According to a report by Reuters (2026), India is pursuing a strategy of diversifying its steel export markets to the Middle East and Asia in an effort to mitigate the effects of the European Union’s Carbon Border Adjustment Mechanism (CBAM), which came into effect in 2026. This development is a manifestation of the structural changes that are taking place in the global steel trade, driven by the need for decarbonization and geopolitical transformation in the global steel industry. India is the world’s second-largest producer of crude steel.
The EU Carbon Border Adjustment Mechanism and Its Effects
The EU’s CBAM is a climate policy instrument that seeks to impose a carbon price on imported carbon-intensive products such as steel, cement, and aluminum. According to the European Commission, the CBAM seeks to address carbon leakage by ensuring that imported products are subject to the same carbon costs as domestically produced products.
For India, this is a major problem. Historically, Europe has been the source of almost two-thirds of India’s steel exports, making the EU one of India’s most important export markets. With the CBAM, Indian steel producers will be less price-competitive in the EU market.
According to government officials, there is pressure on export volumes, as the CBAM is essentially a carbon tariff that targets countries with coal-based production processes, such as India.
Diversification Towards the Middle East and Asia
According to government sources cited by Reuters, India is currently looking to diversify trade agreements and exports of construction steel into regions that are witnessing fast-paced infrastructure development, especially the Middle East and Asia.
These regions offer India opportunities for diversification because of the high demand for construction steel, which is being fueled by urbanization, large projects, and energy infrastructure development.
At the same time, this move of India is also a hedge against the risk of market concentration. By diversifying exports and cutting dependence on the EU, India is attempting to ensure that its exports remain stable in the global market despite the changing regulatory scenario.
In addition, Indian steel companies are also seeking government help to help them compete in markets outside the EU, where Chinese steel exports have historically had a monopoly. China, the world's largest steel producer, has continued to maintain strong export volumes since 2023, which is putting pressure on Indian steel producers in Asia and other emerging markets.
China Competition in the Global Steel Market
The prevalence of Chinese steel exports in the global market continues to be a major structural challenge. As industry sources and global trade statistics cited in the Reuters news article indicate, Chinese exports have seen record volumes in late 2023 and are still driving global pricing trends.
This market environment puts Indian exporters in a tight spot, having to weigh pricing, transportation, and environmental regulatory requirements, especially in markets where cost competitiveness is given higher priority over sustainability.
Raw Material Security and Supply Chain Strategy
Apart from market diversification, the Indian government is also making efforts to secure access to important raw materials that are required for steel production.
These raw materials include coking coal, limestone, and manganese, among other important minerals.
State-owned companies like Steel Authority of India Limited (SAIL) and NMDC Limited are reportedly considering acquisitions of overseas assets and long-term offtake agreements in resource-rich countries such as Australia, Brazil, Argentina, and Indonesia.
Notably, India imports approximately 95% of its coking coal requirements, with Australia supplying more than half. This high import dependency exposes the steel sector to supply disruptions and price volatility, reinforcing the importance of overseas mining investments.
Policy Implications and Strategic Outlook
The change in export policy is indicative of the nexus between climate policies and the transformation of global trade. CBAM is more than a climate policy; it is a trade policy that is redefining competitiveness. The implications for India are threefold:
- Greater need to decarbonize the domestic steel industry
- Urgent need to diversify the export market
- Investment in raw material security
The Steel Secretary of India has stated that the Indian government may have to intervene to help exporters who are affected by the carbon tax system in Europe.
Conclusion
The Indian initiative to increase steel exports to the Middle East and Asia can be seen as a strategic reaction to the carbon border tax imposed by the EU and the changing global trade environment. Although diversification may help offset the negative impact of lost exports, future competitiveness will depend on decarbonization, supply chain robustness, and technological upgrading. In a world where environmental policies are increasingly influencing global trade, the Indian steel industry is on the threshold of a new era in which sustainability, geopolitics, and diversification will shape its future global position.
(IRuniverse Rohini Basunde)
