Latin American steel association questions deadline for EU’s CBAM transition period

Story originally published on Fastmarkets.com

Published by: Ana Enis

Source: iStock

Latin American steel producers expressed their concern regarding the deadlines of the Carbon Border Adjustment Mechanism (CBAM), a tariff on carbon intensive products imported by the European Union, the region's steel association, ALACERO, said.

The association noted that the information published by the EU is “confusing and incomplete” in a statement made public on Tuesday September 19.

“With just a few days left to start the new CBAM regulations, the process is still confusing. The training they would provide to help with adjustments has not been opened yet,” Alejandro Wagner, ALACERO’s executive director, told Fastmarkets on Friday September 22. “These are processes that take time, with the intervention of many people and organizations. Also, mistakes can have associated costs.”

As announced by the European Commission, CBAM works as a new “green” system for pricing the carbon emissions of products imported into the EU. Starting on January 1, 2026, European importers will need to annually declare the quantity of goods shipped into the EU in the previous year, along with their embedded greenhouse gases (GHG).

Then, they may buy the corresponding number of CBAM certificates, each one priced based on average EU emissions trading system (ETS) allowances, expressed in € per tonne of CO2 emitted.

The first stage of this mechanism starts on Sunday October 1, and consists of a transition period for importers, producers and other authorities to collect and report the data of their direct and indirect GHG emissions without making any financial payments or adjustments. The first report must be submitted by January 2024.

The association did not say what timeframe it believes to be more appropriate for the region's steelmakers.

Besides the deadlines to understand CBAM processes and implications, the association considers that there are several flaws in the new import policy, from lack of security in information-sharing and compliance rules, to a schedule that does not favor developing countries with little investment in decarbonization projects.

“Unlike the countries that make up the European Union, Latin American countries do not have subsidies or non-refundable aid to finance the transition or the adoption of disruptive decarbonization technologies,” the association said in its statement. “This situation represents increased administrative processes, with their consequent economic costs, affecting developing regions in an unequal manner.”

The executive director reinforced that the statement is no way related to discussing the decarbonization goals, but the lack of time to improve administrative and operational requirements.

“Many Latin America manufacturers have medium-to-long-term decarbonization goals and are already working on that, but we always need to take into account that goals may vary by production route, technology and available resources,” Wagner said. “Thinking about a single goal today is neither fair nor simple.”

He points out that currently most Latin American steel companies are already developing projects aimed at energy efficiency, maximizing the use of scrap and increasing the use of renewable energy, but there is still a lack of state and organizational resources — which should be considered for a fair and realistic transition mechanism.

According to the director, the amount of steel exported by Latin America to the European Union is low. However, if the region does not adapt well when the new CBAM measures come into force, trade flows could change.

“Steel with a higher carbon footprint from Asia may not be competitive in Europe, and end up coming to our region,” he said.