CBAM uncertainty hits commodity trading

In recent months, the European Commission has published what it describes as “simplified rules” of the carbon border adjustment mechanism (CBAM), but is the policy still unclear and too complicated for energy and metals traders?

In this episode, Richard talks to experts about the CBAM, and why some commodity trading firms  are holding off - despite the official January 2026 start date. Could some be at risk of ceasing trading temporarily?

Host: Richard Sverrisson - Editor-in-Chief, Montel News
Contributor: Gabriel Power - UK Power Reporter, Montel News

Guests:
Dan Maleski - Senior Environmental Markets Advisor, Redshaw Advisors
Nick Ogilvie - Product Manager, Carbon Chain

Editors: Bled Maliqi
Producer: Sarah Knowles

Transcript

Richard Sverrisson - Editor-in-Chief, Montel News: 0:03

Hello listeners, and welcome to Plugged In - the energy news podcast from Montel, where we bring you the latest news issues and changes happening in the energy sector. In this episode, we're looking at CBAM, the EUs Carbon Border Adjustment Mechanism Policy. Many across the sector in energy and in commodities are urging clarity, uncertainty before the start, on the 1st of January, 2026. In recent months, the European Commission has published what they describe as more simplified rules in regards to CBAM, but the industry is still waiting for a hundred percent clarification on costs of the measure. So what impact is this having on trading today? And what are the challenges faced by the energy sector, but also for steel, aluminum and cement industries? I'm pleased to be joined by our UK reporter, Gabriel Power. Who can tell us more. Gabriel? What are the recent changes that the European Commission has introduced in regards to CBAM?

Gabriel Power - UK Power Reporter, Montel News: 1:03

Hi, Richard. Thanks for inviting me on the podcast this week. The most headline grabbing change was that there will now be an exemption for importers bringing in less than 50 tons of cbam covered goods each year, which exempts about 90% of importers. So for them, that's good. The problem obviously is that electricity is excluded from this because you can't really calculate its mass, meaning that even the smallest volumes of imported power are still fully on the hook for CBAM payments, but more relevant to the energy traders is that the obligation to pay for CBAM certificates has been pushed back. Originally, companies would've had to start buying certificates from January. 2026, but under the new proposal that's been pushed back to February 20, 27 businesses still need to track and report the carbon contents of imports during 2026, but won't need to buy certificates until the next year. Giving companies a cashflow reprieve and time to get their ducks in a row In terms of the admin of CBAM.

Richard Sverrisson - Editor-in-Chief, Montel News: 1:55

That, that clarifies a lot there. But how, what has the response been Gabriel, in, in terms of the people that you speak to both from, I mean, you cover the UK and Ireland, have you heard from people outside, outside those countries, in continental Europe for example?

Gabriel Power - UK Power Reporter, Montel News: 2:09

It's not exactly been seen as a huge simplification of the rules. The exemption for low volume imports is a simplification for a lot of importers. But the energy sector has once again been left in the dark which is becoming. Par for the course for a lot of CBAM preparations. And as for the delay in payment it hasn't really moved the needle at all. One analyst told Montel when this was first announced that the delay doesn't remove the financial burden. It just shifts when it hits.

Richard Sverrisson - Editor-in-Chief, Montel News: 2:34

If you could sum up the current challenges for CBAM it, what is it in terms of what it poses for traders, both you know, power traders or carbon traders. Across those two jurisdictions UK and Europe.'cause obviously it affects other parts of Europe, but let's focus on the UK and our continental partners.

