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The European Carbon Border Adjustment Mechanism (CBAM) is just over three months away from entering its “definitive” period from January 1, 2026, but concerns among market participants remain ahead of the implementation of the new border tax.
CBAM liabilities for the 2026 reporting period will not be fully known until the second half of 2027, due to the delayed sale of CBAM certificates and the volatility of EU Emissions Trading Scheme (ETS) allowance prices, to which CBAM certificate prices will be tied to.
As late as August 29, the EU announced a call for evidence on the “methodology for calculating emissions embedded in CBAM goods, rules on the adjustment of CBAM certificates to reflect the EU ETS free allocation, and rules on the deduction of the carbon price paid in a third country”.
“Brussels’ latest call for evidence on vital CBAM calculation elements does nothing to allay concerns about its lack of readiness for the definitive CBAM period,” Fastmarkets’ Head of Carbon Markets Modelling Shyamal Patel said.
“New hedges are emerging to cover certificate price risk but until the European Commission provides final guidance on how it will calculate certificate requirements, few market participants will sign 2026 contracts with conviction,” Patel added.
Ahead of 2026 aluminium contract negotiations which will kick off in September, market participants had voiced concerns over the uncertainty on the full CBAM cost calculation methodology and how this will be reflected in their transactions.
Following an extensive market consultation, Fastmarkets’ benchmark assessment for the European aluminium P1020A premium, on an in-warehouse duty-paid Rotterdam basis, will become inclusive of additional CBAM costs from January 2026, in the same way it currently reflects the import duty.
In 2025, Fastmarkets’ carbon team also launched a CBAM cost calculator, allowing importers to estimate their specific CBAM costs, which can vary sharply, depending on the specific product, the country of origin, the import volume and several other parameters.
European aluminium P1020 ingot premium levels have been recovering over the traditionally slow August period, amid factors such as historically low inventory levels in Rotterdam and the arrival of fewer than expected duty-free Canadian units, as well as concerns over near-term supply from South32’s Mozal smelter in Mozambique and stronger purchasing activity of DP units ahead of the implementation of CBAM on January 1.
Fastmarkets’ twice-weekly assessment of the aluminium P1020A premium, in-whs dp Rotterdam was $210-235 per tonne on Tuesday September 2, unchanged from Tuesday August 19, but up from $190-210 per tonne a month earlier.
“It looks like the element of CBAM is already affecting [European aluminium] P1020 premiums – one consumer we spoke to said they are talking about buying [duty-paid] metal early because of it. To hear consumers talking about it and considering purchasing large volumes is bullish,” one European trader source said.
However, the incentive for traders to import duty-unpaid (DUP) units and pay the 3% duty to sell P1020 in the DP market, on an outright spot assessment basis, has not been present since a brief period in May 2024, and was last established consistently in early 2023, according to Fastmarkets data.DUP supply has been tighter since the Russian invasion of Ukraine in 2022, amid a move away from Russian units by many European consumers, according to sources.
The DP-DUP premium spread had narrowed amid tighter DUP availability, while duty-paid material appeared to be in stronger supply amid increased Canadian flows to Europe, following the imposition of tariffs on Canadian metal in President Donald Trump’s second term, sources said.
The more recent lack of incentive to import DUP units and pay the 3% duty, considering the already narrow spread to DP premiums, has further limited supply of DUP units in the European market, and has begun to push up DUP premiums.
Fastmarkets’ daily aluminium P1020A premium, in-whs dup Rotterdam was $150-$170 per tonne on Tuesday September 3, up from $135-$155 per tonne from a month earlier.
The outright spread between the midpoints of the DP and DUP premiums was $62.50 per tonne on September 3, recovering sharply from a spread as low as $12.50 per tonne in April 2025 – moving closer to opening the window to pay the 3% duty on DUP units.
The all-inclusive in-whs Rotterdam Aluminium P1020 DP price, including LME cash price and the Fastmarkets DP premium, was at $2,845 per tonne, while the all-inclusive in-whs Rotterdam P1020 DUP price, including LME cash price, Fastmarkets DUP premium and the 3% duty, was calculated at $2,866 per tonne, leaving a spread of approximately $(20) per tonne on September 3.
