The free trade agreement between India and the EU improves the prospects of end users, and the impact on steel is weakened
The conclusion of the India-EU Free Trade Agreement (FTA) marks a strategic shift in India's trade relations with Europe, but its direct impact on the steel sector remains limited as carbon regulations, tariff structures and deadlines become mandatory constraints, Kallanish understands.
Market participants generally agree that steel trading is unlikely to gain momentum in the near future, as the CBAM agreement remains in force. The CBAM Agreement does not provide exceptional conditions for individual countries or industries, and the Free Trade Agreement does not change its application.
This pressure has intensified following the abolition of the EU's Universal System of Preferences (GSP) for India from January 1, 2026, in accordance with EU exclusion rules. The industry veteran emphasizes that this step is not part of the free trade agreement, but significantly changes the conditions of market access.
The EU has abolished GSP tariff preferences for about 87% of Indian exports, including iron and steel. As a result, these goods are now subject to duties in the form of the most favored nation (MFN) regime in the amount of 2-7%. According to sources, this leads to a loss of competitiveness by an average of 20%, taking into account the impact of duties, logistics and pricing, as well as the cost of complying with CBAM requirements.
The Indian Ministry of Commerce emphasizes that the Free Trade Agreement includes promising MFN guarantees under CBAM, enhanced cooperation in carbon price recognition, accreditation of inspection organizations, the best available technologies and decarbonization pathways, as well as access to technical and financial support from the EU. Market participants acknowledge that these elements improve visibility in the long term, but emphasize that they do not reduce price pressure in the short term.
"[Steel]exporters will face significant pressure after the cancellation of GSP benefits and the introduction of CBAM. However, recovery can begin by 2030 if FTA[TRQs]quotas can offset these costs, provided that India successfully increases its production of environmentally friendly steel to meet CBAM standards for sustainable access to EU markets," the industry veteran notes.
"But we are happy after India declared the new free trade agreement the 'mother of all deals,'" he adds.
Some participants see more downside risks than growth in the near term, as improved access under the free trade agreement may encourage the influx of specialized European-made steel to India, in particular rolled steel and rail products.