South Korean steel faces roughly USD 4 billion in CBAM exposure, and the sector has a "narrow window" to avoid being locked into a structural cost disadvantage in the EU market. That is the conclusion of a report covered by Carbon Pulse on August 14, 2026. The warning concerns both sides of the trade: Korean mills selling flat steel into Europe, and the EU importers who carry the legal obligation to buy and surrender CBAM certificates against those tonnes.
The headline number is driven by production structure. About 70 percent of Korean steel output comes from the blast furnace route, and the report estimates POSCO's hot-rolled coil at roughly 2.127 tCO₂e per tonne, against an EU benchmark of 1.30. On the report's estimates, the CBAM cost of a tonne of POSCO coil starts near €71 in 2026 and rises toward €259 by 2034 as free allocation phases out. Corroborating country-level detail comes from Terawatt Times, whose Korea country intelligence report of March 24, 2026, written by Preston Hayes, Ethan K. Marlow, Hiroto Nakamura, and Maya Robinson, documents the same intensity and benchmark figures.
Why Korean steel sits so far above the EU benchmark
About 70 percent of South Korea's steel output comes from the blast furnace route, which is why the sector's CBAM exposure is both concentrated and slow to reduce. The South Korea country profile shows an export industry built around large integrated producers, with POSCO the most exposed name in the report. The BF-BOF route emits around 2.0 tCO₂ per tonne of crude steel, roughly four times the scrap-based EAF route, and cutting that intensity requires capital projects measured in years, not reporting cycles.
The report's POSCO estimate of 2.127 tCO₂e per tonne of hot-rolled coil, measured at CBAM system boundaries, sits 0.827 tCO₂ above the 1.30 tCO₂ per tonne benchmark for BF-BOF flat steel. Under the EU steel benchmarks, emissions above the benchmark are chargeable even in 2026, when the free allocation mirror still covers 97.5 percent of the benchmark itself. For scale, a 2022 input-output analysis by the Korea Energy Economics Institute (KEEI), cited by Terawatt Times, valued Korea's CBAM-covered exports at USD 2.952 billion.
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From €71 toward €259 per tonne: the report's cost path
The report estimates a CBAM cost of roughly €71 per tonne of POSCO hot-rolled coil in 2026, rising toward €259 per tonne by 2034, and both figures are report estimates rather than official numbers. The escalation is built into the regulation. In 2026, EU steelmakers still receive 97.5 percent of their free allocation, and importers' CBAM liability is reduced to mirror it, so certificates are owed only on emissions above the free-allocation-adjusted benchmark. That mirror shrinks every year until free allocation is fully phased out on January 1, 2034, at which point the full 2.127 tCO₂e per tonne becomes chargeable at the certificate price, minus any recognized carbon price paid at home.
The key figures from the report are summarized below.
| Figure | Value | Status |
|---|---|---|
| Korean steel CBAM exposure | ~USD 4 billion | Report estimate via Carbon Pulse |
| Share of output from blast furnaces | ~70% | Report estimate |
| POSCO hot-rolled coil intensity | 2.127 tCO₂e/t | Report estimate at CBAM boundaries |
| EU benchmark, BF-BOF flat steel | 1.30 tCO₂/t | Regulatory benchmark |
| Gap above the benchmark | 0.827 tCO₂/t | Derived from the two rows above |
| CBAM cost per tonne, 2026 | ~€71 | Report estimate |
| CBAM cost per tonne, 2034 | ~€259 | Report estimate |
| Industry-wide cost over the coming decade | 3 trillion won or more | Report estimate |
None of the per-tonne figures are official. Actual liability depends on verified emissions, the official quarterly certificate price, and the deduction for carbon prices paid in Korea. The price input is moving too: the Q3 2026 certificate price is tracking six to eight euros above the Q2 figure of €75.28, according to the mid-quarter check on the Q3 CBAM certificate price.
The K-ETS recognition question
Recognition of Korea's K-ETS carbon price under the Article 9 deduction remains Seoul's central ask in its EU engagement. Article 9 of Regulation (EU) 2023/956 lets importers reduce the certificates they surrender by the carbon price already paid in the country of origin, and this carbon price deduction is the one lever that could shrink Korean steel's bill without changing a single furnace. The problem is size. Terawatt Times calculates the legally deductible K-ETS component at €2.92 per tCO₂ in 2026, rising to €13.38 by 2034, which covers only 3.4 to 9.9 percent of the EU reference price. Two factors compress the deduction: 69.2 percent of POSCO's emissions are freely allocated under the K-ETS, and the K-ETS market price trades far below the EU ETS price. A deductible of €2.92 against a certificate price above €75 explains why Seoul is pressing for more generous recognition terms instead of relying on the mechanism as written.
What the numbers mean for EU importers of Korean steel
EU importers, not Korean mills, hold the legal CBAM obligation, so an estimated cost gap of €71 per tonne lands first on the importer's declaration and cash flow. The CBAM guide for steel importers sets out the full obligation chain. Four actions follow directly from this report.
- Request verified emissions data from Korean suppliers at CBAM system boundaries, because supplier-specific intensity determines whether actual values beat default values.
- Model certificate needs before sales open on February 1, 2027, when the quarterly requirement to hold certificates covering at least 50 percent of cumulative embedded emissions starts to apply.
- Reprice long-term supply contracts with the free allocation phase-out in mind, because a 2026 cost near €71 per tonne is the floor of the path, not its midpoint.
- Track the Article 9 file, because any EU-Korea agreement on K-ETS recognition changes the per-tonne math for every Korean tonne declared.
The first annual CBAM declaration, covering calendar year 2026, is due September 30, 2027. The CBAM cost calculator prices Korean steel scenarios at the official quarterly certificate price.
What happens next
Korea's steel association KOSA has already moved from analysis to advocacy, filing in the EU certificate-rules consultation that closed on August 6, 2026. That filing formed part of the heavy third-country presence in the certificate consultation record of 93 submissions. Korea is not the only Asian exporter putting a number on the problem: Malaysia costed its 2026 CBAM steel bill at USD 237 million, the first official ASEAN figure, though Korea's exposure is an order of magnitude larger. A 2024 study by the Korea Institute for Industrial Economics and Trade (KIET), cited by Terawatt Times, projects Korean steel exports falling 2.9 percent by 2026 and 10.4 percent by 2030 under CBAM pressure, and the report covered by Carbon Pulse puts the industry-wide cost over the coming decade at 3 trillion won or more. Whether the window the report describes stays open depends on two clocks: the pace of EU-Korea talks on carbon price recognition, and the annual ratchet of the free allocation phase-out, which pauses for no negotiation.