As the European Union's Carbon Border Adjustment Mechanism (CBAM) nears full implementation in 2026, South Korean steel producers are bracing for significant challenges. The new regulations will require steel exporters to the EU to report quarterly on carbon emissions from production, with fines up to €50 ($52) per ton for non-compliance.In 2022, South Korea exported $4.3 billion worth of steel products and $500 million worth of aluminum to EU countries. 

The Korea International Trade Association (KITA) has expressed concerns about the burden of calculating and reporting emissions figures, even though the EU will not levy a border carbon fee until the end of 2025.

To mitigate the impact, POSCO and Hyundai Steel have implemented internal task forces and are developing technologies to reduce carbon emissions, such as producing direct reduced iron (DRI) using hydrogen and increasing electric arc furnace production. Hyundai Steel aims to cut direct and indirect emissions by 12% by 2030.

However, the Korea Iron and Steel Association (KOSA) has advocated for a weaker 2030 greenhouse gas emissions reduction target for industry in South Korea, contradicting the efforts to meet EU CBAM requirements. The steel industry's engagement with the European Commission and the World Trade Organization suggests strategic attempts to weaken the CBAM during its transitional phase.

As the EU mechanism evolves, South Korean steel producers must adapt to remain competitive in the European market while navigating the challenges posed by the CBAM.