EU's Carbon Border Adjustment Mechanism Sparks Urea Price Hike Fears

The European wood-based panels industry is facing significant challenges due to the introduction of the Carbon Border Adjustment Mechanism (CBAM) by the EU. The regulation, which came into effect on January 1st, imposes a tax on imports of raw materials and semi-finished products that generate high levels of CO2. Urea, a natural gas derivative used primarily in agriculture as a fertilizer but also in panel production as a base for adhesives, is one such material.

The estimated price increase for urea due to the CBAM is between 40 and 60 euros per tonne for each year of the transition phase, with a cumulative impact of around 160-240 euros per tonne over four years. This volatility is further exacerbated by the fluctuating price of gas, which can double in just two months as seen during the closure of the Strait of Hormuz.

The industry is calling on the EU to exclude urea from the regulation due to its significant impact on production costs and competitiveness. Paolo Fantoni, president of Assopannelli, notes that the price rise is already being felt across the entire supply chain, affecting not only panel manufacturers but also furniture makers. He emphasizes that this measure should be reconsidered, especially considering its potential to plunge the industry into crisis.

Businesses are warning that further price rises will be necessary from autumn onwards to offset rising production costs, including gas and transport prices. Stefano Saviola, managing director of the Saviola Group, highlights the risk of undermining the competitiveness of the entire supply chain, particularly in a market environment that is already unfavorable.