Inside the default-benchmark spread reshaping EU steel trade

Fastmarkets08-14 12:00

Default emissions factors sit far above the relevant benchmarks for a number of countries and products, creating a potentially dangerous cost penalty on unverified imports. Across hot-rolled coil, the...

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Across hot-rolled coil, the...</p>\n\n<a href=\"https://www.fastmarkets.com/insights/inside-the-default-benchmark-spread-reshaping-eu-steel-trade/\">Source Link</a>\n\n</div>\n","source":"fastmarkets_highlight","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Inside the default-benchmark spread reshaping EU steel trade</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nInside the default-benchmark spread reshaping EU steel trade\n</h2>\n\n<h4 class=\"meta\">\n\n\n2026-08-14 12:00 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://www.fastmarkets.com/insights/inside-the-default-benchmark-spread-reshaping-eu-steel-trade/><strong>Fastmarkets</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Default emissions factors sit far above the relevant benchmarks for a number of countries and products, creating a potentially dangerous cost penalty on unverified imports. Across hot-rolled coil, the...</p>\n\n<a href=\"https://www.fastmarkets.com/insights/inside-the-default-benchmark-spread-reshaping-eu-steel-trade/\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"KRBN","symbol_name":"KraneShares Global Carbon Strategy ETF","start_time":0,"source_url":"https://www.fastmarkets.com/insights/inside-the-default-benchmark-spread-reshaping-eu-steel-trade/","article_id":"2659424501","we_media_id":null,"thumbnails":[],"rights":{"source":"fastmarkets_highlight","url":"https://www.fastmarkets.com/insights/inside-the-default-benchmark-spread-reshaping-eu-steel-trade/","rn_cache_url":null,"directOrigin":true},"url":"https://stock-news.laohu8.com/highlight/detail?id=2659424501","pubTimestamp":1786680000,"columns":[],"sourceInfo":{"source_id":"fastmarkets_highlight","name":"Fastmarkets"},"weMediaInfo":null,"summary":"How variation in default values and benchmarks across DRI, pig iron and hot-rolled coil is impacting the steel value chain.","collect":0,"end_time":0,"defaultTopTitle":"fastmarkets.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"KRBN":"KraneShares Global Carbon Strategy ETF","BK4156":"煤与消费用燃料"},"translate_title":"重塑欧盟钢铁贸易的违约基准利差内部","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"KRBN":0.64},"content_text":"Default emissions factors sit far above the relevant benchmarks for a number of countries and products, creating a potentially dangerous cost penalty on unverified imports. Across hot-rolled coil, the defaults imply an average effective tariff rate of more than 15% in 2026 unless action is taken to verify emissions or shift trade flows. Those costs are set to rise substantially from here, quadrupling by 2035 for most steel products due to: \n\nFree allowance phase-out: Imports receive 97.5% of the benchmark as free allowance adjustment in 2026, but free allocation is withdrawn progressively until it reaches zero in 2034 under current law (or 2038 if the proposed ETS reforms are adopted), increasing the emissions on which CBAM is charged (see example below). \nRising certificate prices: The first two quarterly prices settled at €75.36 and €75.28 per tCO₂e, but EU ETS prices are expected to at least double by 2035 under current ETS policy.  \n\nSteel is likely to see some of the largest shifts because of CBAM because its emissions are high, production assets are long-lived and many of the technologies needed to decarbonise remain costly or difficult to scale. \n\n\n\nDefault-to-benchmark gaps are wide for major market players \nThe gaps between default values and benchmarks are substantial. In the most exposed cases, free allocation already shields less than half of the assumed footprint, leaving most of the emissions subject to the certificate price. \n\n\n\nIndia is the clear outlier in direct reduced iron, with a default emissions intensity of 4.62 tCO₂e per tonne against a benchmark of 0.397. India and Indonesia also record high default values for hot-rolled coil, at 4.70 and 9.05 tCO₂e per tonne respectively, compared with a benchmark of 1.370. \nCoal-based production accounts for much of the difference. CBAM’s focus on direct emissions reinforces this effect because purchased electricity is not included for iron and steel. A carbon-intensive grid does not, by itself, increase the liability, whereas coal consumed within the installation does. This includes rotary kiln DRI in India, coke- and pulverised coal injection-intensive blast furnaces in Indonesia and South Africa, and captive coal-fired power located within the plant boundary. DRI shows the mismatch most clearly, because the benchmark of 0.397 tCO₂e per tonne reflects natural gas-based production and India is therefore assessed against a route that is not widely used in its domestic industry. \nDefault values are deliberately punitive, using conservative assumptions on emissions intensity, applying an additional mark-up and offering no automatic recognition of decarbonisation at individual facilities. As a result, they can sit well above the actual