The European Commission’s latest guidance on the Carbon Border Adjustment Mechanism turns carbon accounting from a technical reporting exercise into a commercial test for Serbia’s steel industry. Published on 14 August 2026, the sector-specific document defines how embedded emissions must be calculated for iron, steel and downstream products during CBAM’s definitive period. For Serbian producers, the immediate question is no longer whether European carbon policy will affect their business, but how much of the resulting cost they can prevent through verified data, cleaner production and stronger contracts with European customers, explain from CBAM.Clarion.Engineer
The exposure is substantial. Serbia exported approximately $731 million of iron and steel and $834 million of iron and steel products in 2025. European Union buyers accounted for around $641 million of the first category and $573 millionof the second. On this broad trade classification, the EU absorbed almost 78 per cent of Serbia’s combined exports across the two chapters, while taking close to 88 per cent of its primary iron and steel exports.
These figures represent an outer boundary rather than the precise CBAM tax base. Ferrous scrap is excluded, while some finished products classified within the wider iron and steel articles chapter are not presently covered. The mechanism nevertheless reaches deeply into the Serbian industrial economy. It includes hot- and cold-rolled steel, coated products, bars, wire, tubes, pipes, structures, fasteners and numerous fabricated components. The Serbian companies affected therefore extend well beyond the country’s two principal steelmaking groups.
That matters because the wider Serbian metalworking and electrical equipment sector generated exports of about €15.2 billion in 2025, equivalent to 46.1 per cent of the country’s merchandise exports. It employs roughly 197,300 people, including more than 54,000 in fabricated metal products. Steel is not simply another export commodity. It is the input supporting construction products, machinery, vehicle components, energy infrastructure and a network of privately owned manufacturers spread across Vojvodina, Šumadija and central Serbia.
At the centre of the adjustment is HBIS Group Serbia, the Chinese-owned operator of the integrated steelworks in Smederevo and the tinplate operation in Šabac. HBIS acquired the Smederevo assets in 2016 and has since become one of Serbia’s largest industrial exporters and employers. The company has capacity to produce approximately 2.2 million tonnes of finished steel a year and supports more than 5,000 jobs. Its reported environmental investments exceed $300 million, although expenditure on environmental compliance does not automatically translate into a lower CBAM liability.
The Smederevo plant uses an integrated blast furnace and basic oxygen furnace production route. Under CBAM, this creates a demanding accounting chain covering coke and other reducing agents, carbon contained in fuels and raw materials, carbonate use, graphite and electrodes, process gases, slag, waste streams and measurable heat flows. Emissions cannot simply be divided by total steel output and applied uniformly to every exported product.
The Commission requires emissions to be allocated to defined production processes and then carried through the relevant precursor materials. Sintered ore, pig iron, crude steel and rolled products must be connected through mass flows that account for production losses and differences between product categories. Where one tonne of a finished product requires more than one tonne of crude steel or slab because of cutting, trimming, scale or rejects, the embedded emissions of the larger precursor quantity remain attached to the saleable output.
This is particularly important for HBIS because the group sells products across several customs classifications and operates different production and finishing stages. A hot-rolled coil from Smederevo, a cold-rolled product and tinplate processed in Šabac may contain related upstream emissions, but they do not necessarily produce the same CBAM result. Each route requires defensible production data, documented transfers between installations and a methodology that prevents both omissions and double counting.
The Commission guidance permits a combined or “bubble” approach for installations making two or more iron and steel product categories, provided that internally produced precursors are not also sold separately. Once a precursor is sold outside the defined production process, separate accounting is generally required. For an integrated business, that makes the boundary between internal transfer and external sale a financial issue rather than a mere organisational choice.
Waste gases provide another potential source of error. Blast furnace and coke oven gases may be consumed elsewhere in an installation to produce heat or electricity. Their carbon cannot be counted once in the originating production process and again where the gas is subsequently burned. In the Commission’s worked blast furnace example, correcting this double count removed almost 479,000 tonnes of CO₂ from the installation’s reported direct emissions. The example is illustrative rather than representative of Smederevo, but it demonstrates the scale of value that can depend on the accounting architecture.
