News
04/08/26
Indian steel's CBAM hit softer than expected: Sandbag
Mumbai, 4 August (Argus) — The EU's carbon border adjustment mechanism (CBAM)
could have a smaller effect on Indian steel exports than estimated, national
average emissions suggest, as suppliers can redirect lower-carbon output to the
bloc to reduce their exposure, climate think tank Sandbag said today. Instead of
using country-wide average emissions, the think tank assessed CBAM's effect by
considering factors such as product categories, production pathways and existing
capacities. Overall, Indian exports are expected to incur CBAM fees of €762mn
($877mn) in 2034 using national average emissions values, with iron and steel
making up the bulk of the exposure, Sandbag said. Together, flat and long steel,
as well as some other iron products, account for about €735mn of those charges,
according to Sandbag data. But expected CBAM charges for overall exports fall to
€407mn under Sandbag's methodology, which assumes suppliers increasingly channel
output from lower emission steel production routes to the EU, while directing
more carbon-intensive production to the domestic market. This "expected"
scenario represents a "partial reallocation of existing low-emission capacity",
rather than a shift in steelmaking technology. India exported about 4mn t of
CBAM-covered steel products to the EU in 2025, with flat steel accounting for
the largest share at 2.6mn t, followed by long products at about 830,000t,
according to Sandbag estimates. Sandbag's analysis assumes export volumes remain
at the same levels in coming years and a carbon price of €80/t CO2. The
think-tank assumes EU-bound flat steel exports will increasingly be supplied by
ArcelorMittal Nippon Steel's Hazira plant, which has about 8.6mn t/yr finished
steel capacity and relies heavily on gas-based direct reduced iron-electric arc
furnace (DRI-EAF) steelmaking. The gas-based DRI-EAF route has an emissions
intensity of 1.4-1.6t CO2/tcs, compared with the blast furnace-basic oxygen
furnace (BF-BOF) method, which emits 2.2-2.6t CO2/tcs and accounts for more than
45pc of India's steel production, according to ministry data. A large portion of
long steel exports would remain competitive if the output is from Tata Steel's
750,000 t/yr scrap-based EAF in Ludhiana, while pig iron exports could be
substituted by gas-based DRI exports, given rising demand in the EU, Sandbag
said. Sandbag also considers "net costs", which account for higher steel prices
in Europe as free emission allowances are phased out, allowing exporters to
recover part of their CBAM costs by raising prices. The loss on Indian
hot-rolled flat steel exports under the 7208 HS code falls from €97/t under a
national average emissions approach to about €5/t when exports are sourced from
lower-emission Indian plants, the report said. Sandbag has also mapped out an
"ambitious" scenario, in which new low-carbon steelmaking capacity is added and
the use of scrap in steel production increases. By Amruta Khandekar Send
comments and request more information at feedback@argusmedia.com Copyright ©
2026. Argus Media group . All rights reserved.
