By Joe Stonor

European cement majors fell after comments from German Chancellor Friedrich Merz on the European Union's carbon emission allowances sparked fears of continuing oversupply in the continent.

Shares in Heidelberg Materials fell 11% to 189.90 euros, while Holcim dropped 8.5% to 71.16 euros in European trade Thursday. Both stocks trade at their lowest levels since November.

Investors hoped that the planned phase out of free carbon permits--which allow cement companies and others to avoid paying for their emissions--would reduce European oversupply of cement. Analysts expected higher emission prices to raise production costs and force the closure of some cement plants, lowering supply and allowing major players like Heidelberg Materials and Holcim to set higher prices.

However, in comments given Wednesday at a heavy industry summit in Antwerp, Belgium, Merz said that the EU should reconsider or delay the planned withdrawal of free permits.

Merz's intervention is the latest signal that the European Commission--the EU's regulatory arm--could extend the distribution of free permits as it seeks to balance a decarbonization push with industrial competitiveness. The commission said it would reveal proposed changes to carbon markets in the third quarter of this year.

European carbon-allowance futures recorded their sharpest fall since May 2022 following Merz's comments. EUA futures fell 8.2% to 70.64 euros a ton on the Intercontinental Exchange Endex Thursday.

Market watchers expected mounting carbon prices to boost cement stocks. Now, they aren't so sure.

"The noise and question marks currently are: how much will those commitments to raise the price of carbon be rowed back?" JO Hambro senior fund manager Ben Leyland said.

"The concern in the sector over the last week or so is that the positive pricing that people were expecting to see over the next five-to-ten years could be lower than hoped for."

If the European carbon trading scheme is watered down further, cement stocks will suffer, Leyland added.

"What will break the investment case is if the policies are reversed to such a degree that the industry loses its pricing power again."

Utilities on the continent also fell following the fall in carbon prices, though the sector doesn't benefit from free carbon allowances. Finnish energy company Fortum Oyj fell 6.45%, while Italian renewable energy provider A2A dropped 4.7%.

Fortum is the main beneficiary of higher carbon prices among European utilities companies, while clean energy suppliers stand to lose most from Thursday's carbon price fall, Berenberg analysts said.

Write to Joe Stonor at josephmichael.stonor@wsj.com

(END) Dow Jones Newswires

February 12, 2026 13:04 ET (18:04 GMT)

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