This would suggest that the DP-DUP premium spread would need to widen by at least $20 per tonne in order to re-establish the 3% duty differential and incentivise customs-clearing DUP units, at current premium levels.
“Someone, sooner rather than later, will try to clear [more] units before 2026 in case the [duty-paid to unpaid] spread gets better. Even if it doesn’t fully reflect the differential yet, we know there isn’t much duty-paid metal, so it is best to get some cleared before CBAM [comes into effect],” a second European trader said.
Fastmarkets recently launched the aluminium P1020A, FOB Indonesia premium assessment on July 9 amid growing interest in Indonesian-origin spot cargoes, with multiple market participants who spoke with Fastmarkets expecting Indonesia’s aluminium output to increase in the coming years.
Indonesia’s aluminium production is expected to grow to around 700,000-750,000 tonnes per year by the end of 2025, and to about 1.25-1.5 million tonnes per year by the end of 2026. By 2030, the country’s aluminium output is expected to grow to 6-8 million tonnes per year minimally, and optimistically to 10-12 million tonnes per year should investments and expansion projects progress smoothly, according to Fastmarkets’ research team.
Fastmarkets’ research team also forecasts Indonesia’s alumina production to grow to around 20-24 million tonnes per year by the year 2030.
Indonesia currently consumes around 1.8 to 2 million tonnes of primary aluminium per year, Fastmarkets’ research team estimates.
Fastmarkets’ weekly assessment for aluminium FOB Indonesia was assessed at $85-95 per tonne on Wednesday September 3, unchanged from the previous assessment on August 27.
Long-term tariff clarity remains a key focus for market participants in the US aluminium market
Following the inauguration of US President Donald Trump in January, the new administration first raised Section 232 tariffs on aluminium and steel imports to 25% in mid-March, with President Trump doubling the Section 232 tariffs on aluminium and steel imports to 50% in early June.
The second Trump administration closed country exemptions, which notably included Canada, where the US sources around two-thirds of its primary aluminium, due to low-cost hydroelectricity in the Quebec province.
The new administration’s fast-paced and evolving focus on developing tariff policies and negotiating trade deals left much of the market unclear about the future of aluminium trade, sources told Fastmarkets.
Following the implementation of both tariff hikes, the regional Midwest premium – which the North American spot market relies on – jumped to all-time-highs.
Fastmarkets assessment of the aluminium P1020A premium, ddp Midwest US, was 71-73 cents per lb on Wednesday September 3, unchanged at an all-time high since August 22.
Despite the historic highs, many market participants reported the Midwest premium has been unable to cover the costs to replace inventory.
Some market participants had recently expressed confidence in the continued 50% tariff rate in the short-term. These sources point to additional Section 232 investigations into other materials and the expansion of the Section 232 aluminium and steel tariffs to cover over 400 products containing the tariffed metals.
But as the seasonal summer slowdown comes to an end, market participants told Fastmarkets that they are still uncertain in how they will develop 2026 contracts, which typically start in mid-September and end in mid-October.
The billet premium in the US also increased throughout the year, with Fastmarkets last assessing the monthly aluminum 6063 extrusion billet premium, delivered Midwest US at 16-19 cents per lb on August 22, up by 34.62% from 11.50-14.50 cents per lb on January 24.
The climb was largely due to supply tightness following the tariffs on aluminium products, with the elevated premium for aluminium P1020A material causing tightness in the billet market, according to a US billet market participant.
“The longer P1020 stays higher, the more difficult it becomes for VAP consumers to find material,” the US billet market participant said.
Another driver for the higher spot demand for billet material, and the resulting increase in its premium, is tightness in the availability of scrap material, according to a second trader source.
“A lot of billets made in the US are made from scrap. There is a scrap shortage, and considering no one can access units and the [increased] cost of prime [P1020,] everything is going up,” the second trader source said.
Availability of aluminium scrap material had been tight in the US even before tariffs on aluminium were implemented, with tightness still persistent despite scrap not being subject to tariffs, which has motivated more primary scrap being sent to the US to be remelted, industry sources told Fastmarkets.
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