Exporting Steel Enterprises Under Pressure as EU Officially Trials CBAM Mechanism in October
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Mr. Dinh Quoc Thai, the General Secretary of the Vietnam Steel Association (VSA), stated that starting from October 2023, the European Union (EU) will begin the trial implementation of the Carbon Border Adjustment Mechanism (CBAM). If steel companies do not cope well with CBAM, the two-way steel trade relationship with the EU will be affected.
In October 2023, the EU will begin the trial implementation of the Carbon Border Adjustment Mechanism (CBAM), which will impact export items to the EU, such as steel, aluminum, cement, and fertilizers.
As per the CBAM schedule, from October 2023, steel companies will be required to report the total integrated emissions in goods by type and will not be subject to CBAM fees.
After its official operation on January 1, 2026, steel companies will have to purchase one CBAM certificate for every ton of CO2 equivalent found in imported products to the EU, based on the ETS (EU Emissions Trading System) free allocation quota.
By 2034, the CBAM mechanism will be fully in effect, and steel companies will have to pay 100% of the fees.
At the workshop "EU's Carbon Border Adjustment Mechanism and Its Impact on Vietnam's Steel Industry," Mr. Dinh Quoc Thai, the General Secretary of VSA, emphasized that the EU is one of the leading markets for the steel industry. If steel companies fail to effectively respond to the EU's CBAM, it may affect the amount of steel exports to the EU and the two-way trade relationship. This will pose a significant challenge for steel companies.
"The risk is losing many other markets as these countries are also considering applying similar regulations to CBAM," warned the General Secretary of VSA.
Regarding the detailed carbon neutral roadmap for Vietnam's steel industry, Mr. Dinh Quoc Thai revealed that during the 2021-2025 period, the steel industry will optimize processes, energy, raw materials (scrap), and improve technology to reduce 10-30% of CO2 emissions.
In the transition phase from 2025 to 2030, the steel industry will utilize low-carbon materials, increase H2 (hydrogen) gas in blast furnaces by 30%, and inject H2 into electric arc furnaces.
Additionally, the steel industry aims to develop flexible hybrid steel mills and implement CCUS (carbon capture, utilization, and storage) models.
Lastly, from 2030 to 2050, the steel industry will focus on green products with a series of synchronized solutions, such as reducing direct carbon use, operating blast furnaces with green energy (H2), and continuing to implement CCUS models.
Mr. Dinh Quoc Thai confirmed that VSA will continue to organize workshops to exchange knowledge and disseminate information about CBAM in the association's monthly internal newsletter.
"In challenges, I hope the steel industry will seize opportunities and overcome risks. Currently, similar mechanisms to CBAM are emerging in many countries such as the US, Australia, Canada... Exporting companies need to have a solid plan to cope with this mechanism," said Mr. Thai.
As the first Asian steel company to commit to carbon neutrality by 2050, Posco (South Korea) also believes that achieving this goal will not be easy.
Posco's leadership stated that to accomplish this target, the company plans to reduce 50% of carbon emissions by 2040 through advanced techniques, producing steel with hydrogen instead of carbon as before.
In Vietnam, Posco has three branch companies. The companies are well aware of the CBAM mechanism, but there are still some concerns regarding the mechanism.
"Last year, I visited Europe five times to discuss the implementation of CBAM. The EU also acknowledged some issues related to the mechanism, but they are still determined to apply CBAM from October 2023. This will be a trade barrier for the steel industry, demanding steel companies in the country to collaborate to go further. Steel companies in Vietnam need to report export quantities and carbon emissions to the EU on a quarterly basis. Failure to report or provide inaccurate information will result in fines," said the leadership of Posco.
At the workshop, Mr. Nghiem Xuan Da, Chairman of VSA, asserted that the Vietnamese steel industry and steel enterprises are cooperating with ministries, international organizations, and trade associations to take actions in compliance with CBAM regulations.
VSA is also conducting research to evaluate the impact on Vietnamese steel industries with high carbon leakage risk based on the EU's list, studying solutions and implementation roadmaps to gradually reduce carbon emissions for all manufacturing industries, ensuring competitiveness with the world.
About Ton Nam Kim - Nam Kim Steel:
Ton Nam Kim, also known as Nam Kim Steel, is a prominent steel manufacturer and exporter based in Vietnam. The company specializes in producing and exporting various steel products, including galvanized steel. With a strong commitment to quality and sustainability, Ton Nam Kim has gained recognition as a leading player in the steel industry.
Galvanized steel, one of Ton Nam Kim's primary products, is steel that has been coated with a layer of zinc to protect it from rust and corrosion. This process not only enhances the steel's durability but also makes it ideal for various construction and manufacturing applications. As the market adapts to new challenges, including the EU's Carbon Border Adjustment Mechanism (CBAM), Ton Nam Kim continues to innovate and implement strategies to maintain its position as a competitive and responsible steel exporter.
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