INTERVIEW: EU steel prices to rise as CBAM cost could reach €5B/y, says Trasteel CEO

The total cost of the EU's Carbon Border Adjustment Mechanism for steel products could reach €5 billion/year and will be passed entirely on to consumers, Gianfranco Imperato, CEO of Trasteel, told Platts, part of S&P Global Energy, in an interview.

The burden on consumers is likely to be substantially higher because CBAM will inevitably trigger an increase in steel prices across the board, Imperato said. EU regulators appear encouraged by CBAM because they hope it will push companies to reduce emissions or move toward green steel.

"This may happen over time, but I do not expect it in the short term," Imperato said. "For that investment to materialize, operators need to regain confidence in the future and a willingness to invest."

Since the EU's tighter safeguard measures and CBAM entered their latest phase, what changes have you seen in Trasteel's sourcing mix?

Gianfranco Imperato: In the short term, the destination countries of our trading flows have not changed much, while the origins are being adapted to the available quotas. On the industrial side, our companies all have mainly regional businesses and are therefore largely doing what they did before, generally benefiting from a better pricing environment.

The only big difference compared to the past concerns the origin of our imported slabs. With Russian and Ukrainian supplies no longer available, we have increased our sourcing from the Far East.

How is China's position in the European steel market changing, and what broader trade dynamics are you seeing?

Gianfranco Imperato: Europe remains our main destination market, and the key development of the last few years has been the sharp decrease in Chinese steel imports, replaced by imports of Chinese finished products — cars first of all — which shows the limits of the current measures for European industry and consumers.

In other regions — South America, the Gulf — the dynamics are somewhat different, but overall, we are seeing strong trade pressure, mainly against Chinese steel.

How are quota availability, CBAM exposure, and origin requirements affecting delivered prices for imported steel?

Gianfranco Imperato: In the short term, due to the extremely weak demand in Europe, prices have not yet been significantly affected, but I believe that soon, most of the impact of all these measures will be on prices, since the uncertain environment does not encourage companies and banks to invest in significant new production capacity.

Are Europe's new trade measures causing genuine shortages, or are they primarily adding cost and uncertainty?

Gianfranco Imperato: The impact will be significant, especially in certain products — for instance, PPGI (pre-painted galvanized iron) — and the gap will be covered by increasing the current capacity utilization, but obviously not creating new capacity at least for a few years.

In this respect, our latest investment in "La Magona" is bringing back to the market an operator with around 500,000 metric tons/year of galvanized and PPGI capacity.

The main consequence will be an increase in prices, with an additional burden on the final consumers, while rebalancing investments into new capacity will require a much better outlook on consumption than today.

What will determine European buyers' appetite for lower-carbon steel, and can producers pass the surcharge downstream?

Gianfranco Imperato: In a very noble but somehow "theoretical" way, European politics have been pushing very hard toward the green economy, but operators need to survive first, and therefore, the appetite for green steel will mainly depend on the possibility of operators imposing the relevant surcharge downstream.

I am personally critical of the heavy use of carbon taxes chosen by European regulators, rather than supporting companies with subsidies to change. Today, the approach seems to be penalizing rather than enabling.

Could lower-carbon producers in the Middle East and India become significant suppliers to Europe, particularly through DRI-based production?

Gianfranco Imperato: Everybody is now putting a lot of emphasis on DRI, without mentioning that the high-grade iron ore needed to produce it has been largely committed for years. DRI cannot be produced from just any type of iron ore. It is appealing to present it as an easy solution to steel industry emissions, but the reality is more complex.

Are tariffs, carbon costs, and origin controls turning steel into a permanently more regional market?

Gianfranco Imperato: Definitely. We are living, and not only in steel, in a post-globalization era -- a world in which macro-regions face very different conditions. In this respect, there will be more regional players than global players in the downstream sector that we are in. At Trasteel, we decided a few years ago to be "multilocal" rather than "global" -- to be deeply rooted in a selected number of countries rather than on the surface everywhere.

Trasteel is a global steel, energy, and metallurgical trading and industrial group supplying steel products, steelmaking raw materials, consumables, and related services.

This interview has been edited for length and clarity.