European manufacturers in Germany, Austria and Italy are reassessing industrial sourcing costs as CBAM, steel import restrictions and electricity price differences reshape the economics of imported materials. Turkish steel remains substantially cheaper than European supply at the initial quotation stage, but carbon liabilities, customs duties and transport expenses can narrow the gap. Meanwhile, precursor emissions and differences in electricity costs are adding complexity to cross-border industrial supply chains.
The changes affect automotive production, machinery, engineering and metal processing, sectors that rely on imported steel, aluminium and other industrial inputs. Switzerland occupies a separate position because of its linked emissions trading system, although goods originating in third countries do not qualify for preferential treatment simply because they pass through Swiss trading companies or warehouses.
The growing importance of carbon-adjusted procurement is changing how industrial buyers compare steel coils, aluminium billets, cement and fertilisers. Production technology, electricity consumption, upstream emissions and the quality of verification increasingly determine the final cost of materials delivered to European factories.
Turkish steel offers face additional costs at the EU border
European hot-rolled coil (HRC) prices reached approximately €747 per tonne in northern Europe and €741/t in Italy on 7 October 2026. Domestic offers remained relatively firm despite weak demand from manufacturing and construction.
By comparison, Turkish HRC offers stood at around €560–580/t CFR. The initial price difference appears substantial, but the delivered economics change when applicable import duties, CBAM liabilities and logistics costs are included.
For an Italian steel processor, the difference between a Turkish coil priced at €570/t and European material costing more than €740/t may therefore overstate the actual saving. An illustrative CBAM liability of €110/t would reduce the advantage, while an additional 50% safeguard duty on out-of-quota imports, where applicable, could eliminate it.
The EU’s steel safeguards and CBAM create separate financial exposures. Safeguard duties apply to shipments exceeding the relevant tariff-free quotas, whereas CBAM liabilities depend on embedded emissions, applicable benchmarks and eligible adjustments.
The European Commission’s third-quarter 2026 CBAM certificate price of €82.32 per tonne of CO₂ is not a uniform surcharge on every tonne of imported steel. The final obligation depends on the relevant emissions methodology, product benchmarks and transitional adjustments reflecting free allocation under the EU Emissions Trading System.
These differences create a commercial incentive for Turkish mills capable of supplying independently verified, lower-emission steel. Importers relying on default emissions values face greater uncertainty over their eventual carbon-related costs.
Precursor emissions remain relevant across multi-country supply chains
Türkiye supplies industrial precursors including billets, slabs, hot-rolled coils, aluminium ingots and chemical inputs. These materials may undergo additional processing in Serbia, Bosnia and Herzegovina or other non-EU countries before finished or semi-finished products reach customers in Germany, Austria and Italy.
Under CBAM, qualifying precursor emissions must be incorporated into the calculation for covered complex goods. Processing Turkish-origin steel in another non-EU country does not automatically remove emissions attributable to the original steelmaking stage.
This requirement is particularly relevant to German machinery manufacturers, Austrian engineering groups and Italian metal processors sourcing through supply chains that cross multiple national borders.
A Serbian processor using Turkish-origin steel billets, for example, may need to document both the qualifying upstream emissions and those generated during its own production processes. Where the required verified information is unavailable, applicable default values may increase the importer’s assessed liability.
The same underlying issue applies to covered aluminium products and fertilisers containing qualifying upstream materials, although the emissions boundaries differ between product categories.
Electricity prices create substantial differences in industrial operating costs
Wholesale electricity markets across Central Europe and neighbouring countries showed marked price differences on 9 October 2026.
<text color=”secondary” size=”sm”>Day-ahead electricity prices on 9 October 2026</text>
| Market | Average price |
|---|---|
| Germany | €79/MWh |
| Austria | €196/MWh |
| Switzerland | €200/MWh |
| Italy | €233/MWh |
| Türkiye | €53/MWh |
The approximately €154/MWh gap between Germany and Italy illustrates the scale of the short-term electricity price divergence facing energy-intensive industrial operations.
These figures represent daily wholesale spot averages rather than the electricity tariffs paid by individual factories. Actual manufacturing costs also depend on hedging arrangements, supply contracts, network charges and production schedules.
Nevertheless, persistently elevated electricity expenses can weaken the competitiveness of Italian aluminium processing, electric steelmaking and other energy-intensive activities. German and Austrian producers face different market conditions, influencing decisions about production locations, intermediate materials and supplier selection.
