CBAM: An Opportunity for Generating Higher Revenue from Indian Steel Export through Market Diversification
Since the European Union (EU) introduced the Carbon Border Adjustment Mechanism (CBAM) in mid-2023, India’s steel industry has been actively strategizing to tackle the new regulatory landscape. The CBAM is a tariff on carbon-intensive products, including iron and steel, electricity, aluminum, cement, fertilizers, and hydrogen, imported into the EU. Starting January 1, 2026, the EU will collect this carbon tax on each consignment of steel items. Official data highlights that flat-rolled products (hot-rolled and cold-rolled) dominate India’s steel export basket. These products are exported to over 100 countries, yet five EU nations—Italy, Belgium, Spain, Greece, and Poland—accounted for 25% of India’s hot-rolled exports in FY 22-23. Such market concentration could adversely impact Indian steelmakers under the CBAM unless they diversify their export destinations.
India is an emerging global economic powerhouse, engaging with numerous untapped markets in Africa, Latin America, and the Middle East. The Indian government, alongside the domestic steel industry, plans to introduce Made-in-India branded steel products to the global market, offering Indian steelmakers new avenues for international expansion. Countries like Benin, Congo, Egypt, Mexico, Qatar, Somalia, Turkey, and the United Arab Emirates present potential markets for Indian steel exporters to counter the CBAM impact. In FY 22-23, India exported various hot-rolled products to these nations in smaller quantities (13,617.3 tons) at an average price of Rs. 76,700 per ton, compared to higher volumes (91,410.5 tons) at Rs. 66,695 per ton to the EU countries. If Indian steelmakers had targeted these alternative markets, they could have generated an additional Rs. 91 crores (approx.) in revenue, especially amid the depreciating Indian rupee.
The GDP growth in these smaller potential markets, despite global economic challenges in 2022, and China’s strategy to reduce crude steel production, underscore the demand for Indian steel products. For instance, Benin’s GDP grew by 26.32%, and Egypt’s by 20.34% between 2018 and 2022. Concurrently, China’s crude steel production dropped from 1064.77 million tons in 2020 to 1019.08 million tons in 2023, indicating a production gap that Indian steelmakers could fill.
Therefore, by diversifying export destinations and focusing on strategic market entry, Indian steel exporters can mitigate the potential negative effects of the CBAM. This approach not only promises to sustain but also enhance revenue streams, turning the CBAM challenge into an opportunity for growth in the international steel market. By…Ms. Swapna Bhattacharya (ISS 2001 Batch)Deputy Director General M/o Steel Udyog Bhawan, New Delhi.
Disclaimer : (Views expressed here are personal)
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