The free allocation gap keeping EU pig-iron carbon cost-competitive against imported low emissions DRI

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An EU steelmaker weighing metallic inputs for 2026 faces a result that looks perverse: higher carbon costs for direct-reduced iron (DRI) than pig iron. Two factors intersect to drive this: The EU is ...

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One of the best stock trading platforms in Singapore.","ogImage":"https://c1.itigergrowtha.com/portal5/static/media/og-logo.0a0bd8dc.png","ogUrl":"https://sg.tigermarketb.com/news/2662875709"},"companyName":"Tiger Brokers"},"pageData":{"isMobile":false,"isTiger":false,"isTTM":true,"region":"SGP","license":"TBSG","edition":"fundamental"},"isCrawlerRequest":true,"__swrFallback__":{"@#url:\"https://stock-news.skytigris.cn/v3/news\",params:#id:\"2662875709\",edition:\"fundamental\",auth_exemption:1,,,undefined,":{"share":"https://ttm.financial/m/news/2662875709?lang=en_US&edition=fundamental","thumbnail":"","is_english":true,"pubTime":"2026-08-27 12:00","share_image_url":"https://static.laohu8.com/e9f99090a1c2ed51c021029395664489","id":"2662875709","market":"fut","top_or_hot":-1,"title":"The free allocation gap keeping EU pig-iron carbon cost-competitive against imported low emissions DRI","media":"Fastmarkets","content":"<div>\n<p>An EU steelmaker weighing metallic inputs for 2026 faces a result that looks perverse: higher carbon costs for direct-reduced iron (DRI) than pig iron. Two factors intersect to drive this:\n\nThe EU is ...</p>\n\n<a href=\"https://www.fastmarkets.com/insights/the-free-allocation-gap-keeping-eu-pig-iron-carbon-cost-competitive-against-imported-low-emissions-dri/\">Source Link</a>\n\n</div>\n","source":"fastmarkets_highlight","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>The free allocation gap keeping EU pig-iron carbon cost-competitive against imported low emissions DRI</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nThe free allocation gap keeping EU pig-iron carbon cost-competitive against imported low emissions DRI\n</h2>\n\n<h4 class=\"meta\">\n\n\n2026-08-27 12:00 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://www.fastmarkets.com/insights/the-free-allocation-gap-keeping-eu-pig-iron-carbon-cost-competitive-against-imported-low-emissions-dri/><strong>Fastmarkets</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>An EU steelmaker weighing metallic inputs for 2026 faces a result that looks perverse: higher carbon costs for direct-reduced iron (DRI) than pig iron. Two factors intersect to drive this:\n\nThe EU is ...</p>\n\n<a href=\"https://www.fastmarkets.com/insights/the-free-allocation-gap-keeping-eu-pig-iron-carbon-cost-competitive-against-imported-low-emissions-dri/\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"BK4588","symbol_name":"碎股","start_time":0,"source_url":"https://www.fastmarkets.com/insights/the-free-allocation-gap-keeping-eu-pig-iron-carbon-cost-competitive-against-imported-low-emissions-dri/","article_id":"2662875709","we_media_id":null,"thumbnails":[],"rights":{"source":"fastmarkets_highlight","url":"https://www.fastmarkets.com/insights/the-free-allocation-gap-keeping-eu-pig-iron-carbon-cost-competitive-against-imported-low-emissions-dri/","rn_cache_url":null,"directOrigin":true},"url":"https://stock-news.laohu8.com/highlight/detail?id=2662875709","pubTimestamp":1787803200,"columns":[],"sourceInfo":{"source_id":"fastmarkets_highlight","name":"Fastmarkets"},"weMediaInfo":null,"summary":"Identical tonnes of DRI can differ by around €70 in carbon cost in 2026 depending only on which side of the EU border they were reduced on. The gap rewards making DRI in Europe and penalises using it, reducing the competitiveness of DRI-EAF steel producers.","collect":0,"end_time":0,"defaultTopTitle":"fastmarkets.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"BK4588":"碎股","BK4156":"煤与消费用燃料","LU0154245673.USD":"BNP PARIBAS US MID CAP \"C\" (USD) INC","BK4585":"ETF&股票定投概念","BK4232":"货物陆运","ETS":"Elite Express Holding Inc.","DRI":"达登饭店","BK4504":"桥水持仓","LU0154245756.USD":"BNP PARIBAS US MID CAP \"C\" (USD) ACC","KRBN":"KraneShares Global Carbon Strategy ETF","BK4209":"餐馆"},"translate_title":"自由分配缺口使欧盟生铁碳相对于进口低排放DRI具有成本竞争力","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"KRBN":0.9,"DRI":1.5,"ETS":0.61},"content_text":"An EU steelmaker weighing metallic inputs for 2026 faces a result that looks perverse: higher carbon costs for direct-reduced iron (DRI) than pig iron. Two factors intersect to drive this:\n\nThe EU is highly import dependent for DRI but near self-sufficient in pig iron\nImported DRI faces a comparatively penalising CBAM benchmark\n\nThis results in a carbon cost advantage of using pig iron over DRI which starts at around €18/t in 2026 and is only reversed in 2030. This reduces the incentive to switch to the DRI-EAF production routes on which much of the EU’s steel decarbonisation plans depend.