CIF - Managing Risk Through Hedging

CONFIDENTIAL23rd July 2025

CBAM EVENT

Managing CBAM Financial Risk Through Hedging Dan Maleski CBAM Lead – Redshaw Advisors Visiting Research Fellow – Oxford Institute for Energy StudiesCONFIDENTIAL

WHY HEDGE CBAM COSTS?

2 Carbon prices are forecast to increase. Manage exposure to carbon price volatility Carbon cost is now a key factor in export competitiveness Importers Exporters TradersCONFIDENTIAL THE RELATIONSHIP BETWEEN ETS AND CBAM Starting in 2026, CBAM-exposed businesses will be required to purchase CBAM certificates The cost of CBAM certificates is directly tied to the average auction price of the EU ETS 3 source: Redshaw AdvisorsCONFIDENTIAL Current EUA price 0 50 100 150 200 250 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 Price (€/t) YEAR

EUA PRICE FORECAST

Various Price Forecasts

24+ EUA FORECASTS AVAILABLECONFIDENTIAL

24+ EUA FORECASTS AVAILABLE

MARKET CONSENUSUS FOR EUA PRICES - RALEPA

0 50 100 150 200 250 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 Price (€/t) YEAR EUA PRICE FORECAST Current price 2026 €90 2030 €138 2034

Source: Redshaw Advisor’s EUA Price Forecast Assessment (RALEPA)

€178CONFIDENTIAL

REDUCING SUPPLY OF ALLOWANCES – VISUALISED 6 source: Energy Aspects 2025 • 2023-2025 has been a period of muted prices. • This is due to supply and demand having been balanced • This changes in 2026 when the market gets shorter due to reduced supply • This trend continues until 2030 • By 2040 emissions from the EU ETS are required

• 2023-2025 has been a period of muted prices. • This is due to supply and demand having been balanced • This changes in 2026 when the market gets shorter due to reduced supply • This trend continues until 2030 • By 2040 emissions from the EU ETS are required to be at or close to zeroCONFIDENTIAL7

CBAM COST CALCULATION – Case Study

Embedded Emissions (tCO₂e/t product)

EU CBAM

Product Benchmark (tCO₂e/t product) CBAM Factor Phaseout (%) Effective Carbon price Paid (€/t) Embedded Emissions (tCO₂e/t product) Average EUA Auction Price (€/t) Amount of goods (p/a) Good: Hot-rolled alloy steel in coils (CN7225 11 00) Case Study Context: Volume: 100,000 p/a Gain clarity on total CBAM costs Objective: Potential savings from CBAM hedgingCONFIDENTIAL

CBAM EXPOSURE: HEDGED VERSUS UNHEDGED

8

Year Costs: Unhedged 2026 € 1,339,000 2027 € 2,620, 000 2028 € 4,201, 000 2029 € 6,987, 000 2030 € 15,007, 000 2031 € 18,888, 000 2032 € 23,212, 000 2033 € 27,439, 000 2034 € 33,062, 000 € 132,755,000 51% gross saving on total CBAM costs over the next 10 years based on RALEPA

€ - € 5,000,000 € 10,000,000 € 15,000,000 € 20,000,000 € 25,000,000 € 30,000,000

over the next 10 years based on RALEPA € - € 5,000,000 € 10,000,000 € 15,000,000 € 20,000,000 € 25,000,000 € 30,000,000 € 35,000,000 2026 2027 2028 2029 2030 2031 2032 2033 2034

Unhedged Hedged Costs: Hedged € 1,009, 000 € 1,660, 000 € 2,603,000 € 4,435, 000 € 7,812, 000 € 9,438, 000 € 10,986, 000 € 12,460, 000 € 14,025,000

€ 64,428,000

Source: Redshaw Advisors Tonnes Imported: 100,000 p/a CN code: 7225 11 00

Hedge 10-year forward with an average CBAM Certificate price of €75CONFIDENTIAL

WHY HEDGE CBAM COSTS?

9 Carbon prices are forecast to increase. Manage exposure to carbon price volatility Carbon cost is now a key factor in export competitiveness Importers Exporters TradersCONFIDENTIAL 25 35 45 55 65 75 85 0 50 100 150 200 250 300 350 400 450 500 (€/t)(€/t) Logistics, energy & FX CBAM Costs – 4% Cost per tonne of steel

AN EXPORTER WHO MANAGES THEIR CBAM

COST VS ONE THAT DOES NOT

10 Raw Material and Energy Labour Logistics, energy & FX

CBAM Costs: 10-15%

Raw Material and Energy Labour Potential cost per tonne of steel if CBAM cost is managed early Factors that impact CBAM Costs

COST VS ONE THAT DOES NOT

10 Raw Material and Energy Labour Logistics, energy & FX

CBAM Costs: 10-15%

Raw Material and Energy Labour Potential cost per tonne of steel if CBAM cost is managed early Factors that impact CBAM Costs 1) CBAM Certificate Price at the time the goods clear EU customs territory 2) Embedded emissions of the goods imported Exporter can hedge to entice a deal with a trader Exporter can decarbonize or optimize what is exportedCONFIDENTIAL

WHY HEDGE CBAM COSTS?

