The European Commission has proposed extending the Carbon Border Adjustment Mechanism (CBAM) beyond basic steel and aluminium, with a plan to add 180 steel- and aluminium-intensive downstream products from 2028. In September 2026, the European Parliament backed a broader scope, while the Council adopted its own negotiating position in June. These positions are not yet a final regulation. The commercial impact will depend on which customs classifications are included and how emissions from precursor materials are attributed.
Downstream CBAM scope and implications for industrial supply chains
The proposed changes would move emissions accounting further into industrial supply chains linking Chinese manufacturers with European customers. China supplies European industry at multiple stages of the metal value chain, including exports of steel and aluminium inputs as well as finished fasteners, metal mountings, components and industrial equipment. Under the existing framework, some upstream materials fall within CBAM coverage, while some finished products remain outside its scope. If the expansion is adopted, European buyers could increasingly assess suppliers based on carbon-adjusted delivered cost rather than invoice prices alone.
Embedded emissions could also become a factor in sourcing decisions alongside quality, reliability and conventional production costs. For Chinese fabricators, the origin and production history of the metal used in a component could be relevant to emissions outcomes. A part made from purchased steel may have a different emissions profile from an otherwise comparable item made using material from another steel mill. The treatment of embedded emissions would therefore depend on how precursor emissions are accounted for under the eventual rules.
Documentation requirements for embedded emissions reporting
Production records, bills of materials, purchase contracts and precursor-emissions calculations could become important for demonstrating compliance with any future requirements. Evidence of renewable electricity use or low emissions at the final fabrication facility would not, by itself, replace upstream documentation needed under the eventual rules. For parts produced using different input sources, documentation covering those inputs could affect how emissions are calculated for compliance purposes. This could require additional data collection across supply chains connecting upstream material producers to downstream component makers.
The proposed expansion does not necessarily mean European imports of Chinese manufactured goods would stop. Instead, it could shift how suppliers compete as carbon-related costs become more closely linked to materials used and available evidence for emissions calculations. Differences in documentation, contractual arrangements and the treatment of embedded carbon could affect net margins for otherwise comparable products. The extent of these effects would depend on the final EU legislation and implementation rules.
EU trade indicators show rising Chinese finished-steel shipments
The downstream CBAM discussion is occurring alongside changes in Chinese finished-steel exports to the EU. EUROFER recorded a 40% rise in Chinese shipments in the first half of 2026, bringing China’s share to 12.3% of EU finished-steel import volume. These figures describe current finished-steel trade rather than measuring exposure for Chinese machinery or fabricated products under the proposed downstream legislation. Although supply chains are commercially connected through shared inputs, the available data relate to different product groups.
Importers may therefore need to treat trade growth in covered steel separately from potential impacts on downstream manufactured goods. Growth in covered steel shipments does not indicate how much trade in downstream products would fall within an expanded CBAM scope. That outcome would depend on which customs codes and products are included in the final legislation. The timing and final coverage for downstream categories remain subject to negotiations.
Separate EU steel quotas and out-of-quota duties
The EU has also applied tighter steel import quotas and a 50% out-of-quota duty on relevant steel products since July 2026. These measures operate separately from the proposed downstream CBAM expansion and are assessed under their respective rules. Chinese exporters and their European customers would need to distinguish between commodity steel shipments already subject to applicable trade measures and manufactured products that may enter an expanded CBAM scope from 2028 or later. The timing and coverage of those manufactured categories remain under negotiation.
Traceability and access to upstream production data
The ability to provide reliable emissions evidence could become a differentiating factor among Chinese exporters. Producers with traceable inputs and dependable installation-level data may be better positioned to substantiate lower embedded emissions where reporting is permitted under the rules. Exporters unable to obtain precursor records could face less favourable assumptions where applicable. They may then consider alternative materials or absorb part of additional cost to maintain their position in the European market.
For China’s industrial exporters, traceability and access to upstream production data could become increasingly important alongside manufacturing scale, product quality and price. The extent of that shift depends on the final EU legislation and its implementation rules governing how emissions information is verified and attributed across supply chains.