The EU's Carbon Border Adjustment Mechanism (CBAM) will increase European ferro-chrome prices in 2026.
The mechanism is a climate policy measure intended to ensure that imported goods are subject to the same CO2 emission costs as those produced within the EU. The EU aims to prevent carbon leakage, which occurs when businesses move their production to a region with no or lower-cost carbon pricing in place or when cheaper imports from those regions gain market share over EU products.
Previously, emissions were monitored at the plant or production site, which was effective for monitoring domestic producers, but could not be utilised to monitor imports. Through CBAM, the EU is moving from an installation-based accounting system to a product-level system.
Ferro-chrome will be subject to the CBAM. From 1 January 2026, EU ferro-chrome importers will be required to purchase CBAM certificates based on embedded emissions in the imports.
Some market participants expect the CBAM to result in a $0.13/lb duty on high carbon ferro-chrome and a $0.09/lb duty on low carbon ferro-chrome.
Prices already strengthening on supply squeeze
Ferro-chrome prices have been depressed in recent years. In Europe, average annual high carbon 65pc Cr ferro-chrome prices fell by double digits for each of the last three years. The 2025 average price of $1.31-1.57/lb ddp Europe is down 43pc from the average price in 2022.
But over the latter half of 2025, ferro-chrome prices have lifted. Argus assessed high carbon ferro-chrome 60-64.99pc Cr prices at $1.25-1.35/lb ddp NWE on 16 December, up 18pc from the start of year.
The increase is in part because of significant production cuts in South Africa, a major chrome producer.
As a result of high energy costs in South Africa and intense competition from ferro-chrome produced by more cost-efficient Chinese producers, the two major South African ferro-chrome smelters are both cutting production and reorienting towards chrome ore exports.
The South African government is attempting to reverse the trend through preferential energy measures. But most market participants expect South Africa's ferro-chrome smelting industry to continue its precipitous decline, putting significant supply pressure on the global ferro-chrome sector.
CBAM will lift FeCr prices
Ferro-chrome is a particularly carbon-intensive metal to produce, requiring significant energy for smelting.
On 11 December, the EU internally approved key legal implementing acts that will determine emission costs for goods subject to CBAM.
The process-related CBAM benchmark for ferro-chromium under CN Codes 720241 and 720249 will be 1,142/tCO2e/t for production years 2026-27 and 1,106 t/CO2e/t for production years 2028-30, according to the leaked document.
Within Europe, CBAM will provide further impetus to the stronger prices which emerged in the latter half of 2025. The duty will be passed on to end users, lifting transaction levels.
Currently, there is plenty of supply in Europe and end users have significant stocks, so many do not expect prices to rise sharply in the immediate aftermath of the implementation of CBAM. But as end users work their way through their existing stocks and return to the market, upward pressure on prices will build.
For importers, CBAM is expected to be a major complication. One trader estimated if they imported 30,000t of ferro-chrome in a year, they would have to pay the EU approximately $10mn. They will lift prices accordingly.
Some sellers are already feeling the effects. A major African producer sold material to a European trader and that trader signed a contract for delivery with very narrow margins, Argus heard. The seller has been attempting to renegotiate the contract with the end user, who is refusing, so the seller will have to absorb the cost of the CBAM duty.
CBAM may increase Kazakhstan's share of the market. Kazakhstan has the lowest cost of production for ferro-chrome, and Kazakh sellers are willing to absorb the duty in order to offer lower than Turkish and Albanian sellers, a senior executive at a major end user told Argus. Kazakhstan is offering material for 2026 at lower levels than competitors, Argus heard, and Kazakh production is expected to increase.
Some anticipate the complexity of the administrative burden may reduce the number of players active in the market, as not all traders at small firms will be able to manage the new measures.
CBAM will provide a competitive advantage for EU producers that will not be subject to the measures. Outokumpu, the only charge chrome producer in Europe, has a comparatively low carbon footprint. Swedish Vargon Alloys and German Elektrowerk Weisweiler (EWW), the other two key European ferro-chrome producers, are also likely to see an increase in sales prices as buyers seek to minimise their CBAM exposure.
But higher ferro-chrome prices will put upward pressure on European stainless steel prices, making European steel less competitive globally.
