, the decline reflects a quiet start to 2023. Volumes were up 9% in October.
Reflective of EU CBAM
The UK’s CBAM closely mirrors the scheme currently being rolled out by the European Commission. However, the UK version and its associated levy payments will commence a year later. December’s announcement from the UK Government revealed that goods imported into the UK from countries with a lower or no carbon price will have to pay a CBAM levy, ensuring that overseas products face “a comparable carbon price to those produced domestically”.
Despite the added administrative burden CBAM reporting has introduced for EU market participants since its October 1 introduction, many remain hopeful of positive outcomes. It should help EU producers’ prices to remain competitive with imports, despite the growing financial demands of decarbonisation. This month, MEPS respondents suggested that the full effect of CBAM on the price differential between domestic and imported material had yet to be fully realised.
Many UK industry bodies responded positively to the nation’s CBAM plans, in recognition of its protection of domestic industries. However, the nation’s stainless steel traders’ experience of the scheme may be dominated by the added administrative burden and carbon price added to imports.
In the December research period, MEPS respondents once again highlighted the negative effects of CBAM on their businesses. Some stockists are appointing third-party businesses to take on the administrative burden it created. Others are employing staff to ensure paperwork is in order, fees paid and fines averted.
The range of products covered by the UK CBAM will be determined through consultation with UK industry in 2024. The carbon price attached to embedded emissions reported under the proposed UK CBAM is also yet to be determined.
The UK government will also set out reforms to its Emissions Trading System (ETS). This currently provides free allowances which grant permission for certain high emitting industries to generate CO2 emissions. Further credits can also be bought. Revisions to the ETS will aim to offer an “effective financial incentive that drives its participants to decarbonise”, it said.
EU-US steel trade ‘truce’
The EU will phase out its ETS by 2026, when CBAM is fully implemented. As this process gathers momentum, however, progress on the EU-US low carbon steel trade agreement stalled in December.
Efforts to agree the free trade agreement by December 31 were set aside as a truce was called on the United States’ 25% Section 232 import tariffs and the European Commission’s retaliatory measures. Both parties will now suspend tariffs until March 31, 2025.
The European Commission said that the extension would save EU steel and aluminium exporters approximately EUR1.5 billion in tariffs annually.
- This content first appeared in the December edition of MEPS International's Stainless Steel Review. The monthly report provides subscribers with steel prices, indices and market commentary from key steel markets across the globe.