Gabriel Power - UK Power Reporter, Montel News: 2:51

CBAM makes sense for industrial goods like steel and cement, but not electricity. And so the European Commission's decision to apply it to power trading is a bit of an odd one. Power can flow across borders instantly and is traded at 15 and 30 minute intervals, and it can't easily be tracked back to the source of generation. And under Cbam, traders and importers will be required to report where their goods came from prove what carbon price, if any, was paid on them, and buy cbam certificates if they can't prove zero emissions. And if they fail to do that in time, which is basically inevitable in the power market because it moves so fast, they must use the eus default emissions values, which are based on. Average CO2 intensity for the exporting country from 2016 to 2020, which is really outdated and doesn't reflect. Times when renewable energy say, is much higher in the mix. In terms of the uk, Brexit has thrown a spanner in the works completely without a formal ETS linkage between the EU and uk. Power going from the UK to Europe will attract CBAM costs when exported to the eu which will not only drive down power demand in Europe but will also obviously incur costs for European importers. And as a side note, the UK is actually going to introduce its own CBAM mechanism in 2027 and it. Exempts electricity, which is probably a smart move. The biggest loser in the CBAM saga is Ireland because around 81% of its. Power is imported. And all of that comes from the UK because it doesn't currently have interconnectors with other countries, which is already problematic for Irish consumers as they pay some of the highest prices in Europe for power already. Worse still, Northern Ireland shares a grid with the Republic of Ireland. So if power from the GB grid is exported to Ireland, that will be subject to CBAM costs, which could then be priced in if that power is sent to Northern Ireland, which means there's a scenario where the Northern Irish consumers are paying CBAM adjusted prices on electricity produced within their own country.

Richard Sverrisson - Editor-in-Chief, Montel News: 4:44

It's certainly not getting any any simpler here, but there's the web of complexities here. Thank you very much for highlighting some of the problems and the challenges that need to be fixed in the next year or so.

Gabriel Power - UK Power Reporter, Montel News: 4:55

Thank you. Thank you.

Richard Sverrisson - Editor-in-Chief, Montel News: 4:56

So is CBAM good or bad for business? To help me answer this, I'm pleased to be joined by Dan Maleski, senior Environmental Market Advisor at Redshaw Advisors, and Nick Ogilvie, product manager at Carbon Chain. A carbon accounting software provider. A warm welcome to you both. I think, Dan, I'd like to start with you and could you in a nutshell, explain what CBAM is and why it's being introduced.

Dan Maleski - Senior Environmental Markets Advisor, Redshaw Advisors: 5:26

And and as I mentioned, appreciate you having a sign. So CBAM the Carbon Border Adjustment mechanism is here really to try and level the playing field between domestic EU industry that has been exposed to a cost of carbon via the emissions trading system. And their foreign competition who exports into the EU who are not exposed to a cost of carbon. See, because EU industry have had this asymmetrical competitive and cost landscape it's been leading to a phenomenon called carbon leakage, which is when EU industry tries to circumvent the cost of carbon via the eu et s by relocating to jurisdictions that don't have a cost problem, such as Turkey or India, and then exporting that good back into the eu, thereby not having to pay that cost. So in principle, CBAM here to level the playing field by requiring the embedded emissions of goods imported into the block, which are exposed to be virtually measured, then reported, later, verified, and finally procured. In essence, it is requiring the same robust reporting, measuring as well as especially costs associated with polluting for foreign competitors than which EU industry have been experiencing for the last 20 years.

Richard Sverrisson - Editor-in-Chief, Montel News: 6:41

Thank you and very elegant nutshell there Dan. Perfect. Now Nick, can you, I mean, you talk with the metal sector and others as well, and especially with traders, what other the kind of current challenges being posed by CBAM for these sectors? I think, Nick, I mean, sorry, Dan put it very elegantly, but it is a web of complexity, this piece of legislation. Is it not?

