India and EU's agenda revisits steel production priorities
The approval of "Towards 2030: the Joint Comprehensive Strategic Program of India and the European Union" on Tuesday marks a structural shift in the way steel plays an important role in bilateral relations. The framework goes beyond trade volumes and includes steel in a broader agenda covering decarbonization, harmonization of standards and steel demand in the processing industries, Kallanish notes.
This agenda builds on the India-EU free trade agreement announced on January 27, which is expected to improve prospects for steel end users, while short-term growth in steel trade remains limited by CBAM restrictions.
The new EU trade regime, which is expected to enter into force on July 1, does not provide favorable treatment for FTA partners in quota negotiations. However, Commissioner Sefcovic suggested that India would receive preferential treatment as a new partner in the free trade agreement, indicating that there are still some difficult negotiations ahead before the free trade agreement enters into force from 2027. According to sources, a reduction in tariff quotas (TRQ) under the free trade agreement may be "possible" by June 30.
The direct impact on the steel trade remains limited. The strategic agenda does not change CBAM or the tariff regime for steel. Instead, its importance to the industry lies in the convergence of regulatory frameworks and long-term investment signals.
The steel industry is clearly identified as a difficult-to-recover and energy-intensive industry. Both sides have committed to cooperate in developing definitions of low-carbon materials, including steel, in order to create comparable criteria and a level playing field. This is complemented by the exchange of experience between the Indian Carbon Trading System (CCTS) and the EU Emissions Trading System (ETS).
This builds on the EU's earlier confirmation that any carbon price actually paid in India under its CCTS will be deducted from CBAM obligations, subject to pricing, timing and verification systems being agreed. While this does not reduce short-term export costs, it improves planning for Indian producers investing in decarbonization.
Hydrogen is another key component. The India-EU Task Force on Sustainable Hydrogen focuses on applications in heavy industry, providing a technological bridge for the production of hydrogen-based direct reduction iron and low-emission steel in the medium term.
A more direct transmission channel is