Europe: CBAM boosts stainless steel prices, but long-term demand risks emerge

• Import volumes decline as CBAM costs rise
  
  
• European mills gain pricing power amid tighter supply
  
  

The European Union's Carbon Border Adjustment Mechanism (CBAM) is reshaping stainless steel trade flows, supporting domestic prices in the short term while creating long-term challenges for the region's competitiveness and demand outlook.

Since entering its definitive phase in January 2026, CBAM has required importers to report embedded carbon emissions in imported steel products. However, the absence of a fully operational third-party verification system has forced many importers to rely on default emissions values, significantly increasing compliance costs and reducing import volumes.

Imports lose competitiveness

Imports account for nearly 25-30% of the European stainless steel market, with Asian suppliers dominating cold-rolled stainless steel shipments. Market participants reported that uncertainty surrounding emissions verification and higher CBAM-related costs have encouraged buyers to shift towards domestic material.

The impact has been particularly visible in the cold-rolled segment, where imports into the European Union have declined sharply. Industry estimates suggest the share of imported cold-rolled stainless steel has fallen to 12-15% by early 2026 from around 28% previously.

The reduction in import competition has supported higher utilisation rates and improved pricing power for European mills, contributing to recent increases in stainless steel transaction prices.

Actual emissions could lower costs

Industry analysis indicates that default CBAM emission values are substantially higher than actual emissions for many stainless steel producers, particularly those using scrap-intensive electric arc furnace (EAF) routes.

For austenitic stainless steel grades such as 304, estimated CBAM costs based on actual emissions range between EUR 141-160/t for producers using nickel feedstock from Brazil or New Caledonia. These levels remain well below default values applied to several exporting countries.

Similarly, ferritic grades such as 430 could benefit significantly from actual emissions reporting, as current default values do not adequately reflect their lower carbon intensity.

As verification mechanisms become operational, exporters are expected to increasingly report actual emissions, potentially reducing CBAM costs and restoring part of their competitiveness in the European market.

Market support versus demand challenges

The reduction in imports has tightened supply and supported domestic stainless steel prices. However, weak end-user demand has limited the pace of price increases, with market gains remaining moderate despite lower import penetration.

Market participants noted that while European mills have benefited from stronger pricing conditions, sustained cost inflation could encourage manufacturers to relocate production outside the European Union, particularly in sectors exposed to global competition.

Outlook

We expect CBAM to continue supporting European stainless steel prices in the near term through reduced import competition and tighter supply conditions. However, as actual emissions reporting becomes more widely adopted, Asian exporters may regain competitiveness and narrow the pricing gap with European producers. In the longer term, the success of CBAM will depend on its ability to balance decarbonisation objectives without undermining the competitiveness of Europe's stainless steel-consuming industries.