- EU’s CBAM moves to its definitive phase from January 2026
- Emission-intensive imports to face new reporting and cost obligations
- Potential reshuffling of dry bulk trade flows into the EU
- Overall impact on dry bulk demand expected to remain limited
According to Intermodal’s latest market report, the European Union’s Carbon Border Adjustment Mechanism (CBAM) is approaching full implementation, a shift expected to influence global trade patterns and dry bulk markets as the transitional period comes to an end, reports SAFETY4SEA.
CBAM Timeline and Implementation Framework
As explained by Nikos Tagoulis, Senior Analyst at Intermodal, the transitional phase of CBAM will conclude as 2025 draws to a close. From January 1st, 2026, the mechanism enters its definitive phase, introducing formal reporting and financial obligations for importers. While emissions embedded in goods imported during 2026 will be accounted for, the obligation to purchase CBAM certificates has been deferred until February 2027.
Scope of Products Covered
CBAM places a duty on emission-intensive products entering the EU, targeting sectors with high carbon intensity, including aluminium, iron and steel, cement, electricity, fertilizers, and hydrogen. The mechanism focuses on the middle segment of the value chain, covering precursors, primary forms, and semi-finished products such as pig iron, clinker, steel slabs, bars, and tubes, along with selected simple finished goods like bolts and screws.
Raw materials, including unprocessed iron ore, and complex finished goods such as vehicles and appliances, are excluded. The mechanism is designed both to encourage non-EU producers to adopt greener production practices and to shield EU manufacturers from competitive disadvantages linked to the EU Emissions Trading System, ensuring a uniform carbon cost for all products sold within the bloc.
Adjustments for Carbon-Pricing Countries
The EU has introduced provisions allowing CBAM pricing reductions for countries that operate domestic carbon pricing systems. Turkey has recently enacted its first Climate Law, creating the legal foundation for a national emissions trading system aligned with EU standards. This development could help mitigate future CBAM charges, particularly given Turkey’s significant trade links with the EU in steel, cement, and aluminium.
Implications for Non-EU Exporters
For exporters outside the EU, CBAM introduces higher administrative, compliance, and import costs, potentially compressing margins or being passed on to consumers. Producers of high-emission commodities face strategic decisions between investing in greener technologies or redirecting exports to non-EU markets. In parallel, some importers may seek to avoid CBAM costs by shifting toward complex finished goods that fall outside the mechanism’s scope.
Countries with high emission intensities and no domestic carbon pricing are expected to lose competitiveness, prompting EU buyers to favor suppliers with lower-emission production profiles.
Impact on Dry Bulk Trade Flows
In dry bulk shipping, CBAM is expected to prompt a degree of rebalancing in EU import flows. The bloc currently sources CBAM-covered commodities from various non-EU suppliers, including cement and clinker from Turkey, Algeria, and Egypt, steel from China and India, and fertilizers from Morocco.
Over time, exporters without green production practices may scale back EU trade and seek alternative destinations. India is cited as an example, with steel exports to Europe expected to decline as CBAM raises costs for producers relying on higher-emission blast furnaces. Indian producers are exploring transitions toward electric arc furnaces and redirecting volumes to markets such as the Middle East and Africa.
Asia-Europe trade is projected to be affected, with the Asian Development Bank estimating a reduction of approximately 1.1% in total exports from Asia to the EU due to CBAM.
Net Effect on Dry Bulk Demand
The overall impact on dry bulk ton-miles will depend on how sourcing patterns evolve. Some trade routes may shorten if the EU turns to geographically closer low-emission suppliers, while others may lengthen should cleaner producers be located further away. Brazil, for example, could see increased steel exports to Europe due to its expanding green steel capacity.
Nevertheless, the effect on total dry bulk demand is expected to remain limited, given the relatively small share of these trades within overall dry bulk volumes. The impact is anticipated to be concentrated mainly in mid-sized and smaller vessel segments, including Panamax, Supramax, and Handysize tonnage.
Overall, CBAM represents another step toward a lower-emission industrial framework, underlining the growing role of environmental regulation in shaping global trade flows, Tagoulis concluded.
Did you subscribe to our daily Newsletter?
It’s Free Click here to Subscribe!
Source: SAFETY4SEA