\n\nEurope’s decarbonization route remains import-dependent\nMost European pathways for reducing primary-steel emissions combine direct reduction, EAFs and higher scrap use. Blast-furnace emissions are difficult to abate at scale, scrap availability is constrained by volume and quality, and DRI provides a commercially proven ore-based route that can operate on natural gas before progressively switching to hydrogen. The economic question is therefore increasingly where the reduction step can be located and operated competitively.\nArcelorMittal Hamburg remains the EU’s principal established DRI-EAF operation, with installed DRI capacity of about 700,000 tonnes per year. EU DRI imports were about 2.75 million tonnes in 2024 and 2.25 million tonnes in 2025. Russia remained a major supplier in 2025 under temporary quotas for CN 7203 products. Those quotas expired at the end of 2025, effectively halting Russian DRI imports from 2026. Replacement supply has increasingly come from Venezuela, the United States and Libya, generally involving longer shipping distances. First-quarter 2026 EU imports fell 54% year on year, illustrating the challenge of replacing a nearby supplier quickly with more distant sources[1].\nDomestic capacity expansion is also progressing slowly. ArcelorMittal withdrew its Bremen and Eisenhüttenstadt DRI-EAF plans in June 2025, citing market conditions and the economics of low-carbon steelmaking despite committed public support. Similar projects face constraints related to grid access, energy prices, hydrogen availability and project timing. European natural-gas prices also remain materially above US levels, sustaining a cost advantage for gas-based direct reduction in lower-cost regions.\nImported DRI is therefore likely to remain an important source of low-emissions iron units through the rest of the decade. Its competitiveness, however, depends not only on physical emissions and freight, but also on how CBAM converts embedded emissions into a certificate obligation and how the free-allocation adjustment is calculated.\n[1] Global Trade Tracker\n\nThe benchmark gap is wider than the emissions gap\nEU hot metal is allocated free allowances against an EU ETS product benchmark of 1.248 tCO₂e /t for 2026-2030. Imported DRI has its CBAM liability adjusted against a benchmark of 0.397 tCO₂e per tonne where default values are used.\nThe effect can already be seen in 2026. Assuming emissions of 1.6 tCO₂e/t for EU hot metal, the benchmark covers about 80% of emissions. For DRI declared using a default value of around 1 tCO₂e/t, it covers only about 40%.\nThe result is that lower-emissions DRI can still face a relatively high carbon cost, particularly when default values are used, because its CBAM benchmark is significantly lower than the benchmark protecting EU hot-metal production.\n\n\nUnder Fastmarkets’ base EU ETS scenario, EU hot metal carries a net carbon cost of roughly €30 per tonne of metallic in 2026 and €70 in 2029. Imported DRI declared using default values rises from about €50 to €80. It is only in 2030 that the EU ETS costs for hot metal crosses the CBAM costs for imported DRI.\nThis remains a carbon-cost comparison rather than a full landed-cost comparison. Imported HBI also carries freight, handling and a metallic premium, while blast-furnace operators face ore, coking coal, maintenance and reline capital. Eligible carbon prices paid in the country of production can reduce CBAM liability under Article 9. The calculation therefore isolates the portion of the cost stack affected directly by ETS free allocation and CBAM rather than implying that carbon cost alone determines the preferred metallic.\nThe policy path may also change. These calculations use the CBAM factor schedule currently in force, under which the factor falls to 51.5% in 2030 and to zero from 2034. On 17 July 2026, the Commission proposed a slower phase-out, with a 59% factor in 2030, 15% retained from 2034 through 2037 and zero from 2038. If adopted, the proposal would extend the period during which EU hot metal benefits from the larger benchmark-based allocation.