Two Major Shifts Reshape the Global Steel Market: EU Carbon Border Tax Implementation and Simandou Iron Ore Shipment Trigger Industry Upheaval

One event impacts the trade pattern in the short term and the other restructures the industrial chain ecology in the long run. Together, they are reshaping the global steel industry landscape from multiple dimensions including costs, supply and competition rules, leaving domestic steel enterprises facing a complex situation with both short-term pressures and long-term opportunities.

After a two-year transition period, the EU CBAM, the world’s first cross-border carbon pricing system, was officially launched on January 1, 2026. The steel industry has become the most significantly impacted sector due to its large trade volume and high carbon emission intensity. In accordance with the new regulations, the EU will carry out carbon emission accounting, declaration and management for six major categories of high-carbon imported products including steel, aluminum and cement. Formal carbon cost settlement will start in 2027, and enterprises that fail to complete declarations as required or cannot provide valid carbon emission data will face severe penalties.

The core pain point of this policy implementation lies in the EU’s "default value" rule for carbon emissions. Data from the Institute of Green Innovation and Development shows that the default emission factors set by the EU for Chinese steel products are generally on the high side, and the differences between long-process and short-process production technologies are not fully distinguished, assuming that all steel products exported from China to the EU come from high-emission long-process production lines. If enterprises cannot provide measured carbon emission data recognized by the EU, they will be forced to declare using the default value, directly resulting in the carbon border tax cost of about 95% of China’s steel products exported to the EU exceeding 800 CNY per ton in 2026. More severely, during the transition period from 2026 to 2028, the default value will be subject to an annual 10% "surcharge" penalty, meaning the annual growth of enterprises’ carbon costs will reach 22%.

Cost pressures are continuing to transmit through the trade chain. Although the legal obligation to pay the carbon border tax rests with EU importers, under the market mechanism, this part of the cost has begun to be passed on to Chinese export enterprises. A person in charge of foreign trade at a major domestic steel enterprise revealed that many EU customers have recently proposed renegotiating quotations, requiring enterprises to bear part of the carbon costs, otherwise they will switch to suppliers in Southeast Asia or local European and American suppliers with lower carbon emissions. In addition, the EU has proposed expanding the scope of the carbon border tax to 180 steel and aluminum-intensive downstream products such as auto parts and construction machinery in 2028, by which time the management costs and difficulties of full industrial chain carbon footprint tracing will increase exponentially.

Facing the impact, domestic steel enterprises are accelerating their responses. In the short term, the core task of enterprises focuses on carbon data sorting and the construction of accounting systems. By connecting with third-party certification institutions and improving product carbon footprint statements, they strive to break away from reliance on the EU’s default value. In the long run, the transformation of low-emission processes and green power substitution have become the key to breaking the deadlock. Some leading enterprises have increased investment in low-carbon technologies such as hydrogen metallurgy and short-process steelmaking, and at the same time actively participated in domestic carbon market transactions to reduce compliance costs through carbon quota deductions.

While the EU carbon border tax is roiling the trade market, the upper reaches of the global steel industrial chain have also seen major changes. On January 17, the first shipment of nearly 200,000 tons of Simandou iron ore arrived smoothly at Baowu Majishan Port in China, marking the official opening of the full industrial chain channel of the world’s most abundant and high-quality iron ore project and its entry into the commercial operation stage. The vessel named "Vale Young" set sail from the Port of Marebaya in Guinea and completed its maiden voyage after a 46-day, 10,958-nautical-mile journey. Although the volume of a single shipment has a limited impact on the current market, its role in reshaping the global iron ore supply and demand pattern cannot be ignored in the long run.

Public data shows that the Simandou iron mine has a resource reserve of over 4 billion tons with an average total iron grade of more than 65%, far exceeding the 58%-62% grade level of the current global mainstream iron mines. After the project reaches full capacity, it will add 120 million tons of high-quality iron ore supply to the global market every year, accounting for about 5% of the global total iron ore supply. At present, the project has started capacity climbing, with a 2026 production target of 5-10 million tons. It is expected to operate at full capacity around 2030, which will greatly ease the tight supply of high-grade iron ore in the global market.

This increment will directly change the global iron ore pricing logic. Previously, the global iron ore market has long been dominated by the four major mining enterprises: Vale, Rio Tinto, BHP and FMG, with a high degree of supply concentration. Price fluctuations are mainly affected by China’s demand side. Several authoritative industry institutions have deduced that with the gradual release of Simandou iron ore capacity, the global iron ore market will gradually shift from a tight balance to loose supply in 2026, and the bottom center of iron ore prices may fall back to the range of 85-95 USD per ton, a significant decline from the current high of more than 105 USD per ton.

For domestic steel enterprises, the commissioning of the Simandou iron ore mine does not simply bring raw material price reductions, but promotes the redistribution of profits in the industrial chain. The increase in high-grade iron ore supply will reduce steel mills’ smelting costs and improve production efficiency. Especially for long-process steel mills, high-quality ore can reduce coking coal consumption and lower carbon emission intensity, which exactly forms a synergy with the demand to cope with the EU carbon border tax. An analyst of the steel industry at a domestic securities firm pointed out that in the long run, the Simandou iron ore mine will help domestic steel enterprises improve their low-carbon competitiveness while controlling costs, drive the industry to transform from a "price war" to a "value war", and accelerate the optimization of the industry pattern.

Overall, the two major events of the EU carbon border tax implementation and the commissioning of the Simandou iron ore mine have impacted the global steel market from the downstream trade rules and upstream raw material supply respectively. In the short term, the contradiction between cost pressures brought by the carbon border tax and high inventory and weak demand will lead steel prices to maintain narrow fluctuations; in the long run, low-carbon transformation and raw material supply optimization will become the main development lines of the industry, and enterprises with low-carbon technologies and high-grade iron ore resource channels will gain competitive advantages.

Industry experts suggest that domestic steel enterprises should balance short-term responses and long-term layout: on the one hand, accelerate adaptation to international green trade rules, improve the carbon accounting and tracing system, and stabilize overseas market share; on the other hand, seize the opportunity of the Simandou iron ore mine’s commissioning, optimize the raw material procurement structure, increase investment in low-carbon technology research and development, and seize the opportunity in the restructuring of the global steel industry pattern. For the industry as a whole, these two major events are both challenges and important opportunities to promote the high-quality development of the industry and achieve the "dual carbon" goals.