During a panel titled "Arab Steel and Decarbonization Race: How Can We Address the CBAM Challenge?" at the 19th Arab Steel Summit, held in Cairo, Egypt, on November 3-4, industry experts discussed the implications of the EU's Carbon Border Adjustment Mechanism (CBAM) for Arab steel producers, highlighting the region's competitive advantages in low-carbon steelmaking, increasing compliance costs and the need for further investments in decarbonization technologies. The speakers emphasized that, while the Arab steel industry is relatively well positioned due to its widespread use of natural gas-based direct reduced iron-electric arc furnace (DRI-EAF) production, maintaining this advantage will require reliable emissions verification, technological improvements and long-term investment strategies.
Verified emissions data critical to minimizing CBAM costs
Eng. Mohamed Emam Omar, EAF & LF Section Head at Qatar Steel, highlighted the importance of accurate emissions monitoring, reporting and third-party verification in reducing CBAM-related costs. He explained that the mechanism's financial impact will increase progressively as free allowances under the EU Emissions Trading System (ETS) are phased out, with the share of free allocation retained declining from 97.5 percent in 2026 to zero by 2034.
Omar warned that exporters relying on EU default emissions values instead of verified actual data could face significantly higher costs. He also highlighted the advantages of the DRI-EAF production route compared to conventional blast furnace-basic oxygen furnace (BF-BOF) steelmaking, noting that lower carbon intensity could strengthen the competitiveness of Arab producers in the European market. However, he emphasized that producers must continue reducing emissions while preparing for increasingly stringent reporting and verification requirements.
Arab steel industry's existing carbon advantage must be strengthened
Dr. Dimitrios Dimitriou, Vice President – ESG & Sustainability at EMSTEEL Group, noted that steel produced in the Arab Gulf has approximately 30 percent lower carbon intensity than the global average, largely reflecting the region's reliance on natural gas-based DRI-EAF production.
However, Dimitriou stressed that this advantage alone would not be sufficient to ensure long-term competitiveness. He argued that CBAM should be viewed as a regulatory signal rather than a sufficient incentive for major decarbonization investments, which require greater policy certainty and commercially viable conditions.
He also emphasized the importance of scrap-adjusted emissions standards to ensure a more balanced comparison between different steelmaking routes. Regarding EMSTEEL's decarbonization strategy, Dimitriou highlighted several technological pathways, including carbon capture, utilization and storage (CCUS), green hydrogen, clean electrification, solar energy and digital innovation.
CBAM presents both financial risks and export opportunities
Paulo Carvalho, managing director of decarbValue, warned that CBAM costs for steel imports into the EU are expected to rise considerably as free allowances are gradually removed and emissions benchmarks become stricter. He noted that the financial impact will vary depending on production routes, product categories and the availability of verified actual emissions data.
Carvalho also highlighted uncertainties surrounding the verification of 2026 emissions and the resulting financial obligations for imports in 2027. He explained that these uncertainties could complicate commercial negotiations and increase financial risks for European importers and their suppliers.
Nevertheless, he identified potential opportunities for Arab steel producers, particularly in supplying lower-emission natural gas-based hot briquetted iron (HBI) to European customers. He pointed to possible supply gaps arising from restrictions on Russian HBI and pig iron imports, while suggesting that Arab producers could adjust their production mix and increase scrap use in long steel production to make more HBI available for export.
Existing technologies can support further emission reductions
Andreas Rathhuber, VP and head of worldwide sales & marketing at Primetals Technologies, emphasized that Arab steel producers already have a favorable starting position in the decarbonization transition. According to the figures presented, conventional BF-BOF steelmaking generates approximately 1,765 kg of CO₂ per mt of liquid steel, compared to 940 kg for natural gas-based DRI-EAF production, representing a 47 percent reduction.
Rathhuber outlined three major technological pathways for further decarbonization: electrification, carbon direct avoidance through hydrogen-based processes, and CCUS. He noted that hydrogen-based DRI-EAF production could significantly reduce emissions further, while digitalization and artificial intelligence could improve operational efficiency and reduce energy consumption.
He also highlighted the importance of optimizing existing facilities and developing flexible DRI technologies capable of operating with different combinations of natural gas and hydrogen. In addition, he pointed to emerging technologies that could reduce dependence on high-grade iron ore, which is becoming an increasingly important consideration as global DRI production expands.
Regulatory uncertainty remains a challenge for investment decisions
During the subsequent panel discussion, the speakers examined whether CBAM would accelerate decarbonization investments or create additional uncertainty for steel producers. While the mechanism could encourage investment by increasing the commercial value of lower emissions, the panelists noted that unpredictable regulatory requirements, future energy availability and uncertain investment returns could complicate decisions on capital-intensive projects.
The discussion also addressed the potential role of domestic carbon pricing mechanisms, including emissions trading systems, in supporting decarbonization investments while retaining carbon-related revenues within producing countries.
The panelists agreed that Arab steel producers should not delay action despite these uncertainties. They encouraged companies to strengthen emissions verification capabilities, improve the efficiency of existing production facilities, prepare for stricter regulations and explore technological partnerships.
The speakers concluded that the Arab steel industry has significant potential to strengthen its position in the evolving global low-carbon steel market, but that preserving its competitive advantage will depend on combining regulatory compliance with technological investment and commercially sustainable decarbonization strategies.
