There is real tightness of aluminium in Europe, but it is a supply shock rather than a CBAM-driven deficit

Europe’s aluminium market is navigating a new carbon-cost reality as the EU’s Carbon Border Adjustment Mechanism (CBAM) enters its definitive phase. Since 1 January 2026, the policy has brought fresh questions over import costs, domestic versus imported aluminium pricing, low-carbon premiums and changing procurement strategies. In search of these answers, AL Circle has engaged in a candid conversation with Nick Ogilvie, CBAM Lead at CarbonChain, in which he has unpacked how these dynamics are playing out in the market. He explains that while CBAM is designed to close the carbon-cost gap between EU-produced and imported aluminium on direct emissions, its pricing impact remains relatively modest. According to Ogilvie, the current tightness in European aluminium supply is being driven far more by supply shocks than by CBAM itself.

He also discusses how carbon considerations are beginning to reshape downstream procurement, with buyers increasingly scrutinising suppliers’ ability to provide verified installation-level emissions data. Beyond compliance, Ogilvie explores the emerging value of carbon data, the evolving low-carbon aluminium premium and why CBAM, for now, may be moving money and data through the aluminium supply chain faster than it is reducing emissions.

Read the full interview for his perspective on how CBAM could reshape aluminium pricing, sourcing and carbon accountability across Europe.

AL Circle: CBAM entered its definitive phase on 1 January, 2026, bringing imported primary unwrought aluminium into a carbon-cost framework alongside European production already exposed to the EU ETS. Eight months into the regime, is there evidence that the price gap between imported and EU-produced aluminium is narrowing? How significant is CBAM compared with factors such as energy costs, regional premiums, freight and the EU ETS?

Nick Ogilvie: By design, CBAM closed the gap on direct emissions on 1 January: an importer is now liable for emissions above 97.5 per cent of the CBAM benchmark, mirroring what an EU smelter pays under the ETS after free allocation. The catch is that both numbers today are small. With a benchmark of 1.423 tCO₂e/t and certificates at around €75, a smelter with verified direct emissions of 1.6–1.8 tCO₂e/t carries a CBAM charge of roughly €15–30/t this year. On default values, it is higher: around €50–60/t for Middle Eastern, Indian, Indonesian, or Canadian metal and around €145/t for Chinese.

EU-produced and imported metal in free circulation trade off the same duty-paid Rotterdam premium, so CBAM shows up inside that premium rather than as a separate price gap. Fastmarkets has included it in its duty-paid assessment since January, Platts since April. The duty-paid/duty-unpaid spread was about $50/t in mid-December; CRU had it at $79/t on 23 September, still short of covering import duty plus CBAM. So we are seeing pass-through, but it’s partial.

This year, CBAM is a second-order price driver. The duty-paid premium went from $330/t in December to $575–600/t in early April on the Gulf conflict, Mozal and the end of the Russian quota, with vessel delays and logistics costs on top. CBAM only becomes a first-order driver as free allocation phases down towards 2030, and later still if the Commission’s July ETS review proposal, which would reintroduce 15% of the phased-out free allocation from 2028 and stretch the phase-out to 2038, is adopted.

We are also only seeing small hints towards indirect cost compensation changes in the EU, which would open the door to bringing indirect emissions into the scope of EU CBAM - and this would certainly make CBAM a first-order driver for the aluminium sector where indirect emissions can exceed ten times that of the direct emissions footprint.

AL Circle: Industry data indicate that EU unwrought aluminium imports have fallen by around 15.46% year on year. How much of that decline can reasonably be attributed to CBAM rather than weaker demand, trade-flow changes, sanctions, energy prices or broader macroeconomic conditions?

Nick Ogilvie: Most of it isn’t CBAM - or at least not CBAM as a price signal. CBAM’s clearest fingerprint in the trade data is timing. Importers cleared metal before 1 January to keep it out of the first liability year: Fastmarkets’ figures for EU-27 unwrought imports, excluding CBAM-exempt Norway, Iceland and Switzerland, show 675,000 in December 2025, against a normal 280,000-360,000 a month, followed by 143,000 in January and 183,000 in February. That pull-forward alone depresses any 2026 year-on-year comparison.

