The European Parliament has moved to address one of the key weaknesses in the EU's carbon border policy by backing a broader application of the Carbon Border Adjustment Mechanism (CBAM) to downstream steel and aluminium products. The move comes only days after EUROMETAL warned that rising costs of steel imported into Europe risk shifting competitive pressure towards finished goods manufactured outside the bloc.
While the Parliament's position acknowledges that carbon leakage is increasingly moving further down the value chain, EUROMETAL believes significant gaps remain. In particular, the federation points to incomplete product coverage, a slow implementation timeline and the lack of an effective solution for EU exporters facing carbon costs in international markets.
Downstream carbon leakage gains political recognition
The Parliament's position comes amid growing concern among European steel users that stricter carbon and trade requirements on steel could alter import patterns rather than reduce competitive pressure.
As SteelOrbis previously reported, EUROMETAL raised the issue during the European Convoy for Industrial Competitiveness in Brussels on September 7, warning that higher costs on steel produced or imported into the EU could make finished components, machinery and other steel-containing products manufactured outside Europe increasingly competitive.
The latest development therefore marks an important political recognition that carbon leakage is no longer confined to primary steel and aluminium, but can extend to components, assemblies, equipment and finished products further down the manufacturing chain.
Product coverage still leaves significant loopholes
For EUROMETAL, however, the proposed extension remains too limited. Even under the broader scope supported by Parliament, a substantial number of steel- and aluminium-containing products would remain outside CBAM. This could encourage non-EU manufacturers to carry out additional processing outside Europe and export product categories not covered by the mechanism, effectively shifting carbon leakage further downstream instead of preventing it.
The implications go beyond competition in finished goods. If a growing share of steel-intensive manufacturing moves outside the EU, domestic demand for European steel could also come under pressure.
Timing and export competitiveness remain key concerns
The timing of the extension is another concern. European manufacturers are already facing stronger import penetration in steel-intensive products, while regulatory and cost disparities are increasingly influencing investment and production decisions. EUROMETAL argues that delaying effective downstream coverage could give manufacturers further incentives to relocate production outside the EU while continuing to supply the European market.
At the same time, the issue of EU exports remains unresolved. European manufacturers selling into global markets continue to bear EU ETS-related carbon costs through their steel and aluminium inputs, while competitors in countries without equivalent carbon pricing may face no comparable burden. This leaves EU exporters at a structural disadvantage that an import-focused CBAM does not address.
CBAM cannot offset the wider EU cost gap
EUROMETAL also stressed that carbon costs are only one part of the competitiveness gap between European and non-European manufacturers. The federation pointed to the cumulative effect of carbon regulation and EU trade defence measures, including antidumping and antisubsidy duties and safeguard-related restrictions. These contribute to higher steel input costs within Europe, while manufacturers in third countries may continue to access steel at lower international prices.
As a result, finished products imported into the EU could retain a cost advantage even after downstream CBAM obligations are introduced, while European manufacturers continue to face both higher material and regulatory costs.
EUROMETAL is therefore calling for a broader value-chain approach, with wider coverage of steel- and aluminium-intensive products, faster implementation and measures addressing the competitive position of EU exporters.
“Today's vote is a step in the right direction, but it does not yet deliver a level playing field for European industry,” EUROMETAL president Alexander M. Julius said, adding that Europe needs to protect the entire value chain if it wants to prevent carbon leakage and deindustrialisation.
