The European Union’s Carbon Border Adjustment Mechanism, coming into force in January 2026, threatens to significantly impact Indian steel and aluminium exports, prompting industry adjustments and policy negotiations amid concerns over rising costs and market shifts.
The European Union’s Carbon Border Adjustment Mechanism (CBAM), which came into effect on 1 January 2026, is set to materially reshape trade flows and margin structures for Indian steel and aluminium exporters, industry participants and analysts say. According to the report by The Hindu Business Line, the timing is especially difficult for Indian metalmakers that are already coping with a hefty 50% duty on some exports to the United States, and with high-emissions production concentrated in blast-furnace routes.
Under the EU rules, imports of steel and aluminium will be taxed according to the volume of process-related emissions associated with production, increasing landed costs for carbon-intensive consignments. “We are still studying the impact as it is not yet clear whether CBAM will be company-specific or country related,” an executive with a steel company told The Hindu Business Line. The government is seeking an exemption or favourable terms under a free trade agreement being negotiated, the article added.
Industry analysts warn the competitive effects could be large. According to a Business Standard summary of comments from logistics and trade specialists and Kuehne+Nagel executives, the European Commission has also proposed tighter tariff protections for domestic industry that could cap tariff-free steel imports and raise out‑of‑quota duties, further reducing opportunities for third‑country sellers. Business Standard noted India accounted for between 32% and 45% of its annual steel exports to the EU in recent years, largely made up of value‑added products, and that any sustained disruption would hit the profitability of primary steel producers that rely on superior export realisations.
Emission intensity differentials are central to the problem. Industry data cited by Business Standard show India’s blast furnace–BOF route emits around 2.2 tonnes of CO2 per tonne of steel, versus an EU benchmark of roughly 1.44 tonnes. Initial CBAM pass‑through estimates range from about $60 per tonne of steel today to $150–160 per tonne as free allowances are phased out by FY34, a scenario that would compress margins or force price increases for exporters.
Independent research groups have urged fast action. The Global Trade Research Initiative warned CBAM could translate into a 20–35% effective tax on select imports to the EU and urged the government to create a task force to ready administrative ministries and industry, establish an Indian carbon market and accelerate firm‑level compliance. Speaking to The Times of India, GTRI co‑founders and analysts urged education initiatives so exporters meet reporting and verification deadlines and avoid sudden market exclusion.
Credit and ratings commentary points to both sectoral divergence and limited near‑term impact in some cases. ICRA and other assessors told LiveMint and Business Standard that CBAM’s initial implementation focuses on direct process emissions; for primary aluminium, indirect emissions from electricity supply account for around 80% of total footprint and are excluded from the first phase. As a result, ICRA expects a limited financial impact on domestic primary aluminium producers in the short term, with CBAM‑related charges for aluminium likely to remain in a range equivalent to about 2–6% of current prices through 2034. By contrast, ICRA and LiveMint both warned that 15–40% of India’s steel exports to Europe could be affected between 2026 and 2030 unless mills reduce carbon intensity.
The likely market response is already visible. The Hindu Business Line reported steel firms exploring alternative destinations in Africa and West Asia as EU exports become less viable. Business Standard also flagged a potential rerouting of around 12 million tonnes of Asian steel away from the EU to other markets, which could increase import competition in India and place additional downward pressure on domestic prices.
For industrial decarbonisation professionals, the implications are threefold. First, exporters face immediate compliance and reporting obligations that will raise administrative costs and require verified emissions accounting; second, capital allocation decisions will need to prioritise low‑carbon pathways, greater scrap use, electrification, renewables integration, hydrogen, and carbon capture, and third, policy engagement is necessary to secure transitional arrangements and domestic carbon pricing that align competitiveness and decarbonisation. As Ajay Garg, Director & CEO of SMC Global Securities, told The Hindu Business Line, “This could compress the margins for Indian exporters or reduce their price competitiveness, unless producers improve energy efficiency or shift toward cleaner production technologies.”
The message from ratings agencies and trade researchers is clear: CBAM is likely to broaden over time. Bernitt of the logistics community warned that by 2034–35 CBAM could cover many more industrial goods, and analysts at LiveMint and Business Standard emphasised that failure to reduce carbon footprints risks long‑term loss of market share in Europe. For Indian metals companies and their financiers, the window to invest in lower‑emissions production and to build robust measurement, reporting and verification systems is now.