Then come supply shocks that have nothing to do with carbon pricing. The Russian quota expired in February. South32 put Mozal, one of Europe’s largest external suppliers, on care and maintenance in mid-March because it couldn’t secure affordable power. The Gulf, which supplied around a fifth of Europe’s imports before the conflict, lost a large slice of capacity: Qatalum has been running at about 60%, Alba shut three lines because of the Hormuz disruption, and EGA had restored only a quarter of Al Taweelah’s cells by late August after the March strikes. Demand from the EU has been relatively soft on top of all that.

The structural effect - metal staying away because Europe is uneconomic once carbon is priced - is small this year because the cost is small as we saw earlier: tens of euros a tonne against a premium of $450–600/t. I’d be surprised if CBAM’s ongoing cost accounts for more than a couple of percentage points of the decline. Where it does bite is in the paperwork. Authorisation and uncertainty over default values push smaller importers above the 50-tonne threshold towards buying metal that traders have already cleared, which changes who imports more than how much.

AL Circle: Has the decline in aluminium imports translated into any genuine supply tightness in the European market, or is it too early to describe this as a supply deficit? If imports continue to weaken, where is Europe most likely to find replacement tonnes - from higher domestic production, recycling, lower-carbon overseas suppliers or alternative trade partners?

Nick Ogilvie: There is real tightness, but it is a supply shock rather than a CBAM-driven deficit. The signals are clear: the Rotterdam duty-paid premium is still around $500/t against $330/t in December; LME stocks are down to roughly 240,000 tonnes, and CRU points to low physical stocks, restricted prompt availability and vessel delays. What has stopped this becoming a full deficit is weak demand. If European demand picks up before the Gulf is fully back - EGA is targeting the first quarter of 2027 for Al Taweelah - it will get tighter.

In the near term, trade diversion is supplying most of the replacement tonnes. Canadian metal, redirected by US tariffs and high European premiums, is flowing into Europe; Norway and Iceland, inside the ETS and outside CBAM, are well placed; and Gulf volumes should return as smelters restart. Domestic primary is marginal. San Ciprián completed its restart in April, and Slovalco began restarting 75,000 tonnes in late August, after Slovakia’s indirect carbon cost compensation scheme cleared Brussels. This also helps to put into context - at least today - what decides whether European smelters run: power prices and state aid, not necessarily CBAM.

Another angle that plays a critical role is recycling, which is a lever Europe actually controls, and why the Commission’s planned restriction on scrap exports to non-OECD countries, now being pursued under the Waste Shipments Regulation after the proposed export duty was dropped, matters more for long-run supply than anything in CBAM. Lower-carbon overseas supply will help at the margin, but it is already the tightest corner of the market. This also prompts interesting questions around the EU’s approach to the extension of CBAM scope with regard to the inclusion or not of both pre- and post-consumer scrap as a precursor in CBAM.

AL Circle: If Europe does experience tighter availability of primary aluminium, what happens to the premium for verified low-carbon aluminium? Would scarcity strengthen the premium, or could buyers become less willing to pay specifically for low-carbon attributes when their immediate priority is securing metal?

Nick Ogilvie: This year has answered that question, and it is the second outcome. When availability is the constraint, buyers pay for tonnes first and attributes second. The duty-paid premium rose by around $250/t between December and April. Fastmarkets’ European low-carbon differential, which sat at $0–20/t for most of 2025, was assessed at $15–30/t in early September. In other words, the premium for tonnes moved by around $250/t, while the premium for carbon moved by $10–15/t.

There are two nuances here when it comes to low-carbon metal. First, low-carbon metal is itself scarce - Fastmarkets describes the duty-unpaid low-carbon market as considerably tighter than the wider market - so buyers with firm Scope 3 commitments are paying up, but through term contracts rather than in the spot market. Security of volume and carbon attributes are being bundled together.

Second, CBAM is creating a different premium: one for verified data rather than for low carbon. Default values carry a 10% mark-up this year, rising to 20% in 2027 and 30% from 2028, so metal that comes with verified, installation-level emissions data is worth more than identical metal without it. It’s critical to remember that the CBAM emissions system boundary is restricted to just direct emissions, whereas low-carbon definitions capture smelter electricity (Scope 2) and, in some cases, the full cradle-to-gate footprint of the metal. The CBAM premium rewards anode and PFC performance, not renewable power, which dictates whether metal qualifies for the low-carbon premium. In a tight market, I’d expect the voluntary low-carbon differential to stay compressed and the value of verified data to keep rising. The two are easy to confuse, and they are not the same thing - and buyers have different commercial reasons for placing value on each respectively.

