Australia’s low CBAM iron ore default creates an indirect trade advantage

Fastmarkets

Oct 05

Australia has one of the lowest CBAM carbon scores for iron ore, yet that advantage is unlikely to send much more Australian ore directly to Europe. CBAM covers iron-ore pellets, the agglomerated ore ...

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CBAM covers iron-ore pellets, the agglomerated ore ...</p>\n\n<a href=\"https://www.fastmarkets.com/insights/australias-low-cbam-iron-ore-default-creates-an-indirect-trade-advantage/\">Source Link</a>\n\n</div>\n","source":"fastmarkets_highlight","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Australia’s low CBAM iron ore default creates an indirect trade advantage</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nAustralia’s low CBAM iron ore default creates an indirect trade advantage\n</h2>\n\n<h4 class=\"meta\">\n\n\n2026-10-05 12:00 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://www.fastmarkets.com/insights/australias-low-cbam-iron-ore-default-creates-an-indirect-trade-advantage/><strong>Fastmarkets</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Australia has one of the lowest CBAM carbon scores for iron ore, yet that advantage is unlikely to send much more Australian ore directly to Europe. CBAM covers iron-ore pellets, the agglomerated ore ...</p>\n\n<a href=\"https://www.fastmarkets.com/insights/australias-low-cbam-iron-ore-default-creates-an-indirect-trade-advantage/\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"KRBN","symbol_name":"KraneShares Global Carbon Strategy ETF","start_time":0,"source_url":"https://www.fastmarkets.com/insights/australias-low-cbam-iron-ore-default-creates-an-indirect-trade-advantage/","article_id":"2673702625","we_media_id":null,"thumbnails":[],"rights":{"source":"fastmarkets_highlight","url":"https://www.fastmarkets.com/insights/australias-low-cbam-iron-ore-default-creates-an-indirect-trade-advantage/","rn_cache_url":null,"directOrigin":true},"url":"https://stock-news.laohu8.com/highlight/detail?id=2673702625","pubTimestamp":1791172800,"columns":[],"sourceInfo":{"source_id":"fastmarkets_highlight","name":"Fastmarkets"},"weMediaInfo":null,"summary":"Limited pellet capacity constrains direct EU trade, but the default could influence Asian sourcing and investment further up the value chain.","collect":0,"end_time":0,"defaultTopTitle":"fastmarkets.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"KRBN":"KraneShares Global Carbon Strategy ETF","FLBR":"Franklin FTSE Brazil ETF","GUNR":"全球上游自然资源ETF-FlexShares","BK4585":"ETF&股票定投概念","FBZ":"First Trust Brazil AlphaDEX Fund","BK4588":"碎股","BK4156":"煤与消费用燃料"},"translate_title":"澳大利亚低CBAM铁矿石违约创造了间接贸易优势","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"KRBN":1.5,"FBZ":1.5,"GUNR":1.5,"FLBR":1.5},"content_text":"Australia has one of the lowest CBAM carbon scores for iron ore, yet that advantage is unlikely to send much more Australian ore directly to Europe. CBAM covers iron-ore pellets, the agglomerated ore category under CN 26011200, while almost all Australian iron ore exports are fines and lump which are outside the mechanism. Carbon cost is also only one part of a mill’s sourcing decision. Chemistry, grade, sizing, freight, and security of supply can outweigh a modest CBAM saving. The more important effect may therefore be indirect, through Asian mills that already buy Australian ore and export steel to Europe. Public 2024 trade data show EU imported 21.7 million tonnes of pellets, led by Canada at 9.1 million tonnes, Ukraine at 6.8 million tonnes, Brazil at 3.2 million tonnes and the United States at 2.4 million tonnes. The majority of the Canadian flow is captive or contracted within integrated groups, limiting the merchant volume that Australian supply could realistically displace1.\nAustralia supplies more than half of global seaborne iron ore trade by volume but is largely absent from Europe’s pellet market2. Its 2026 pellet default is 0.099 tCO₂e/t, including the 10% mark-up, the joint-lowest with Canada. Whilst that looks attractive, a buyer will not switch origin on CBAM cost alone. Iron content, alumina, silica, phosphorus, sizing, pellet quality, freight, and security of supply all affect the burden decision, and quality trends in mainstream Pilbara ores can reduce appeal for European mills seeking high-grade feed. Australia’s low iron ore default is therefore an advantage only where eligible product is available and technically suitable, and where incumbent suppliers cannot narrow the gap through verified actual emissions.\n\nAustralia and Canada sit at the bottom of the iron ore default-value table\nCountry-level default values for agglomerated iron ore are set in Implementing Regulation (EU) 2025/2621 and combine direct and indirect emissions with a prescribed mark-up. Australia and Canada share the lowest value at 0.099 tCO₂e/t in 2026, rising to 0.108 in 2027 and 0.117 from 2028. Brazil is higher, while the United States, Mexico and India sit materially above Australia. The relative advantage becomes more material over time as the price of CBAM certificates is forecast to increase.\n\n\nThe significance of the default-value table becomes clearer when CBAM is considered alongside freight. Freight remains an important determinant of delivered cost, but by 2030 and more clearly by 2035, differences in embedded emissions begin to offset part of the advantage associated with geography and shipping routes. Australia is already relatively well-positioned against the United States and Mexico, where vessel size or canal-related costs increase freight. Its lower CBAM exposure widens that advantage as carbon costs rise, including when competing suppliers are assumed to verify below their country defaults.\nThe comparison with Brazil and India is more consequential. Brazil benefits from a freight advantage into Europe, but that advantage is progressively eroded by CBAM. India has freight costs relatively closer to Australia’s, leaving carbon intensity as a more important differentiator. Once CBAM is added, its delivered-cost position deteriorates significantly. The point is not that CBAM replaces freight, but that it can narrow or reverse freight-based rankings as free allocation falls.