Nick Ogilvie - Product Manager, Carbon Chain: 7:03

Yeah, Absolutely. We've been through the, we're nearly finished with the transitional period, which started in October, 2023. CBAM was a piece of legislation, was formulated a little bit before that as well. It's been there's been awareness in the industry, particularly with the European businesses, that, this cost of carbon implication is coming down the line. But we've now done, nearly two years of reporting. There's been no cost implication yet. So many European businesses are, happy with the way in which they do their declarations today into the eu, and they're working with their suppliers to measure the emissions of their products in order to understand what you know, the cost might start to look like in 2026. And so the key challenges really now, we've had some disruptions in some of the supply chains driven by tariff impacts. And now we're getting to the point where particularly on some of the metal side, we're. Six months from the 1st of January, 2026 which will be when the CBAM costs starts to come into effect. And that's really the lead time for some of these deliveries for materials being sourced from from Asian producers coming into the eu. And so as a metals trader or a fertilizer trader or a cement trader for that case, all these kind of product categories that are captured under the uc, bam. You are therefore starting to say, okay I'm about to purchase this material. I'm gonna clear it into the EU and sell it to my customer. Maybe it's a back-to-back transaction where I want to lock in the margin that I'm gonna be taking as the intermediary here. And so you are presented with this uncertainty, which is what is my CBAM cost going to be? And today there's three, pieces of that puzzle, that calculation that you need to understand. The first is the EUA price. The carbon price in the eu, which I think Dan can talk to a little bit more later on. The second is the emissions intensity number. So you know this number that the producer of the material that I'm trading is going to be calculating based on their annual emissions intensity average for those products. And the third piece is this. Unknown figure, which is the emissions benchmark that needs to be defined by the eu. So actually, today six months to go before the costs come into effect, you cannot accurately give an exact cost figure for what your CBAM charge is going to be for goods cleared from the 1st of January, 2026, and millions of tons of material coming into the EU that, in some cases is being purchased. At the moment. That is an unacceptable business risk that many of the traders that we work with and, just. In general, large procure is a metal going into the eu, are really tackling right now, which is, in their eyes an unacceptable financial issue that they, are really struggling with.

Richard Sverrisson - Editor-in-Chief, Montel News: 9:43

It's not as if the rest of the world is very certain anyway Nick in the current climate, but I just one point of clarification or explanation is you said the 1st of January, 2026, but I was under the impression that the, that there was a year, there was a delay into february, 2027.

Nick Ogilvie - Product Manager, Carbon Chain: 9:58

Yeah, there is a delay on the cash flow. So the EU CBAM cost will, will take effect from the 1st of January, 2026 where any material cleared into the EU from the 1st of January, 2026, you'll have a CBAM obligation associated with the emissions that you are importing. The, you'll have to purchase certificates to cover those emissions that you're importing, but the actual. Cash flow associated with the purchasing of those certificates to cover those emissions imported in 2026. Under the omnibus proposal, which is due to be approved in, in, in the coming kind of weeks and months. Cross your fingers. Yep. Yeah. Cross, that, that is pushed to 2027. So is a very dangerous reality that many, in, in certain cases we, we speak to, some businesses that yeah, their default reaction is, okay, cool, CBAM is delayed until 2027 and we don't have to worry about any of our costs. But that is not the case. The cost needs to be accrued in 2026, and the cashflow implications will come in 2027 when the registry opens to enable certificate purchases in 2027.

Richard Sverrisson - Editor-in-Chief, Montel News: 11:03

I think that's a very important point to clarify that I think there was a, maybe a mis misconception or misunderstanding about that, that delay in , or that push to 2027. Dan what are your feelings here? I mean, what were customers telling you? What are the frustrations?

Dan Maleski - Senior Environmental Markets Advisor, Redshaw Advisors: 11:16

I think Nick summarized it probably the best way you can. He mentioned that there, there are three main critical issues that our steel traders are dealing with, and you have to walk a mile in their moccasins. So if I'm a trader, the thing, I'm not. Really a fandom is speculation and risk. I'm in a business of margins, so what that typically looks like is, let's say I will lock a contract in, and this isn't just, steel traders. It's some power. Same with, most commodity sectors. I lock a contract in, I lock in my profit margin. Which could be a few percent, and then I'll wait for example, until the commodity is delivered or executed maybe in a few months from now. And so the idea of when this is gonna take place is, you know, I like to say we've been talking about CBAM for years and I kept saying, 20 23, 20 24, Hey, this is coming. And even earlier, a few months ago, so a few months ago, we were saying, this is coming. This is coming. We're in a position now where we're not talking years or months, we're talking days. Yesterday I hit my, we've been speaking a lot with our steel traders yesterday. We have a steel trader who, as of right now, has sold a contract that is baking in CBAM costs because it's gonna be custom cleared in January, 2026. And when we talk about the numbers here. Their CBAM cost is gonna potentially constitute about 20% of the entire cost. And that is right now. Now, as Nick mentioned, it's very difficult for them to bake in that cost 'cause they don't necessarily know all the variables. They don't know, for example, the benchmark. They don't know the emissions intensity. And so if I'm a trader, if I'm not really a fan of risk, if I don't wanna speculate, how am I supposed to do business? And so the result of this, and it's crazy to hear this. We speak with a lot of traders who are gonna cease business. They're gonna cease business until they get more information. And so there's a few, there's a few quite sophisticated traders that can continue to move on, and they have a bit of ability to wiggle when it comes to that risk. But most of the steel traders are looking at ceasing their contracts until potentially September, August. And so what that's gonna create is a vacuum where it's by demand. There's a supply of traders are gonna be risk off. And so that's gonna create increase of premium on pricing. And so the few traders that will have the ability to continue to import are gonna make a killing. And so that's what we're seeing with our steel traders. I'd say nearly four to five meetings a day with still traders saying the exact same thing, which is how do we manage this risk? What's gonna happen. Now there's mechanisms to assist in this, but widely speaking, this is a complete, broad market issue that everyone is facing.