For producers deciding where to put effort, that distinction has a practical edge to it. The low-carbon premium depends on the smelter's power source, which for most operators is a contract they cannot change quickly. However, the verified-data premium depends on whether installation-level emissions data has been collected properly and can be defended in front of a verifier – only one of those is readily available this year.

AL Circle: What actually determines the low-carbon aluminium premium today? Is it primarily carbon intensity, CBAM liability, renewable-power credentials, traceability, physical availability, or simply buyers' willingness to pay? Do you expect the premium to become more transparent and standardised as CBAM matures?

Nick Ogilvie: Today, it is mostly willingness to pay, expressed through bilateral contracts. A fairly small group of buyers with Scope 3 targets, mainly in automotive, packaging, cables and façades, pay for metal below a threshold: typically 4 tCO₂e/t on a Scope 1 and 2 basis in the price reporting agencies’ assessments. Carbon intensity sets eligibility, renewable power is how producers get under the threshold, and traceability and assurance through schemes such as ASI and LME passport make the claim bankable. CarbonChain is heavily involved in product-level emissions calculations to enable clients to access these low-carbon premiums. Physical availability in the right form sets the level, which is why low-carbon differentials vary between P1020, billet and other value-added products.

CBAM liability is a minor input. For aluminium, CBAM counts only direct emissions (anode consumption, PFCs and fuel), and those look broadly similar at a coal-fired and a hydro-powered smelter. It says almost nothing about electricity, which is what the low-carbon premium is paying for.

It will become more transparent, and I would frame why in a longer arc than CBAM itself. Commodity markets have been through a version of this before. Metals once traded on inspection and reputation, with quality argued over cargo by cargo. What changed that was a data standard rather than a price signal: once brands were listed against a published specification and an independent assay could certify the content of the metal, purity stopped being a negotiation and became an attribute of the tonne. It travelled with the material and could be financed and traded against without being reopened.

Carbon is moving the same way. The LME already requires emissions reporting from all its listed aluminium brands, with third-party verification from September 2027, and CBAM is assembling the first verified installation-level emissions dataset this industry has had. The direction of travel is towards carbon intensity being something the market knows about a tonne rather than something a buyer has to request.

It will become more transparent, but in two separate pieces. The CBAM component is already getting there: Fastmarkets and Platts both build CBAM into their duty-paid assessments, and Platts publishes a calculated CBAM cost. I’d like to see that component split out routinely, because buyers should know what they are paying for. The low-carbon premium will take longer because the definitions still diverge. The agencies use 4 tonnes on Scope 1 and 2, the LME Insight sustainable premium uses 8 tonnes cradle-to-gate on the IAI methodology, and there is no consensus on how to treat scrap. What CBAM will add is a verified, installation-level dataset on direct emissions for metal shipped to Europe: the data backbone the low-carbon market has been missing.

AL Circle: How are European downstream manufacturers adjusting procurement strategies as the carbon cost of imported primary aluminium becomes more visible? Are you already seeing carbon intensity influence supplier selection alongside conventional factors such as price, quality and delivery?

Nick Ogilvie: Carbon intensity is influencing supplier selection, but it arrives as a data-quality question before it becomes a carbon question. The first thing buyers now ask is not ‘how low is your footprint?’ but ‘can you give me installation-level direct emissions data that will stand up to verification?’, because the alternative is paying on marked-up default values. A supplier who can answer that has an edge over one who can’t, whichever of them is cleaner.

That is the problem CarbonChain’s Supplier Catalogue was built for: a single structured route for importers to request installation-level data and for producers to return it in a form a verifier will accept, rather than the spreadsheet and email cycle most of this industry still runs on. The importers who have that in place are ranking suppliers on a CBAM-adjusted landed cost rather than a headline premium.

The other visible shift is who carries the obligation. Many downstream manufacturers would rather buy duty-paid, CBAM-inclusive metal from a producer or trader acting as declarant than import directly and run the compliance themselves. Platts moved CBAM into its duty-paid assessment in April precisely because it was increasingly embedded in duty-paid and DDP spot deals. Contracts are catching up, with clauses allocating CBAM costs, obligations on suppliers to provide emissions data and support verification, and pricing that shows the CBAM element separately. The key piece here is that whilst the premiums enable efficient pricing, an importer’s CBAM cost is tied directly to the installation-specific emissions values of the cleared material. As a result, where not already negotiated, many businesses are performing post-transaction adjustments to reflect the actual CBAM cost associated with the specific tonnes sourced.