\n\n\nThe direct trade opportunity is narrower than the default value suggests\nThree factors limit the direct opportunity. The first is product form. In 2024 Australia exported about 2.83 million tonnes of agglomerated ore versus about 899.7 million tonnes of non-agglomerated ore. Pellets therefore represented only around 0.3% of iron ore export tonnage3. Most of those pellets went to South Korea, China, Indonesia, Malaysia and Vietnam rather than Europe. The low Australian default therefore applies to a tiny slice of the country’s current export base. It does not apply to the Pilbara fines and lump that underpin Australia’s position in the seaborne market.\nThe second constraint is capacity. Australia’s current pellet output is concentrated at Grange Resources’ Savage River mine and Port Latta pellet plant in Tasmania. The operation produces roughly 2.2–2.5 million tonnes a year. That makes Port Latta the clearest existing asset that could benefit if European netbacks improve. It already produces CBAM-eligible product under a low country default. But its scale is small, and it already serves Asia-Pacific markets. Existing commercial commitments and freight also constrain how much can be redirected. In other words, the low default applies to a very small part of Australia’s overall iron ore system. Expanding the opportunity would require substantial new pelletising capacity, potentially in Western Australia. CBAM alone is unlikely to underwrite a multi-billion-dollar investment.\nThe third factor is verification. Country defaults are fallback values, not a guaranteed ranking of actual facility performance. Individual Canadian or Brazilian pellet plants may demonstrate verified emissions below their country defaults. That could narrow or remove part of the apparent Australian advantage. This is particularly relevant for pelletising, where installation-level emissions can be measured comparatively directly. Incumbent suppliers with established European trade flows therefore have the strongest incentive to verify.\nFastmarkets’ trade-flow modelling still projects direct Australia-to-EU pellet trade rising more than 30% from 2025 to 2035. However, that percentage comes from a near-zero starting point. In absolute terms, Australia would remain a small supplier relative to an EU pellet-import market of roughly 18 million tonnes.\n\n\nThe larger opportunity is indirect\nThe more relevant opportunity is the precursor route into third-country steel. Under the CBAM calculation rules, a producer can report verified actual emissions for its own installation. It can use default values for qualifying precursors at the same time. Pellets are a designated precursor for pig iron. Assume roughly 1.5–1.6 tonnes of ore are required per tonne of hot metal. On that basis, a 0.1 tCO₂e/t difference at the ore stage becomes roughly 0.15–0.16 tCO₂e per tonne of hot metal. The opportunity is therefore concentrated in mills that already use pellets and export CBAM-covered steel to Europe. These mills must also have enough incentive to verify their own process emissions. If finished steel is declared on a country default, the ore’s origin is not visible in the CBAM calculation.\nIndonesia provides the clearest existing case. In 2024 it imported about 0.45 million tonnes of Australian pellets and about 0.46 million tonnes from India. This creates a real procurement pool in which precursor carbon can differentiate competing supply. Indonesia also became a major flat steel supplier to the EU in 2025. It shipped more than 2.2 million tonnes,⁴ against 0.7 million tonnes in 2024. At 1.55 tonnes of ore per tonne of steel, that represents an upper-bound ore-equivalent of roughly 3.4 million tonnes. That estimate does not yet allow for production route, yield and burden mix.⁵ The 2026 defaults put Australian pellets at 0.099 tCO₂e/t and Indian pellets at about 0.37. Australian pellets therefore reduce precursor emissions by around 0.271 tCO₂e/t of ore. At 1.55 tonnes of ore per tonne of hot metal, that equals roughly €32/t of cost savings. The figure uses the €75.28 Q2 2026 certificate price. The saving rises with the certificate price and default mark-up. However, it remains contingent on verification and on the ores being technically and commercially substitutable.\nThe same screening should be applied across Australia’s existing pellet destinations rather than assuming a generic Asian opportunity. The investable market needs to be built mill by mill. Each assessment should combine EU steel-export exposure, ore-based production route, pellet share, verification capability, freight and long-term offtake. The Indonesia example shows that CBAM can strengthen the value of lower-emissions Australian pellets for existing buyers. But it does not yet make a standalone investment case for large new Australian pelletising capacity.\nDefault values and mark-ups could be revised by December 2027 at the latest. The Commission has indicated that it will seek to move sooner. Australia’s current advantage should therefore be treated as a near-term signal, not a permanent parameter. For Australian iron ore producers, the more durable issue is how the mechanism changes their customers’ competitiveness. That includes those selling non-agglomerated fines and lump outside CBAM. Asian mills may gain or lose EU market share depending on their emissions and whether they verify them. That would shift where Australian ore demand grows or falls. At the same time, broader changes in the much larger non-agglomerated market will reshape the competitive backdrop. The most notable are the arrival of high-grade Simandou supply and changing quality in mainstream Pilbara ores. Both matter even though those products sit outside CBAM. Australia’s low iron ore default for pellets is therefore one trade signal within a much larger reallocation of iron units. It is not a standalone guarantee of European market share.\n\n\n\n\n\n\nWho captures Europe’s green steel premium?\nFeedstock value forecasts across DRI, scrap and carbon scenarios.\n\nAccess the report\n\n\n\n\nGMK center, World Bank WITS/UN Comtrade ↩︎Australia’s Department of Industry ↩︎World Bank WITS/UN Comtrade ↩︎","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":false,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"isVideo":false,"video":null,"symbols":[],"gpt_button":0,"need_auth":false,"need_login_tip":false,"code":"91000000","status":"200"}}}