The European Union’s carbon border mechanism, the Carbon Border Adjustment Mechanism (CBAM), covers some ferroalloys but leaves four strategically important products outside its current scope. Ferro-manganese, ferro-chromium and ferronickel are covered, while ferro-tungsten, ferro-vanadium, ferro-molybdenum and ferro-niobium are excluded from the relevant Chapter 72 scope. The difference creates a regulatory gap for materials used in advanced manufacturing and industrial supply chains.
Import concentration and industrial uses
EU trade data for 2025 show concentrated supply in two of these markets: China accounted for 68% of EU ferro-tungsten imports by value, and Brazil supplied 83% of ferro-niobium imports. These materials serve demanding industrial applications. Tungsten alloys are used in tooling and high-performance manufacturing, while niobium is used in specialised steels and other advanced materials.
Vanadium and molybdenum also contribute to steel performance and are used in construction, transport and other industrial sectors. The materials can support defence-related supply chains as well. Their supply concentration is relevant to the EU’s Critical Raw Materials Act, which aims to strengthen European supply chains and reduce reliance on individual third countries for strategic raw materials.
Despite that strategic relevance, the current CBAM framework does not treat these ferroalloys consistently. Products can remain outside the mechanism even when their production involves energy-intensive, high-temperature metallurgical processes. The distinction also matters for European producers competing with imports while bearing carbon-related costs under the EU Emissions Trading System (EU ETS).
Different carbon-cost treatment by product
Under the current scope, imports of ferro-tungsten, ferro-vanadium, ferro-molybdenum and ferro-niobium do not incur a CBAM certificate obligation. This can affect competition between European manufacturers and overseas suppliers. However, exclusion does not establish that every excluded product has a higher carbon footprint than covered alternatives.
Actual emissions depend on production technology, energy sources and facility efficiency. The regulatory distinction means that comparable industrial processes can receive different carbon-cost treatment depending on a product’s customs classification. It also raises questions about whether EU carbon border policy aligns with ambitions to strengthen domestic processing capacity and reduce dependence on concentrated foreign suppliers.
For European manufacturers, the different treatment creates uncertainty about how far CBAM can support domestic production while limiting carbon leakage. Existing product boundaries reflect earlier scope decisions, rather than a comprehensive ranking of ferroalloys by emissions intensity or strategic importance. The exclusions therefore distinguish products without assessing the sector as a whole against either measure.
Effects on investment in processing
The exclusions also affect investment decisions. Companies considering European tungsten conversion, niobium-alloy production or other specialised ferroalloy processing cannot assume that strategic importance alone will provide CBAM protection against competing imports. Project economics may instead rely more heavily on long-term offtake agreements, supply-security premiums, recycling opportunities and government backing.
Technical specifications required by industrial customers are also among the factors that may shape project economics. For developers, reliable raw-material availability and access to specialised markets may matter more than any anticipated benefit from carbon border measures. Investors must also account for carbon costs incurred by European operations and the competitive position of imported products that remain outside CBAM.
These considerations are particularly important for projects intended to reduce reliance on concentrated supply chains while establishing commercially viable processing capacity in Europe. European producers face carbon-related costs through the EU ETS, while imports of the four excluded ferroalloys have no CBAM certificate obligation under the current scope. That difference forms part of the competitive setting for proposed processing projects.
Potential focus of future CBAM reviews
Expanding CBAM to additional ferroalloys would require policymakers to weigh competing priorities. A broader scope could make carbon-cost treatment more consistent and potentially support European processing, but adding products would increase administrative complexity and could raise input costs for downstream manufacturers. Keeping strategically important materials outside the mechanism could also weaken incentives for domestic investment where carbon costs materially affect competitiveness.
The policy challenge is to balance carbon leakage prevention, strategic supply security and the competitiveness of European industry without imposing disproportionate costs on manufacturers that depend on specialised alloys. Future discussions may focus increasingly on individual product codes and their industrial applications, rather than treating ferroalloys as a uniform category. The tungsten, vanadium, molybdenum and niobium exclusions illustrate how carbon regulation, strategic dependence and industrial competitiveness do not always align at the EU customs border.
How policymakers address these gaps will help determine whether future CBAM revisions can better support Europe’s decarbonisation and critical raw materials objectives.