What we are not yet seeing is carbon intensity overriding price, quality and delivery - and this year of all years this is unlikely to change. Security of supply has dominated since March, and on verified data, CBAM at 2026 cost levels roughly equalises metal from different origins, although on defaults Chinese metal carries around €90/t more. That changes as verified data arrives in 2027 and free allocation phases down. Under current law, by 2030 the charge on a typical primary tonne will be around three times this year’s, even at today’s carbon price (slightly less if the ETS review is adopted as proposed), and the gap between a supplier with verified data and one on defaults becomes a line item procurement can’t ignore.

AL Circle: CBAM's potential expansion further downstream raises a different challenge: carbon accounting becomes considerably more complex once aluminium moves through rolling, extrusion, fabrication and assembly. Where do you see the biggest data and traceability gaps emerging?

Nick Ogilvie: The biggest gap is scrap, by some distance. Under today’s rules, pre- and post-consumer scrap both enter CBAM with zero embedded emissions, which makes remelting the cheapest route to a lower bill. European Aluminium’s worked examples show Chinese metal entering a Vietnamese remelter as scrap and declared as Vietnamese falling from €164.5/t to €26/t. The Commission’s December proposal would make pre-consumer scrap a precursor carrying emissions, the Council has endorsed that, and Parliament wants declarations to state whether scrap is pre-consumer, post-consumer or a mix (note that scrap breakdown is already a mandatory disclosure for installations today). But once scrap has been melted, nothing at the border can tell you which is which. Until remelters and cast houses have a verifiable chain of custody, scrap claims will remain under intense scrutiny from verifiers.

The second is inheritance of precursor data through the tiers. An extruder blending billet from three smelters with scrap has to know which verified figure applies to which batch, then pass it to a fabricator, who passes it to an assembler. Every hand-off is a point where data gets averaged, lost or defaulted. Couple this with tight verification and reporting timelines, and this risk looks very real for importers of aluminium products already in scope ahead of the first declaration deadline in September 2027, and for downstream importers if the extension applies from 2028.

The precursor inheritance problem is a custody problem rather than a calculation problem, which is why it is harder than it looks. Emissions data has to move between counterparties who do not share systems, with provenance intact and with the supplier retaining control over what is disclosed and to whom. That is what CarbonChain’s Data Sharing module is for. Solved at tier one and tier two, the downstream extension is manageable. Left to email attachments, it is not.

The third is composition. Downstream goods are rarely pure aluminium, so alloying elements and other materials have to be stripped out of the mass and emissions calculation, across thousands of SKUs. Most fabricators have never had to do that, and presenting the controls, ownership and processes behind these calculations to verifiers may shine a light on these gaps. The irony is that processing itself adds little: rolling and extrusion come to a few hundred kilograms of CO₂e a tonne at most. The risk isn’t getting the processing step wrong; it’s losing the thread back to the metal.

AL Circle: For an EU importer, CBAM is ultimately both a carbon-accounting problem and a procurement-cost problem. Where is CarbonChain currently delivering the greatest value: obtaining supplier emissions data, calculating embedded emissions, preparing CBAM declarations, comparing suppliers, or identifying opportunities to reduce future carbon liabilities?

Nick Ogilvie: Right now the greatest value is at the front of the chain: getting installation-level emissions data out of suppliers and making it verification-ready. That is where the money is in 2026 and 2027. For primary aluminium, the difference between a verified actual value and a marked-up default can be the difference between a CBAM bill of €15–30/t and one of €50–145/t, and the gap widens as the mark-up rises. The emissions and free allocation calculations themselves aren’t the hard part. The hard part is getting non-EU operators, often several tiers upstream, to provide data in the right format, for the right production period, backed by a monitoring plan a verifier will ultimately sign off. That is what CarbonChain’s Supplier Catalogue and verification support are built for.

Calculation and declarations matter - the first annual declaration and certificate surrender for 2026 imports are due by 30 September 2027 - but they are only as good as the data underneath. The emissions and free allocation calculations themselves aren't the hard part. The hard part is getting non-EU operators, often several tiers upstream, to provide data in the right format, for the right production period, backed by a monitoring plan a verifier will ultimately sign off. That is a supplier engagement problem more than a carbon accounting one, and it is what CarbonChain Connect is built around: our Installations module so a producer prepares a dataset once rather than rebuilding it for every customer, the Supplier Catalogue so importers can request and track it in one place, and Data Sharing so it moves between counterparties with the provenance intact.