- https://www.thehindubusinessline.com/news/cbam-to-crush-steel-aluminium-exports-to-the-eu/article70453278.ece – Please view link – unable to able to access data
- https://www.business-standard.com/economy/news/eu-carbon-levy-may-tilt-steel-trade-away-from-india-kuehne-nagel-s-exec-125110601617_1.html – The European Commission has proposed capping tariff-free steel imports at 18.3 million tonnes annually, a 47% reduction from 2024 levels, and doubling the out-of-quota duty to 50%. Experts suggest that the European Union remains a key export destination for India, accounting for 32-45% of its annual steel exports, primarily comprising value-added products. Any significant disruption in this trade could impact the profitability of domestic primary steel producers, given the superior export realisation. With the Carbon Border Adjustment Mechanism (CBAM) taking effect in January 2026, Indian exporters face emerging cost challenges. The relatively higher emission intensity of the domestic blast furnace-BOF route, at around 2.2 tonnes of CO₂ per tonne of steel compared to the EU benchmark of 1.44 tonnes, could significantly impact export competitiveness. Initial estimates suggest a potential cost of around $60 per tonne, which could rise to $150–160 per tonne by FY34 as free allowances are phased out. The agency also warned that about 12 million tonnes of Asian steel (excluding India) now heading to the EU could be diverted to alternative markets, including India, increasing import competition and pressuring domestic prices. Bernitt cautioned that CBAM would not remain limited to a few sectors. “By 2034-35, it’s expected to cover all industrial goods. Even if you’re not affected today, you could be tomorrow.”
- https://timesofindia.indiatimes.com/business/india-business/eu-cbam-challenge-gtri-warns-of-trade-hit-urges-india-to-fast-track-carbon-scheme/amp_articleshow/124013892.cms – The Global Trade Research Initiative (GTRI) has warned that the European Union’s Carbon Border Adjustment Mechanism (CBAM) could adversely impact India’s exports of metals such as iron, steel, and aluminium to the EU. The CBAM, which translates into a 20-35% tax on select imports into the EU starting January 1, 2026, will subject India’s iron, steel, and aluminium exports to extra scrutiny under the mechanism. In 2022, India’s 27% exports of iron, steel, and aluminium products, valued at $8.2 billion, went to the EU. The adverse impact is expected to increase as the EU adds more products to the CBAM list, potentially leading to the loss of billions of dollars in exports. The GTRI co-founder suggested that the government should consider setting up a task force to prepare administrative ministries and the industry to meet the CBAM challenge, educate all steel and aluminium firms to meet the October 1 deadline, and establish the carbon market in India. Indian firms should start preparing to minimize the impact of the CBAM. The mechanism will affect steel and aluminium firms initially, but by 2034, CBAM tax will be charged on all products entering the EU.
- https://economictimes.indiatimes.com/news/economy/foreign-trade/eus-carbon-tax-to-impact-indias-metal-exports-gtri/articleshow/98332338.cms – The European Union’s Carbon Border Adjustment Mechanism (CBAM) is set to adversely impact India’s exports of metals such as iron, steel, and aluminium products to the EU. The CBAM, which translates into a 20-35% tax on select imports into the EU starting January 1, 2026, will subject India’s iron, steel, and aluminium exports to extra scrutiny under the mechanism. In 2022, India’s 27% exports of iron, steel, and aluminium products, valued at $8.2 billion, went to the EU. The adverse impact is expected to increase as the EU adds more products to the CBAM list, potentially leading to the loss of billions of dollars in exports. The GTRI co-founder suggested that the government should consider setting up a task force to prepare administrative ministries and the industry to meet the CBAM challenge, educate all steel and aluminium firms to meet the October 1 deadline, and establish the carbon market in India. Indian firms should start preparing to minimize the impact of the CBAM. The mechanism will affect steel and aluminium firms initially, but by 2034, CBAM tax will be charged on all products entering the EU.