11 Carbon prices are forecast to increase. Manage exposure to carbon price volatility Carbon cost is now a key factor in export competitiveness Importers Exporters TradersCONFIDENTIAL

BACK-TO-BACK TRADERS WILL FEEL CBAM COSTS

FIRST 12 Traders operating on back-to-back trades typically: Match purchase and sales contracts simultaneously Use hedging instruments to lock in profit margins Earn margin through arbitrage or spreadCONFIDENTIAL 25 35 45 55 65 75 85 0 50 100 150 200 250 300 350 400 450 500 (€/t)(€/t) CBAM COSTS CAN ERASE MARGINS IN BACKTO-BACK DEALS Total production and freight cost locked in at €430/tonne. locks in steel contract, selling at €445/tonne. CBAM exposure of €45/tonne realised at 2026 customs.

Profit: €15/tonne Due to CBAM, steel costs €465/tonne — €20 more than the locked-in sale price. Resulting in a loss

July 2025 January 2026

Steel contract signed: July 2025 (back-to-back trade) Production & transportation take 6 months Customs clearance

— €20 more than the locked-in sale price. Resulting in a loss July 2025 January 2026

Steel contract signed: July 2025 (back-to-back trade) Production & transportation take 6 months Customs clearance into EU: January 2026

Baked into this hedge is €10/t of product for CBAM costs. Locked-in production cost (incl. CBAM) Example final import cost with CBAM priced at clearanceCONFIDENTIAL

PROBLEM:

EU ALLOWANCES ARE AN IMPERFECT HEDGECONFIDENTIAL

WHY EUAs FALL SHORT FOR CBAM HEDGING

66.00 67.00 68.00 69.00 70.00 71.00 72.00 73.00 74.00 75.00 76.00 (€/t) EUA price Vs EUA auction clearing price (May 2025) EUA spot price ~€3 Price Difference ~€1.2 Price Difference ~€2.5 Price Difference EU Auction Clearing priceCONFIDENTIAL January 2024 – December 2024 45 50 55 60 65 70 75 80 EUA spot price Quarter 1 Quarter 2 Quarter 3 Quarter 4 Q1 ~ €59.5 Q2 ~ €68.4 Q3 ~ €67.2 Q4 ~ €66.3 CBAM Prices for 2024 ~€5 Price Difference ~€7 Price Difference

THE PROBLEM WILL BE AMPLIFIED IN 2026

Source: Redshaw AdvisorsCONFIDENTIAL

WHAT OUR CLIENTS TOLD US

17 We don’t want to buy EUAs, we want to buy CBAM CertificatesCONFIDENTIAL

VCC® - VIRTUAL CBAM CERTIFICATE

18 Choose when you want to take delivery or resell based on your needs Buy VCCs now. Receive CBAM certificates later Lock in your CBAM Certificate costs today

we want to buy CBAM CertificatesCONFIDENTIAL

VCC® - VIRTUAL CBAM CERTIFICATE

18 Choose when you want to take delivery or resell based on your needs Buy VCCs now. Receive CBAM certificates later Lock in your CBAM Certificate costs today Purchase VCCs today to fix your future CBAM certificate costs on both a spot and forward basis Each VCC is exchangeable for a CBAM certificate exactly when you want themCONFIDENTIAL

WHY HEDGE CBAM COSTS?

19 Carbon prices are forecast to increase. Manage exposure to carbon price volatility Carbon cost is now a key factor in export competitiveness Importers Exporters TradersCONFIDENTIAL 24/07/2025

Redshaw Advisors t: +44 20 3637 1055 e: info@redshawsdvisors.com

www.redshawadvisors.com Contact: Find out more about CBAM risk strategiesCONFIDENTIAL No part of this document may be copied, duplicated or redistributed without the written consent of Redshaw Advisors Limited. This document has been prepared by Redshaw Advisors Limited for informational purposes only and shall not constitute an underwriting commitment, an offer of financing, an offer to sell, or the solicitation of an offer to buy any products or securities described herein. The views and information expressed in this document do not constitute and may not be relied upon as constituting any form of investment advice, inducement to invest or recommendation in relation to transactions and / or any related products or securities described herein and prospective investors or clients must obtain appropriate independent professional advice before making investment decisio ns. The information in this document has been compiled in good faith, but no representation or warranty, express or implied, is made as to the accuracy, completeness or correctness of the information provided. Redshaw Advisors Limited, its officers, employees, representatives and agents accept no liability whatsoever for any loss or damage, whether direct, indirect, consequential or otherwise however arising (whether in negligence or otherwise) from the use of this document or reliance on the information or views contained herein.

DISCLAIMER

21