There is a broader point here about timing that I think is underweighted. The value of good carbon data compounds, and it compounds against dates that are already set. The default mark-up moves from 10% to 20% to 30%. Free allocation phases down towards 2030. Downstream scope expands. On current law, the charge on a typical primary tonne by 2030 is around three times this year's, even at today's carbon price. Each of those widens the spread between a business whose data is clean and one whose data is not, and none of them is a forecast.

A business that puts proper installation-level data collection in place now, while the cost of being wrong is still tens of euros a tonne, is building that capability at the cheapest it will be. A business that waits until the number hurts will be building the same thing under deadline pressure, with verifiers already booked out, having paid defaults in the meantime for metal that may not have been that carbon-intensive.

Where we see value growing fastest is in turning compliance data into commercial intelligence: comparing suppliers on a CBAM-adjusted landed cost rather than headline premium, modelling liabilities forward as free allocation phases down, and deciding which suppliers are worth the effort of verification. As the CBAM factor falls, importers who treat CBAM as a sourcing input rather than a compliance exercise will build a structural cost advantage.

AL Circle: When assessing aluminium's embedded emissions, companies have to consider the smelter's electricity source, alumina refining, anode consumption, casting, recycled content and logistics. Which of these typically dominates the carbon footprint of primary aluminium, and where can producers realistically achieve the largest reduction?

Nick Ogilvie: Electricity source, by a distance. On the International Aluminium Institute’s latest global figures, primary aluminium averaged 14.8 tCO₂e/t cradle-to-gate in 2023, and 8.6 tonnes of that was electricity for electrolysis. Alumina refining adds about 2.4 tonnes, mostly heat for the Bayer process; anode production about 1 tonne; the process CO₂ from consuming anodes in the cell 1.5 tonnes; PFCs 0.8 tonnes on average; transport around 0.5 tonnes; and casting under 0.2 tonnes. Recycled metal is a different world, at around half a tonne.

So the largest reduction comes from the power source. Moving a smelter from coal to hydro, renewables or nuclear takes it from the high teens to somewhere around 4–7 tonnes, depending on the alumina behind it. Alumina refining is the next prize, through electrified calcination, mechanical vapour recompression and low-carbon steam.

The CBAM twist is that the regulation sees very little of this. For aluminium, it counts only the smelter’s direct emissions - anode consumption, PFCs and fuel combustion, including casting. Under the Commission’s guidance, alumina and anodes, even anodes baked on site, sit outside the system boundary, and electricity is excluded because aluminium is listed in Annex II (which is the list of goods for which only direct emissions are in scope under the CBAM regulation). CBAM therefore sees perhaps a tenth of a coal-fired smelter’s cradle-to-gate footprint, and between a third and a half of a hydro-powered one’s. As designed, it is closer to a price on anodes than a price on aluminium’s carbon.

AL Circle: Eight months into the definitive CBAM regime, is there enough evidence to say that it has reduced the carbon intensity of aluminium consumed in Europe, rather than simply changing the cost or origin of imports?

Nick Ogilvie: Likely not, and unfortunately CBAM measures the wrong thing for this question. It captures direct emissions only, so a switch from coal-fired to hydro-powered metal barely registers in CBAM data. Furthermore, this year’s shifts in where Europe’s metal comes from were driven by sanctions, Mozal and the Gulf rather than by carbon, and they cut both ways: largely hydro-based Russian metal is being phased out entirely, while more Canadian hydro metal is arriving because of US tariffs.

What CBAM has changed is the behaviour around the metal: when it is imported, how premiums are priced, and how much installation-level emissions data moves through supply chains. The LME now requires emissions reporting from all its listed aluminium brands, with third-party verification from September 2027. Those are preconditions for decarbonisation, not necessarily evidence of it.

The risk is that CBAM changes the paperwork rather than the production: resource shuffling, where multi-asset producers route their best-performing tonnes to Europe, and remelting routes that exploit zero-rated scrap. The downstream and anti-circumvention package now heading into trilogue is the real test, along with the Commission’s 2027 assessment of whether to bring indirect emissions into scope. Until then, for the aluminium sector, CBAM is moving money and data more than it is moving emissions.