- https://www.livemint.com/industry/indias-steel-exports-to-eu-to-come-under-pressure-on-cbam-framework-icra-amp-11687517299420.html – India’s steel exports to the European Union (EU) are expected to face pressure during the period from 2026 to 2030 due to the implementation of the Carbon Border Adjustment Mechanism (CBAM) framework. The CBAM is set to impact between 15% and 40% of India’s annual steel exports to Europe. Failure to reduce the carbon footprint may result in lower profits in EU markets and a possible loss of market share in Europe for Indian mills. The EU is the second-largest steel-consuming block globally, and the carbon footprint of Indian mills is significantly higher than competing suppliers to the EU. Therefore, unless the carbon footprint of Indian steel mills is brought in line with global standards, it can potentially lead to lower profits and a loss of market share in Europe for domestic producers. To mitigate the potential impact on profits and market share, Indian steel mills must prioritize reducing their carbon footprint through the adoption of various technological interventions, including increasing the share of renewables and scrap in the steelmaking process, utilizing superior-grade raw materials or alternative fuels such as hydrogen and coal bed methane, investing in logistics infrastructure, and establishing carbon capture utilization and storage units. However, such a transition toward low-carbon technologies may require significant capital investments by steel manufacturers.
- https://www.business-standard.com/industry/news/eu-carbon-tax-may-have-limited-impact-on-domestic-aluminium-producers-icra-124040900821_1.html – The Carbon Border Adjustment Mechanism (CBAM) ruling on exports to the European Union (EU) is expected to have a limited impact on domestic primary aluminium producers. This is because the present notification covers the financial impact effective from January 1, 2026, on direct process-related emissions only, while excluding the indirect emissions, which contribute 80% to the total emissions in the primary aluminium production process. The indirect emission primarily results from the production of electricity that is subsequently consumed in the smelting process. India exported around 0.7 metric million tonnes (24% of exports) of primary aluminium to European countries in FY23. However, unlike steel, the carbon tax is not expected to materially impact the export competitiveness of the domestic primary aluminium players, as the taxes arising from CBAM are likely to remain in the range of USD 50-140 per metric tonne between 2026 and 2034, which would be 2-6% of the current aluminium prices.
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The draft above was created using the information available at the time the story first
emerged. We’ve since applied our fact-checking process to the final narrative, based on the criteria listed
below. The results are intended to help you assess the credibility of the piece and highlight any areas that may
warrant further investigation.
Freshness check
Score:
8
Notes:
The narrative presents recent developments regarding the EU’s Carbon Border Adjustment Mechanism (CBAM) and its potential impact on Indian steel and aluminium exports. The earliest known publication date of similar content is from September 2025, indicating that the information is current. The report appears to be based on a press release, which typically warrants a high freshness score. However, the presence of similar narratives across multiple sources suggests that the content may have been republished, potentially reducing its originality. No significant discrepancies in figures, dates, or quotes were identified. The article includes updated data but recycles older material, which may justify a higher freshness score but should still be flagged. ([business-standard.com](https://www.business-standard.com/economy/news/steel-secy-warns-eu-carbon-border-rules-could-hit-india-s-exports-to-europe-125091700597_1.html?utm_source=openai))
Quotes check
Score:
7
Notes:
The narrative includes direct quotes from industry executives and analysts. The earliest known usage of these quotes appears to be from September 2025. Identical quotes have appeared in earlier material, indicating potential reuse. No variations in quote wording were found. The absence of online matches for some quotes suggests that they may be original or exclusive content.
Source reliability
Score:
8
Notes:
The narrative originates from The Hindu Business Line, a reputable organisation known for its business journalism. This adds credibility to the report. However, the presence of similar content across multiple sources raises questions about the originality of the information. The report mentions statements from industry executives and analysts, but without direct verification, the reliability of these individuals cannot be fully assessed.
Plausability check
Score:
9
Notes:
The claims regarding the impact of the EU’s CBAM on Indian steel and aluminium exports are plausible and align with existing reports from reputable sources. The narrative includes specific figures and dates, providing factual anchors that enhance its credibility. The language and tone are consistent with typical corporate and official communications. No excessive or off-topic details unrelated to the claim were identified. The tone is appropriately formal and informative.
Overall assessment
Verdict (FAIL, OPEN, PASS): OPEN
Confidence (LOW, MEDIUM, HIGH): MEDIUM
Summary:
The narrative provides current information on the EU’s CBAM and its potential impact on Indian steel and aluminium exports. While the source is reputable, the presence of similar content across multiple outlets and the reuse of quotes suggest a lack of originality. The claims are plausible and supported by specific details, but the reliance on recycled content and unverified statements from industry executives and analysts introduces some uncertainty.
