New Delhi: The Carbon Border Adjustment Mechanism (CBAM) framework will impact India's 15-40 percent of steel exports to Europe, ICRA said on Thursday. The impact will be seen from the calendar year 2026 to 2034, the rating agency said in a report. The European Union (EU) is introducing the CBAM from October 1 this year.
ICRA said that the EU is the second largest steel-consuming block globally. It recently signed the mechanism laying the framework for the imposition of taxes on embedded carbon imports from six sectors, which includes steel, aluminium, cement, hydrogen, electricity, and fertiliser.
"...CBAM compliance requirements could pull down the profits of Indian steel exports to the EU by USD 60-165/MT between CY 2026 and CY2034. CBAM to impact between 15-40 percent of India's annual steel exports which are made to Europe. Failure to reduce the carbon footprint may result in lower profits in EU markets," it said.
According to ICRA, India exports up to 3-5 million tonnes of finished steel to Europe every year. India produced 122 MT of finished steel in FY 2022-23. The average emission intensity of leading domestic primary steel producers is 12 percent higher than the global average level from the blast furnace route, it said.
Jayanta Roy, Senior Vice-President & Group Head, Corporate Sector Ratings, ICRA said, "Leading domestic primary steel producers have an average CO2 emission intensity of around 2.6 MT CO2/ MT crude steel.
Europe has historically remained an important overseas destination for Indian steel mills, accounting for between 15-40 percent of our annual steel exports. However, the carbon footprint of Indian mills is significantly higher than competing suppliers to the EU."