Richard Sverrisson - Editor-in-Chief, Montel News: 13:42

So Dan, just to, to clarify, these are trading firms, so these are importers and exporters of steel. We hear about both the woes of the UK steel industry and also the European steel industry. But what kind of effect will that have this kind of cessation of trading? What will they have on European industry is already struggling at the moment?

Dan Maleski - Senior Environmental Markets Advisor, Redshaw Advisors: 14:03

It's, all of these, Nick mentioned earlier tariffs, and now we have the, it it's just further inefficiency. And so if we look at trade dynamics inefficiency is gonna just create more hurdles. It's gonna create a premium and it's potentially gonna slow down trade. And so if Europe is already a net importer of steel and we're gonna throw more hurdles at these poor traders who are already trying to juggle tariffs and Trump man, and especially now Cbam, what are they gonna do? They might back off Europe. I was speaking with a MD of a steel company yesterday, a group. So they, all over the world. And they're looking at taking a step back from their Europe operations and they be focusing more in, in Latin America or Asia, right? And so these are quite strategic decisions being made as a result of CBAM. Again, CBAM people think is gonna happen maybe in a few months from now, but no, it's as of right now, material decisions are made, being made every single day, and now we're focusing on steel traders. But it's not just steel. Nick mentioned fertilizer. There's gonna be most quantities right now. The folks who have to look ahead, 'cause a lot of quantities are sold on a forward basis. They have to start baking that cost today. And it's how they, how do they do that with all these variables that they can't find?

Richard Sverrisson - Editor-in-Chief, Montel News: 15:10

Yeah, absolutely. Nick, do you echo those comments by Dan, that actually the consequences of this delay and this uncertainty or the lack of clarity around the costs incurred, is forcing some companies to close business?

Nick Ogilvie - Product Manager, Carbon Chain: 15:23

Yeah. It. It's having a, it's a significant cost uncertainty that on fine margins is difficult to justify and, taking decisions around materials that are moving into the EU that have unknown costs that's generally a business risk that these entities are not willing to undertake. I think, yeah, there'll be quite a significant reckoning in 2026 as we start to see businesses that. Don't, acknowledge that exposure that they have. I had a conversation, the o the other day, which was looking at what is the trade off between accepting anti-dumping duties versus to clear material in Q4 2025 versus clearing material in 2026 and having to pay cbam cost, right? This is a, it's not an insignificant cost. That if you are not aware of today then it'd be, yeah. Quite a yeah. Concerning business implication for next year. But one of the kind of, one, one of the areas that maybe is interesting is the benchmark intensity figures will dictate what that cbam cost is. If you are pro production and you are buying from suppliers that you know, are producing low carbon material where you know, the emissions intensity of the direct emissions intensity is low and, you may not have A-C-B-A-M cost. So when we. We get the benchmark information from the eu. If you import material, which has an emissions intensity below the benchmark, there is no cost. And one of the areas that you know is carbon chain, doing carbon accounting work, working with traders and producers of these materials. We're looking to help facilitate the trust and engagement that these buyers have with their suppliers, because if you can say, yeah, this is low carbon material, we're pretty comfortable that this is below the current emissions trading system. Benchmarks in the eu. Then therefore, like there is a, an expectation that this won't actually have a CBAM charge. These materials won't have a CBAM charge. And one of the areas that we're seeing a lot of interest in, a lot of opportunity around is okay identifying low carbon suppliers and really starting to see, more and more of that. The concept of this green premium or really just ultimately this, avoidance of CBAM charge, which eventually will start to look like a green premium coming into a play where, traders are, start to consider this commercial side of sustainability very acutely. And trust in the numbers is key. Like one of the key variables is the emissions intensity of the product has to be verified. Based on the 2026 emissions intensity. And so you have a year of unknown kind of exposure until that 2026 data is available for you to sit and wait. So making sure that when you're buying from suppliers and ensuring that emissions intensity. Is accurate and trustworthy and ultimately will be verified is something that, we are seeing traders who are looking to, grow and mature with their suppliers of low carbon material to manage and reduce their exposure to CBAM. Been really interesting on that side to see traders get more in the weeds of the underlying carbon accounting that feeds a lot of this calculation.

