Barclays-European Cement Steel Aluminium Punitive CBAM default values...-20251215

EC has approved provisional CBAM figures. We expectrevisions, but at face value, default reporting could add30%/70% to steel/cement pre-duty import prices. Impactlikely transitory (actual emission verification & policyrevision) but uncertainty could still benefit domesticproducers

The EU CBAM committee has approved default and provisional benchmark carbon intensityvalues for cement and other materials under the Carbon Border Adjustment Mechanism (CBAM)taking effect from 2026. While we are still awaiting the full publication from the EU, the FrenchMinistry has published the relevant data values for CBAM to help importers start to plan for costincreases. These values are still subject to change (indeed the EC has noted these values will berevised before Dec 2027) and seems to have created significant confusion in the market.Nevertheless, based on the values we now have available, we estimate CBAM could add ~30%to import HRC prices, and over 70% to imported cement prices assuming default values. Theimpact on aluminium is smaller at an estimated +3% vs. LME. Steel markets have partly reactedalready but we still see at least €30/t upside on top of duty paid import prices. This cost impactwill likely grow over time as the preliminary CBAM framework includes a phased mark-up todefault values (10% in 2026, rising to 30% by 2028) to penalise companies for failing to verifyemissions levels. We estimate this, in addition to a falling CBAM factor (i.e. lower free allocationprovision over time) could add a further 11% inflation in imported HRC and 29% in importedcement by 2028.