Chennai: India’s iron, steel, aluminum and its products are exported to the EU, and it has begun to slow down before the implementation of the Carbon Border Adjustment Mechanism (CBAM) and deforestation rules. The industry expects that by September, the new order will have to comply with emission norms and will feel a greater impact.
CBAM and the deforestation rules in January 2026 will affect the export of iron, steel, aluminum and its products as output emissions are higher than the EU’s prescribed levels.
“EU authorized auditors are working with large iron, steel and aluminum producers to meet standards and other requirements. However, small and medium-sized producers of metal products are still not ready for the new system.”
In February 2025, exports of aluminum and aluminum products to the EU fell by 73%, and further down 34% in March. Similarly, EU iron and steel exports fell 62% in February and 48% in March. Shipping volumes of iron and steel products were flat in February and fell 5.6% in March.
In terms of overall engineering product exports, the EU is the only market with negative growth in the four major regions in fiscal 25. India’s engineering exports to Italy, Belgium and Spain fell by 23.1%, 18.7% and 13.2% in FY25.
The new regulations appear to have hit EU imports from various markets in the fiscal 25.
CBAM will be implemented from January 2026, and production of export orders will begin in September. “By then, we will see a big impact,” Duta said.
The EU is the second largest destination for Indian engineering goods, accounting for 19% of exports in fiscal 24. In FY25, this has dropped to 17%. With the new rules in place, India will be at a disadvantage as it is one of the highest emissions among EU suppliers.
For example, India uses coal captive plants to produce aluminum, while the domestic aluminum industry has the highest average greenhouse gas emission intensity in the world, with 21-22 TCO2/T AL. In contrast, Europe is one of the lowest greenhouse gas intensity, Crisil was found at 6-7 TCO2/t Al.
India is reaching a free trade agreement with the EU. However, with the new rules in force, the FTA will not be able to provide equality for India’s exports. After the implementation of the FTA, EU products will enter India with zero tariffs, while Indian products will have to pay 20-35% at CBAM fees.
Exporters are not excited about EU goods and are considering diversifying their markets. The export share of West Asia and North Africa increased from 15% in FY24 to 17% in FY25. The UAE, Saudi Arabia and Latin America are increasingly buying goods from India.