Richard Sverrisson - Editor-in-Chief, Montel News: 18:18

And I think isn't that key here as well is terms of the benchmark. A lot of, the carbon intensity will change very rapidly over the course of a few months or years certainly even days sometimes and that can, that. Maybe that's reflected or it will be hard to be reflected in those benchmarks. And so actually the carbon intensity may be wrong 'cause it's based on old data.

Nick Ogilvie - Product Manager, Carbon Chain: 18:42

Yeah. And the benchmarks we suspect would obviously, they'll be set based on kind of EU objectives around decarbonization. Whereas the default values will be set around ensuring that there's no there circumvention activities taking place. Really, if you are an importer and you are looking to, you, you don't have good data from your suppliers. Falling back on the default values will be even more like incredibly punitive to the point at which like that material is, potentially commercially unviable to be cleared into the eu. So for the traders default values are not an option in the slightest, but if you are, a downstream man producer or manufacturer clearing, 1,000 tons of material into the eu, that cost is readily absorbable. But if you're a trader and you're moving millions of tons of material into the eu, you cannot ignore small, euro, one or two Euro numbers, let alone 80, a hundred euro numbers that we seeing itself.

Richard Sverrisson - Editor-in-Chief, Montel News: 19:35

Absolutely. So I think, that's absolutely crucial. Yeah. Dan, can I bring you in and talk a little bit about, one of the aspects here, which is important in the UK and certainly for UK exporters, is that linkage or the connection between the UK ETS and the EU ETS what's happening in here? What's happening here at the moment?

Dan Maleski - Senior Environmental Markets Advisor, Redshaw Advisors: 19:53

Yeah a lot. And before, before I jump in on that topic, just to briefly follow up with something that, that Nick mentioned, which is visibility. I think it's very key for kind of, something that especially, carbon chain is doing, but it's, I always say you can't manage what you can't measure. And so giving these traders the ability to look and understand, to make the, the best opportunities, it's what system's about. It's forcing companies, it's forcing traders and industrials and everyone else exposed to make educated decisions that are gonna impact their profitability. And so if they can choose something that, for example, is lower in carbon that's gonna create more profitability and therefore drive investment to create further, decarbonization of processes. And so it's the entire idea of CBAM which I think is, quite brilliant. And that's why I'm here. That's why I love this acronym and I love this sector.'cause I truly believe in what we're trying to do here to decarbonize. Now the topic of linking, of course, is very hot. Right now we're four days away. So on the 19th of May we are expecting some discussions to be held and we shall see what happens. But as of right now, the market's fairly bullish. We are sitting on about an 18.3 million net long position. On UKs. So most of the hedge funds and pension folks they're quite bullish on some conversations. And if you look at it structurally, it makes sense. Linking would be good for everyone. The UK ETS historically has significantly struggled with liquidity. So much so that you can hardly even find option contracts in this market. The UK ETFs is fairly light when it comes to participation just because of only about a thousand companies are ex are exposed compared to eu, which is north of, almost 10,000 installations. And so when it comes to low liquidity, you struggled with price discovery and a whole heck of a other issues that linking would solve. And then of course, the elephant in the room is CBAM. So we are speaking with a lot of companies, power traders, steel traders, who are really concerned when it comes to UK exports into the ev. There have been more than a few public papers commissioned on this topic. And I can set a few numbers of how much money the UK treasure could lose and all that stuff. But the main takeaway is this would be a net benefit to most. Companies and potentially even jurisdictions involved. Now that means leaking, of course, on merit would make sense, but this is very much a political conversation 'cause the conversations around linking are not simply on the EU ETS and UK ETS side. They're also tossing in aspects when it comes to phishing jurisdictions. They're also tossing in, a lot of other, they're heaping a lot into this pile. And so the idea of just looking at this pragmatically of link linking would be beneficial. I'd say most folks would say yes. But this is not necessarily always a pragmatic conversation, especially with politicians. And May 9th of the day most folks we talk with are quite bullish. And that is best example of that is the net long position. But we shall of course, seminar our hands.