The same example produced total embedded emissions of 1.567 tonnes of CO₂ per tonne of finished steel, including 1.539 tonnes of direct emissions and 0.028 tonnes associated with electricity used for sinter production. After the applicable free-allocation adjustment, an import of 10,000 tonnes of rails required 3,690 CBAM certificates, or 0.369 certificates per tonne.
These numbers must not be used as default assumptions for HBIS. Actual Smederevo emissions could be higher or lower, depending on fuel efficiency, burden composition, yields, waste-gas treatment and product mix. Their relevance lies in showing that an integrated producer’s CBAM position is determined by plant-level evidence. A Serbian supplier that cannot produce verified actual data may leave its European customer dependent on conservative default values, which can result in a higher certificate obligation and a lower price offered for the steel.
Serbia’s other major steelmaking route is represented by Metalfer Steel Mill in Sremska Mitrovica. The privately held producer operates an electric arc furnace and rolling facilities with annual capacity in the region of 0.5 million to 0.6 million tonnes. It produces reinforcing bar, rebar in coils and wire rod, using steel scrap sourced within Serbia.
Metalfer’s scrap-based model gives it a structurally different emissions profile. Scrap generally enters the CBAM calculation with zero embedded precursor emissions, although its carbon content must still be included in the installation’s carbon mass balance. The process continues to generate direct emissions through fuels, electrodes, carbon additions, alloys and other materials. Scrap origin, grade and pre-consumer content must also be documented.
Electric arc furnace production is electricity-intensive, but the present CBAM rules contain an important distinction. For iron and steel goods listed in Annex II, only direct emissions are normally included. Indirect electricity emissions are currently counted for sintered ore, but not as a separate charge on most final steel products. Renewable electricity can still reduce Metalfer’s operating costs, exposure to power-price volatility and future regulatory risk, yet it does not automatically reduce the current certificate obligation on every tonne of exported rebar or wire rod.
Metalfer has already secured development financing that moves in this direction. Austria’s Development Bank provided a €25 million facility in 2022, followed by another €20 million in 2023, supporting renewable energy, solar capacity, wastewater treatment, energy efficiency and emissions reduction. The combined €45 million package illustrates the kind of financing Serbian steel companies will increasingly require: longer-tenor capital linked to measurable environmental and operational improvements rather than general corporate borrowing alone.
The financial advantage of the electric arc route will still depend on the quality of Metalfer’s records. The guidance requires weighted averages when different production routes, precursor sources, reporting periods or electricity supplies are combined. It also requires producers to disclose parameters such as scrap consumption per tonne, the share of pre-consumer scrap, alloy composition and the carbon and metal content of ferroalloys. A low-carbon production claim unsupported by auditable material flows has little value under the definitive CBAM regime.
The downstream consequences are visible at companies such as Unipromet, the family-owned manufacturer based in Čačak. Founded in 1989, the company employs around 650 people, reports annual turnover of approximately €102 million, and operates production facilities in Čačak and Kraljevo. Its portfolio includes road safety barriers, welded steel pipes, noise barriers, traffic signs and steel structures for solar installations and carports.
Unipromet recently supplied around 65 kilometres of steel safety barriers for the Vrnjačka Banja–Vrba section of the Morava Corridor. This kind of business demonstrates the position of Serbian fabricators between domestic infrastructure demand and export markets. It also reveals how CBAM reaches beyond steel furnaces.
For a producer of pipes, structures or fasteners, most embedded emissions can sit in the purchased steel rather than in the fabrication process. The Commission’s worked examples put the precursor share at more than 90 per cent of total embedded emissions for certain fasteners and at 94.3 per cent in one stainless steel electric arc furnace example. These are not Serbian company values, but they explain why procurement is becoming as important as factory efficiency.
Cutting, welding, coating and finishing emissions may be outside the defined process boundary for some iron and steel goods, yet the steel consumed before cutting losses remains relevant. If 1.18 tonnes of steel input are needed to deliver one tonne of fasteners, the embedded emissions of the full input quantity are allocated to the tonne sold. Selling scrap generated during fabrication does not erase the upstream carbon already attributed to the purchased material.
A company such as Unipromet must therefore know the customs classification of every exported product, the origin and embedded emissions of its steel, the production period of the precursor data and whether the supplier’s emissions report has been verified by an appropriately accredited verifier. A generic certificate declaring that steel is “green” will not meet the evidentiary standard.