emissions intensity of better-performing plants within the same country. This methodology creates a strong incentive for exporters to move away from defaults and establish verified actual emissions. \nMany facilities in Indonesia and South Africa may be able to narrow part of the gap between their emissions and free allocations using verified plant-level data, particularly where country defaults are influenced by ageing assets, smaller plants or low utilisation. Indian coal-based DRI has less scope to do so because the published default is closer to the physical emissions of the process. In that case, verification can remove the penalty embedded in the default methodology, but not the emissions inherent in the production route itself. Reducing the remaining liability will require a change in feedstock or production route. \n\nCost escalation is backloaded and highly uneven by origin \nThe increase in CBAM costs to 2035 is built into the policy design rather than driven solely by increase in the certificate price. Two multipliers apply in sequence. The uplift on default values rises until 2028 and then remains fixed. Free allocation is progressively withdrawn, falling to 51.5% of the benchmark in 2030 and to zero in 2034 under current law. Even if the certificate price remains flat, every origin will therefore pay a multiple of its 2026 cost by the middle of the next decade. \nThe ranking across countries remains unchanged across the period. Indonesia carries the highest cost, followed by India and China, with Japan the lowest. That order is determined by the gap between each default value and the relevant benchmark, but the financial distance between suppliers widens over time. Suppliers that appear broadly comparable on landed cost during the first years of CBAM separate decisively by the early 2030s. For example, CBAM cost differential between Indonesia and Japan increases from around €100/tonne in 2026 to around €340/tonne by 2030. The relatively flat early years are therefore the key decision period. Buyers assessing 2027 tenders may see little difference between suppliers that will carry sharply different liabilities by 2032. \nRecognized domestic carbon pricing schemes under Article 9 could affect this ordering in the future. Japan’s GX-ETS became mandatory for large emitters from the 2026 financial year, while China’s ETS now covers steel.  \n\n\n\nVerification will determine who retains market share by 2035\nThese cost differences will directly shape future trade flows. Under European Commission default values, Fastmarkets forecast hot-rolled coil imports from most origins to decline by 2035. The picture changes materially when verified plant-level data is used. Türkiye, Libya, Morocco and Mexico gain market share in the verified scenario but lose it under the default one. \nThe type of emissions factors widely used will also likely reshape trade in different ways. Defaults apply broadly across an origin and therefore drive more substitution between countries. Verified actual emissions differentiate individual facilities and production routes, creating more scope for sourcing to shift within a country. In Indonesia, for example, buyers may move away from higher-emitting blast furnace material towards lower-emitting EAF production rather than away from Indonesia altogether. \nVerification recovers the difference between assumed and actual emissions. It does not recover the difference between actual emissions and the benchmark. Its value is therefore greatest where national defaults are distorted by a group of older or less efficient plants rather than by the dominant production route. \nTürkiye is the clearest example. Its national emissions intensity is among the lowest of the EU’s major suppliers, yet blast furnace coil remains penalised under default values. Libya, Morocco and Mexico also benefit because their gas-based DRI and electric arc furnace routes tend to perform better than country-level assumptions suggest. On the other hand, Indian volumes decline in both scenarios because the default value for coal-based rotary kiln DRI is close to actual emissions.  \n\n\nHow much of the verified scenario materialises remains uncertain. It will depend on the availability of accredited verifiers, exporters’ ability to obtain precursor emissions data across several tiers of the supply chain and the carbon prices the Commission recognises under Article 9. Exporters that treat verification as a commercial capability rather than a narrow compliance task will be better placed to defend their position in the EU market.\n\n\n\n\n\n\nThe default value is not your number\nModel CBAM cost import-by-import to 2035, with every figure traceable to source\n\nRequest demo","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":false,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"isVideo":false,"video":null,"symbols":[],"gpt_button":0,"need_auth":false,"need_login_tip":false,"code":"91000000","status":"200"},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"isLaohu8Offline":false,"tenantId":"TBGLOBAL","deviceId":"web-server-community-laohu8-v3","version":"4.47.1","shortVersion":"4.47.1","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2659424501","isCrawlerRequest":true}