Richard Sverrisson - Editor-in-Chief, Montel News: 22:29

Dan, have you looked at the implications for for the power sector, electricity sector, but electricity sector? Because I think, one of the, one of the concerns is that renewable energy and renewable energy flows into the EU are gonna be a charged attacks through a policy designed to promote renewable energy.

Dan Maleski - Senior Environmental Markets Advisor, Redshaw Advisors: 22:50

It's power. Power is really difficult. And I do feel for the European Commission, 'cause they're trying to roll out a policy that is broad brushed both industry and power, even though they don't trade very similarly. And the dynamics are different. For example power is typically traded on the exchange, which is anonymous. So how do you track the embedded emissions of this specific electrons? How do you do that? Now if we were talking about steel, for example, or even Lium, was trade on LME, you can still have a bit more clarity on this but power is very difficult to actually track down. And so the result of that is gonna potentially create some conversations about has, this power export already paid a cost of carbon. How embed how emissions intensive is it? That's be quite difficult to answer. And so the result of this especially with the conversations we're having with our power traders is again, a bit of a risk off attempt. We've been speaking with a lot of the interconnectors specifically who are quite worried on capacity and some of their clients who buy capacity, they're quite sophisticated. They're the big utilities who are quite switched on. But they also have some folks who are just straight financial institutions that might be based in Australia or America, who might not be very switched on with the ETS and CBAM, this whole new complex world that potentially might not be as bullish on, for example, buying capacity. And that's gonna really hurt these interconnectors. And the result of all this is gonna be potential again, like steel this disruptions in inefficiency especially when it comes to the current delta between the UK and EU ETFs, which is always in flux. As of right now, actually power exporters have a premium over EUAs.'Cause when UKA is around, call it 47 pounds, stick on top of that an 18 pound CPS charge. We're talking about a four year premium over ES as of right now for power exposed generations. It all gets very tricky and muddy the further you look into the subject. And so again, if I'm, again, if I'm EDF or Eon, I'm fine.'cause I can have a, I've a carbon team operating it for 20 years. They're clued on. But if I'm just some financial institution again, in maybe America who doesn't know all this as well, I might be risk off and that's gonna potentially disrupt some of the capacity in the interconnectors. And have a wide range of domino effects.

Richard Sverrisson - Editor-in-Chief, Montel News: 24:56

And I also hear concerns about raised about, how this is measured. Do based on the nominations or the actual flows, and I think there is also often a discretion there because these are real time markets. But Nick, if I can turn to you and say, so what, what would you like to see happen in the coming weeks? I can real sense your, your urgency and your desire to get things moving very quickly to create more certainty. But for you, what would be the. Prime aspect that you'd like to see covered in the coming weeks?

Nick Ogilvie - Product Manager, Carbon Chain: 25:22

Yeah particularly the cost certainty needs to come into effect pretty quickly. Even if we can get indicative benchmark figures from the eu, like as soon as the, in, in the next couple of weeks, like that will be, one of the most kind of powerful components on CBAM to ensure that like a lot of these businesses can start to really understand exactly what the costs are gonna look like, even if it's just around the methodology and not necessarily the underlying metrics. So that they can start to piece together the. The cost and what that will look like for them. So on the trader side, we need regulatory certainty. We need to understand exactly, what they need to be accruing for and factoring into their contracts to be able to make sure that they, can continue to deliver the va The incredibly valuable service that they provide to ensuring material gets into the eu, is still an aluminum is. Is the, core products feeding most of the construction and automotive and key technology that are facilitating a decarbonized future on the electricity side as well. And then on the manufacturer side, we need. We need very swift confirmation, particularly post omnibus around verification. What does it look like? How do I get it done? Who can do it? And then ultimately that will facilitate that flow of emissions data to the impact of businesses so they can start to get even more certainty around the cost. Ultimately, whether or not stock cbam is a net benefit or impact on some of these flows, and we will see a lot of, changes in the supply chains. Ultimately that transparency into the emissions numbers and ultimately the carbon cost is fundamental to enable this the mechanism that they're looking to establish here to be effective, but also to enable them to then make any changes that they need to to kind of ensure that it. It maintains, you know, that remove that carbon leakage risk, but also protects or ensures that there is a level playing field between domestic production in the eu whatever the commodity or product is. And then the overseas production that is coming up against this border.