\n\n\n\nSame DRI, same emissions, a €70 carbon cost gap\nThe benchmark design also creates a significant difference between EU-produced and imported DRI with the same emissions intensity, at odds with a key design principle of CBAM. EU-produced DRI benefits from the higher EU ETS hot-metal benchmark, while imported DRI is adjusted against the much lower dedicated CBAM benchmark. In 2026, this creates a carbon-cost advantage of a €70 per tonne for EU-produced DRI in 2026 relative to an imported tonne with the same emissions intensity.\n\n\nThe gap initially widens as rising EUA prices increase the value of the additional free allocation received by EU production faster than that allocation is phased out. It begins to narrow later in the decade as free allocation declines more substantially towards 2030.\n\n\n\nThis treatment supports investment in domestic DRI capacity, but the effects extend further along the steel value chain. European DRI-EAF producers without integrated DRI capacity face a higher carbon cost when sourcing imported DRI, potentially weakening one of the routes available to reduce steelmaking emissions. At the same time, the framework provides additional protection to existing EU BF-BOF production.\nThis reflects a deliberate feature of the CBAM design. Applying the much higher hot-metal benchmark to imported DRI could have left low-emissions DRI with little or no CBAM liability in the early years, giving imported DRI-EAF steel a substantial advantage. The dedicated DRI benchmark avoids that outcome, but in doing so creates a trade-off between protecting EU ironmaking and facilitating access to lower-emissions metallics.\nThe perverse incentive disappears as free allowances phase out and carbon costs track emissions more closely\nThe impact of this benchmark asymmetry is likely to be most visible only in the early stages of Europe’s green-steel transition.\nOur market outlook indicates that much of the initial growth in lower-emissions steel production comes from EAF capacity using a combination of scrap and pig iron, while gas-based DRI becomes a more significant source of metallics closer to 2030. This suggests that Europe’s transition will not immediately move from blast-furnace production to large-scale DRI-EAF production. Instead, the first phase is likely to rely more heavily on existing metallics, including pig iron, alongside increased scrap use in EAFs.\n\n\n\nCarbon costs can reinforce this sequencing. Although imported gas-based DRI has substantially lower physical emissions than conventional pig iron, its lower CBAM benchmark means that this emissions advantage does not translate directly into an equivalent carbon-cost advantage. In the early years of CBAM, EU-produced hot metal can therefore remain relatively competitive as a metallic input even as steelmakers increase EAF production.\nAs free allocation declines and carbon costs rise towards 2030, the economics increasingly shift towards lower-emissions metallics. Gas-based DRI consequently becomes more competitive over time, supporting a larger role in European steel production later in the decade.\nThe implication is that CBAM may influence not only the cost of the green-steel transition, but also its timing. In the near term, the regulatory framework can support a transitional model in which EAF growth occurs without an immediate large-scale shift away from pig iron. The stronger move towards DRI is more likely to emerge as the carbon-cost advantage of lower-emissions production becomes larger towards 2030.\nThe benefit for EU DRI producers is also likely to be temporary. Europe currently has relatively little operating DRI capacity, meaning that only a small number of producers can take advantage of the more favourable EU ETS treatment in the near term. By the time a larger pipeline of European DRI projects could come online, free allocation will already have been substantially reduced.\nThis limits the extent to which the benchmark advantage can act as a clear investment incentive. It supports the economics of existing and early moving EU DRI projects, but the window of greatest benefit arrives before domestic capacity is expected to scale materially. For projects targeting production around 2030 and beyond, energy costs, hydrogen availability, capital requirements and long-term carbon prices are therefore likely to matter more than the temporary benchmark advantage.\n\n\n\n\n\n\nWhat does the benchmark gap cost you per tonne of imported DRI?\nTrack CBAM and EU ETS cost per tonne of pig iron, DRI and HBI by origin with our CBAM Analytics module\n\nRequest demo","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":false,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"isVideo":false,"video":null,"symbols":[],"gpt_button":0,"need_auth":false,"need_login_tip":false,"code":"91000000","status":"200"}}}