The guidance requires monitoring plans and emissions reports to be available in English, while supporting records must be retained for six years. Actual precursor data from another installation can be used only when the accompanying verification is valid for the correct sectoral scope and reporting period. Otherwise, the European importer may have to apply default values.
For smaller Serbian fabricators, this creates a concentration risk. Large European customers can demand data in a standard format, insist on contractual warranties and pass calculation errors back to suppliers. Smaller exporters may have to obtain verified information from steel mills that possess much greater negotiating power. The result could be a two-tier supply chain: companies with verified product-level emissions retain access to high-quality customers, while those relying on default values compete through discounts.
CBAM’s formal liability sits with the authorised European importer, but the economic cost will migrate through contracts. Buyers can reduce the ex-works price, introduce carbon adjustment clauses, demand security for future corrections or switch to suppliers with more reliable emissions records. Serbian exporters may also face longer payment cycles while European customers reconcile certificate requirements, explain from CBAM.Clarion.Engineer
The scale of the risk can be illustrated without forecasting the future EU carbon price. Using €80 per tonne of CO₂, the reference value employed in the Commission guidance for assessing unreasonable monitoring costs, every 0.1 tonne of certifiable emissions per tonne of steel represents €8 per tonne of product. Across annual sales of 500,000 tonnes, that difference becomes €4 million. A gap of 0.5 tonnes of CO₂ per tonne between verified actual data and an adverse default assumption would imply €20 million.
The Commission’s illustrative blast furnace rail example would correspond to approximately €29.50 per tonne after its free-allocation adjustment at that carbon price. Its stainless pipe example would produce a cost of almost €77 per tonne. The cases cannot be directly compared because the products, alloys, precursor assumptions and process routes are different. They nevertheless show that product-level documentation can move margins by more than many steelmakers earn in a normal year.
CBAM is also arriving alongside tighter conventional trade protection. From 1 July 2026, the EU reduced its tariff-free steel import quota to 18.3 million tonnes a year, about 47 per cent below the volume allowed under the previous safeguard arrangement. Imports above the quota face a 50 per cent tariff, double the former rate.
The new regime introduces a “melt and pour” origin requirement intended to identify where steel was originally produced rather than where it received its final processing. The Commission’s timetable points to detailed implementation by the end of August and application from 1 October 2026. Serbian exporters will consequently need to prove both the carbon history and the metallurgical origin of their products.
For HBIS, the Chinese ownership of the Serbian company does not determine steel origin: material genuinely melted and poured in Smederevo is Serbian-origin steel for this purpose. The evidence must still be sufficiently detailed to withstand customs examination. Downstream manufacturers using imported coils, slabs or wire rod face a more complex position because Serbian fabrication does not necessarily change the melt-and-pour origin.
The interaction between CBAM, quotas and origin controls will shape capital allocation. A product can have verified emissions and still be commercially unattractive after the quota is exhausted. It can remain within the quota yet lose orders because its carbon cost exceeds that of an EU producer or another foreign supplier. European buyers will increasingly assess landed cost as the combination of the steel price, transport, CBAM certificates, quota availability, tariff exposure and compliance risk, explain from CBAM.Clarion.Engineer
Serbian banks will have to incorporate these variables into credit analysis. Exporters unable to quantify CBAM exposure may encounter tighter working-capital limits, higher collateral requirements or wider credit spreads. Companies with verified low-emission production, diversified customers and long-term financing for modernisation should be better positioned to protect cash flow. Development institutions can provide part of the required capital, but commercial banks will still need credible emissions data before treating decarbonisation projects as a reduction in borrower risk.
At the sovereign level, Serbia’s dependence on European industrial demand makes the competitiveness of steel and metalworking relevant to export receipts, employment and the current account. The government’s exposure is not limited to the performance of one large Chinese-owned plant. A decline in steel competitiveness would move through transport companies, scrap collectors, engineering businesses, construction-product manufacturers and the banking system.
The most valuable Serbian industrial assets in the CBAM period will therefore include more than furnaces and rolling mills. They will include verified monitoring systems, stable precursor contracts, documented product yields and the ability to connect every exported customs code to an auditable production record. For Serbian steel companies, carbon data has become part of the product being sold to Europe—and increasingly part of the price Europe is prepared to pay.
Elevated by CBAM.Clarion.Engineer