Richard Sverrisson - Editor-in-Chief, Montel News: 27:16

Dan what's on your wishlist for policy makers? If you can add to what Nick's just said? I sense clearly the urgency here for some form of certainty. That's not always possible in it's very uncertain world, but I certainly sense the need for it.

Dan Maleski - Senior Environmental Markets Advisor, Redshaw Advisors: 27:28

You i gonna, it is really echoing what Nick said. We lick and I deal broadly speaking with somewhat similar clients, just on somewhat different needs. We typically take the financial aspect and the hedging aspect of CBAM. But they still come to Nick and I and then everyone else with broadly the same questions. And this those three points Nick mentioned earlier and Nick mentioned earlier it's also just price certainty. We register advisors, we can lock in the CBAM costs, but a company needs to know how many CBAM certificates they need to lock in. So if I'm a speculator, sorry, if I'm a steel trader, I don't want to speculate. So let's say I have a contract where I'm gonna lock in, let's say in May, I need to buy a hundred thousand CBAM certificates just to cover that cost, right? I'm taking an assumption it's gonna be a hundred thousand. I don't know. It could be 105,000, it could be 95,000.'cause again, I don't know the benchmarks, I don't know the embedded emissions. And so sure when they unwind that hedge, they could just roll it forward. But that's taking a risk.'cause most of our clients, they will not sign a deal a steel trade unless they can guarantee profitability. They don't want any kind of speculation and it makes sense. Nick mentioned earlier, but these guys operate in fairly small margins and the spread of let's say four or five euros could completely kill them. And that's not something they wanna take a chance on. So when it comes to some of our more sophisticated clients, you know, they can potentially estimate and do some scenarios on benchmarks and embedded emissions, and then they can go and hedge. But that's only the most sophisticated guys we work with. The majority of folks we speak with, again they wanna take this risk off the table. They just don't know how much to buy. And it's something that's gonna completely slow down their business. I can't tell you how many steel guys we speak with. Are sitting on their hands right now and they're gonna say, I think we're not gonna do anything until, let's say August or September, even October, when we have more information. And so there's gonna be a, 3, 4, 5 month block this summer where only a few seal guys who are potentially willing to either take it, take that risk and speculate a bit more, or are quite clever and can do some scenario bases are gonna be, open market on the steel imports and they're gonna make a lot of money. And so those guys will be happy, but the majority of the market is not 'cause. How can they do business? Because they're gonna have to, they're almost going to have to speculate to an extent. Now they can do option contracts and whatnot, but the option premiums almost make it unprofitable. And so they're really between a hard place in a wall. It's hard for them to operate at all. And so if I'm asking the commission anything, provide a bit more clarity to these steel traders especially because there're other folks right now who need deal with this.'Cause again, they're, as Nick said, custom clearance could be a nine, six to nine month forward. So we're already speaking with guys right now who are looking at CBAM costs.

Richard Sverrisson - Editor-in-Chief, Montel News: 29:56

Gentlemen, I, I've only covered half my questions here, but I think you've made it very clear and the message is loud and clear. We need more information, need more clarity, need more certainty. So thank you very much for being guests on the Plugged In - Montel News Podcast.

Dan Maleski - Senior Environmental Markets Advisor, Redshaw Advisors: 30:10

Richard, thank you for having us.

Richard Sverrisson - Editor-in-Chief, Montel News: 30:12

It's been an excellent and insightful discussion. I hope you agree, listeners, and thank you for tuning in to this episode. Our podcast episodes are released every Friday. For the latest news from Montel, please visit montelnews.com and you can follow us on LinkedIn, Bluesky, and other social media channels. See you next time.