The Impact of the EU's CBAM Carbon Tax on Ukrainian Metallurgy
The EU's Carbon Border Adjustment Mechanism (CBAM), applied without exemptions or delays, has forced the ArcelorMittal Kryvyi Rih steel plant to completely halt its metal product shipments to the European Union market. This policy has led customers to cancel all orders for the first quarter of 2026, resulting in the shutdown of workshops and affecting over 3,000 employees. The plant's CEO, Mauro Longobardo, stated this was a severe blow, as they had planned to ship approximately 300,000 tons of products to Europe. The CBAM is a key part of the EU's 'Green Deal' strategy, designed to prevent carbon leakage by imposing costs on imports from countries with less stringent climate policies.
Economic Consequences and Forecasts
The additional CBAM levy on products amounts to $60-90 per ton. The company had planned to export 1.25 million tons of metal products to Europe in 2026, nearly half of its planned output volume. The cancellation of orders has halted operations at the plant's blooming mill and foundry-mechanical plant. Consequently, this decision impacts Ukraine's economic situation, with research from the GMK-Center forecasting a 2.1% drop in the country's GDP by 2030 solely due to reduced iron and steel exports.
A complete cessation of long rolled products and square billet exports from Ukraine is projected by 2030, alongside a 75% reduction in pig iron exports and a 30% decline in flat-rolled product exports. The estimated losses from the halted exports total $1.75 billion.
Longobardo emphasized that ArcelorMittal Kryvyi Rih lost the European market instantly, and if no exceptions or deferrals are made for Ukraine, the export opportunities for Ukrainian metallurgists to the EU could be blocked permanently within five years.
The CBAM tax situation underscores the serious challenges facing the Ukrainian metallurgical sector in the international market. The loss of the European market for major enterprises like ArcelorMittal Kryvyi Rih could have far-reaching consequences for the national economy, affecting employment and overall export volumes. These changes necessitate an urgent review of state policy and international agreements to preserve Ukrainian manufacturing within the global context.
The challenges facing Ukrainian metallurgy are compounded by external factors, including the EU's changing market dynamics. As the impact of the Carbon Border Adjustment Mechanism continues to unfold, understanding why Ukrainian steel is losing ground in the EU becomes crucial for grasping the full scope of this crisis and its long-term implications for the industry.