CBAM in practice: What foundries need to bear in mind now

A key question remains as to how embedded emissions will be determined in practice. Importers can either submit verified emissions data from manufacturers outside the EU or use the European Commission’s standard emissions values.

In the final implementation phase, actual emissions values may only be used if they have been validated by an accredited verifier. As the register of verifiers is not due to be available until September 2026, many importers will have to rely on default values for a significant part of the first year of implementation.

These default values have been deliberately set at a high standard. They take into account the average carbon intensity of the exporting country and incorporate additional factors designed to penalise inadequate reporting or non-compliance with CBAM requirements. If national emissions data are deemed unreliable, the European Commission may apply particularly high reference values.

Additional uncertainty arises from calculation elements that have not yet been fully defined. These include the cross-sectoral adjustment factor, which is linked to the phasing out of free ETS allowances for European manufacturers. Many companies are currently working on the basis of assumptions until the final implementing rules are available.

The uncertainty surrounding allowances, emissions data and calculation methods is leading to differing strategies in the market. Some suppliers continue to offer a base price and invoice CBAM-related costs separately once the quarterly ETS prices have been finalised. This model creates transparency but shifts part of the risk onto the customers.

Other market participants are already incorporating fixed additional costs into their pricing. Still others do not initially factor in CBAM costs and intend to settle payments only in 2027. Whilst this approach may lead to lower prices in the short term, it carries significant risks once the allowances to be surrendered are determined.

This results in a fragmented procurement market for foundries. Comparable materials may be subject to different charges depending on the country of origin, supplier, emissions data and pricing strategy. Purchasing decisions are thus becoming more complex and are increasingly influenced by regulatory factors.

The financial implications can be substantial, depending on the raw material and its origin. Italy sources almost 90 per cent of its pig iron from countries outside the European Union. Assuming a CO₂ price of 80 euros per tonne, standard emission levels could increase the cost of South African pig iron by around 210 euros per tonne in 2026.

There are significant differences between countries of origin. An increase of around 100 euros per tonne is expected for Ukrainian pig iron, and around 40 euros per tonne for Brazilian pig iron. These differences are already influencing procurement decisions. Brazil is becoming more attractive to buyers because many manufacturers there are working on verified emissions reports and comparatively favourable default values apply.

Ferroalloys are also affected. Around 75 per cent of Italy’s ferronickel requirements are imported from countries outside the EU, a large proportion of which comes from Indonesia. Indonesian ferronickel could face a CBAM surcharge of around 335 euros per tonne in 2026, assuming a CO₂ price of 80 euros per tonne. By 2028, these additional costs could rise to almost 480 euros per tonne.

Significant additional costs are also expected for low-carbon ferromanganese. Primary aluminium faces comparable burdens. Imports from non-EU countries account for around 68 per cent of European primary aluminium consumption. For aluminium from Mozambique, additional CBAM costs of around 170 euros per tonne could arise in 2026, whilst imports from Malaysia or Oman are expected to incur costs of around 40 euros per tonne.

CBAM increases the costs of key raw materials processed by European foundries. At the same time, the mechanism offers only limited protection against finished castings from countries outside the European Union. Many raw materials fall within the scope of the scheme, but only a few finished castings are covered.

Furthermore, for covered castings, only direct emissions are currently taken into account. Emissions from electricity consumption are not included in the calculation. As a result, manufacturers from countries with carbon-intensive electricity generation can continue to export castings to Europe without bearing CBAM costs to a comparable extent.

This creates a potential competitive imbalance for European foundries. They must factor in rising and, in some cases, difficult-to-predict costs for raw materials, whilst imported finished products are not subject to the same level of cost. Customers are thus faced with the decision of whether to accept the higher and more uncertain costs of European castings or to switch to suppliers outside the EU.

Europe does not have sufficient domestic capacity for strategic raw materials such as pig iron and primary aluminium. The CBAM could therefore place an additional financial burden on foundries, whilst the sector is already under economic pressure.

Assofond is working with national and European authorities to secure improvements and adjustments to the mechanism. Until any potential changes are implemented, foundries and raw materials traders must cope with considerable uncertainty. They must calculate financial risks whilst adapting to a regulatory system whose practical implementation is still being further defined.