Europe's Reliance on Nickel Pig Iron to Persist Until CBAM's Full Implementation

ANGLO AMERICAN

Europe’s stainless steel industry will continue to rely heavily on nickel pig iron (NPI) imports until the European Union's carbon border adjustment mechanism (CBAM) enters its definitive phase in 2026. John Eastwood, head of sales for stainless and specialty steel raw materials at Anglo American, confirmed this trend during the Nickel Institute Seminar at LME Week, indicating that Europe’s current scrap shortage and rising material costs have pushed producers to depend on the cheaper, more carbon-intensive Indonesian NPI. According to Jim Lennon, managing director of Red Door Research, from January to July alone, European imports amounted to 10,000 tons of nickel metal content.

The driving factor behind the shift is the increasing cost of raw materials combined with a scarcity of stainless steel scrap in Europe. Even as scrap prices drop, Eastwood does not foresee any immediate changes. He emphasized that only CBAM, the EU's effort to limit carbon leakage, will likely curb this reliance. In its trial phase, CBAM requires European importers to account for CO2 emissions linked to imported goods by purchasing emissions certificates, further affecting the industry’s sourcing strategies.

Industry Facing a Third Year of Decline

The European stainless steel industry continues to struggle. With demand expected to shrink for a third consecutive year in 2025, many flat producers are operating far below capacity. Acerinox, a Spanish producer recovering from a five-month strike, has also committed to using NPI as feedstock. Despite the excess production capacity, profitability isn’t the issue, according to Eastwood. “The problem is excess capacity," he said. Even Acerinox’s market absence barely impacted ferro-nickel sales.

By mid-2025, Eastwood anticipates demand recovery, driven by improved macroeconomic conditions and relaxed monetary policies. However, he highlighted industry criticisms of CBAM, particularly its exclusion of scope 3 emissions and its perceived role as a protectionist policy. "There are many holes in CBAM," Eastwood noted, pointing out inconsistencies such as the inclusion of ferro-nickel but the omission of refined nickel.

Future Projections for Nickel and Freight Costs

Anglo American forecasts the class 1 nickel market to hold surpluses in the coming years, while the class 2 market, including NPI and ferro-nickel, remains balanced or tight. Eastwood predicts stable nickel prices on the London Metal Exchange (LME) through 2025, dismissing any expectations of price spikes. Additionally, high freight costs are likely to limit imports of finished stainless steel into Europe next year, further weighing on the industry.