India considers alternative markets amid CBAM implementation

Since the EU announced the gradual introduction of CBAM, Indian steelmakers have been exploring ways to overcome this challenge. To mitigate the impact of the cross-border carbon adjustment mechanism on the country’s exports, the country is identifying potential new markets, Business Today reports.

According to official data, flat products (hot-rolled and cold-rolled) account for the bulk of Indian steel exports. India exports hot-rolled steel products to more than 100 countries, with five EU countries – Italy, Belgium, Spain, Greece and Poland – accounting for 25% of these exports in FY2022/2023. With such a high level of market concentration, the CBAM could have a significant impact on Indian steel producers if they do not diversify their overseas supplies.

India is negotiating with untapped markets in Africa, Latin America and the Middle East. In addition, the government, together with steelmakers, will soon introduce steel products under the Made-In-India brand to the global market. This will enable Indian steelmakers to expand their reach abroad.

To mitigate the impact of the CBAM, Egypt, Mexico, Qatar, Somalia, Turkey, and the UAE have been identified as potential markets for Indian exporters of steel products. In FY2022/2023, India exported various hot-rolled products to these markets, albeit in small volumes, while the same products were supplied to the EU market in large volumes, but at a price that was 13% lower.

The Indian steel sector could generate additional revenue from exporting selected hot-rolled products to the aforementioned countries in Africa, Latin America and the Middle East instead of the EU, especially given the upward trend in the rupee’s depreciation. In addition, China’s strategy to reduce steel production allows Indian steel products to fill this gap.

At the same time, according to BigMint, steel prices in India have fallen to their lowest level in three years due to rising imports and declining exports. In July, the price of hot-rolled coil in the domestic market averaged 52.27 thousand rupees ($622.62) per ton. Increased imports from China and Vietnam, together with Chinese overseas supplies, have made Indian exports uncompetitive in many regions, putting pressure on domestic pricing dynamics.

As GMK Center reported earlier, India has been cool to the EU’s proposal to levy a higher carbon tax on its industry, considering the plan impractical and unacceptable. Ajay Seth, the country’s economic affairs minister, called the solution proposed by European officials “unworkable” for developing countries.