Van Leeuwen
Carbon Border Adjustment Mechanism (CBAM) and the impact on the market for steel tube products.

Carbon Border Adjustment Mechanism (CBAM) and the impact on the market for steel tube products.

What is CBAM?

CBAM means Carbon Border Adjustment Mechanism. It is an EU regulation for the correction of CO2 emissions at its border, released during the production of six product categories: iron and steel, cement, fertilizers, aluminium, electriclty and hydrogen. The CBAM therfore also applies to our assortment of steel pipes, fittings, flanges and bar steel.

Why is a regulation like CBAM needed?

CBAM is designed to prevent "carbon leakage", or the relocation of production within the EU to countries outside the EU where companies do not have to pay for their CO2 emissions. This is necessary because many European companies are subject to strict rules about their CO2 emission and/or must pay for it. Carbon leakage is bad for our climate, because in the end, global CO2 emissions would increase. In addition, it is bad for the European economy. The purpose of CBAM is to level the playing field between companies within and outside the EU (source: NEA).

What does CBAM mean for the trade of steel pipe and tube products?

The CBAM regulation will officially to into effect on 1 January 2026. A transition period went into effect in October 2023, in which everyone can prepare for the new rules. During this transition period, importers of steel products must report quarterly on carbon emissions released during the production of imported steel products. Aside from this reporting requirements, there are no other obligations yet.

As of January 1, 2026, this will change. From then on, importers apply for prior authorisation to import CBAM related goods from outside the EU in advance. This permit will be in the form of a certificate. Also, importers must pay a price for the CO2 emitted during the production of the goods. This CO2 levy is equal to the levy that applies to these products when they are manufactured within the EU. This prevents uneven competitive playing fields. These could otherwise arise when mills outside the EU pay less or not at all for their CO2 emissions as local requirements are less severe. In other words: CBAM ensures a level playing field for all steel producers in this respect.

How are CO2 emissions of steel producers established?

The importer, such as Van Leeuwen, is obliged to quarterly report the CO2 emissions of the imported steel products from outside the EU. The steel mills should provide these data. However, many mills are not able to do so yet. Until the end of June 2024, mills were allowed to use the standard emission values established in the CBAM regulation. As of 1 July 2024, however, mills must report their real data. For many steel producers, this is quite a challenge.

Impact on the environment

Obviously, the carbon levy on steel products, whether produced inside or ouside the EU, arose from the need to protect our climate and reduce our carbon emissions. The CBAM is part of the "Fit for 55" package of the EU designed to reduce greenhouse gas emissions by 55% compared to 1990 as a means to create a climate neutral Europe by 2050.

Many steel mills are making significant investments in reducing their CO2 emissions. This is also true for the mills from which we buy our pipe and tube products. In Zwijndrecht, as well as in other European stock sites, we are building stocks of tubes made from CO2 reduced steel, forwhich the data are recorded in an Environmental Product Declaration (EPC). These tubes are sold under our own brand "Van Leeuwen Impact". For more information about these tubes, click here.

Consequences for the steel market

The CBAM regulation is still new for many, and consequences are not yet fully appreciated everywhere. The price of imports from outside the EU may rise, possibly considerably, which will change the steel market landscape siginficantly.

What does this mean for you, our customer?

For customers who purchase their steel tube products from distributors within the EU, such as Van Leeuwen, nothing changes. Van Leeuwen will look after the required reporting and certificates when we import material from outside the EU.

For companies that buy their steel products directly from steel mills, there are consequences of course. In the role of imporer, they will have to take care of the required reports and CBAM certificates. It is therefore sensible to make the necessary preparations for this well ahead of time.

Should you still have any questions, please contact us via info@vanleeuwen.nl or give us a call.

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