CBAM distinguishes imported electricity from power used in production
The mechanism treats electricity differently depending on whether it crosses the EU border as a covered commodity or is consumed during industrial production.
Electricity imported directly into the EU is subject to its own CBAM liability, calculated under the applicable emissions methodology and carbon-price adjustments. Imports from carbon-intensive electricity systems, including parts of the Western Balkans, can consequently incur costs that are not apparent from wholesale price comparisons alone.
For steel and aluminium, however, indirect emissions from purchased electricity are not currently included in CBAM certificate liability. Their principal regulated exposure arises from direct emissions and relevant precursor emissions.
Cement and fertilisers follow a different approach because their CBAM calculations also include indirect emissions associated with electricity consumption. The distinction affects how changes in electricity sourcing translate into carbon-related costs across industrial sectors.
Renewable electricity has different implications across industrial sectors
Wind and solar power purchase agreements can reduce industrial electricity expenses and contribute to a lower overall carbon footprint. However, renewable electricity procurement does not automatically reduce CBAM certificate obligations for steel and aluminium.
For cement and fertilisers, lower-emission electricity can directly improve the relevant emissions calculation, subject to the applicable regulatory methodology.
Electricity exported as a CBAM-covered commodity presents a separate compliance challenge. Demonstrating qualifying actual emissions requires more than purchasing renewable energy certificates. Contractual arrangements, hourly generation and delivery evidence, transmission documentation and independent verification are central to establishing the relevant emissions treatment.
These requirements connect renewable electricity investment with the documentation needed to support cross-border transactions, while preserving the distinction between electricity used in industrial production and electricity imported as a commodity.
Swiss carbon-market links do not automatically cover third-country materials
Switzerland’s linked emissions trading system provides an exemption for qualifying Swiss-origin CBAM goods. However, Turkish or Asian materials do not become eligible for that exemption merely because they pass through a Swiss warehouse or trading company.
The origin of the goods and the processing undertaken remain decisive. This distinction is important for manufacturers using intermediaries in Switzerland while sourcing steel, aluminium and other industrial inputs from outside the EU.
For industrial buyers, tracing material origin and production stages is therefore relevant alongside emissions calculations. A change in the commercial route does not, by itself, establish eligibility for preferential CBAM treatment.
Industrial lenders assess carbon-adjusted procurement risks
Banks financing working capital, inventories, trade credit and capital expenditure must increasingly assess whether industrial borrowers can absorb carbon-adjusted material costs while maintaining export competitiveness.
Existing financing arrangements for metal processors, cement producers and other energy-intensive manufacturers may require revised stress tests covering electricity prices, precursor sourcing, customs duties and the availability of verified emissions information.
Renewable energy projects introduce an additional consideration for lenders. They need to distinguish conventional electricity-market revenues from any additional commercial value associated with verified cross-border delivery arrangements.
For industrial borrowers, the ability to document emissions and anticipate border-related expenses is becoming relevant to procurement planning and financing needs, alongside the traditional risks associated with raw material prices and energy costs.
Proposed downstream CBAM extension could affect manufacturers from 2028
A further regulatory development concerns proposed EU legislation to extend CBAM to selected steel- and aluminium-intensive downstream products from 2028, subject to final adoption.
If adopted, the expansion could affect machinery, components and other manufactured goods that currently fall outside the mechanism. Turkish and Western Balkan manufacturers supplying these products to European industrial customers could face additional compliance and cost exposure.
The proposed extension could also alter the relative competitive position of EU processors using imported materials whose carbon costs are already reflected in their procurement decisions. The final implications will depend on the products included and the legislation ultimately adopted.
The first annual CBAM declaration and certificate surrender for 2026 imports is due in September 2027. Companies therefore have a limited period to establish reliable emissions records and review procurement contracts before the first annual compliance deadline.
For suppliers operating across several production stages and national borders, maintaining traceable information on material origin, precursor emissions and manufacturing processes remains central to preparing for the reporting and certificate requirements.
Across Germany, Austria and Italy, the cost of industrial inputs is increasingly shaped by the interaction between international commodity prices, electricity contracts, production efficiency, customs treatment and verified emissions. For Turkish and Western Balkan exporters, maintaining access to European customers depends increasingly on demonstrating the origin and carbon intensity of the materials supplied.
