India Eyes Middle East & Asia for Steel Exports Amid EU Carbon Tax

New Delhi is actively seeking alternative export destinations for its steel products, pivoting towards the Middle East and Asia to mitigate the economic impact of the European Union’s newly implemented carbon tax. The tax, which came into effect in January, is already putting pressure on Indian steel exports to Europe, traditionally a key market.

The move comes as India, the world’s second-largest crude steel producer, braces for a potential decline in shipments to the European Economic Area (EEA) following the introduction of the EU’s Carbon Border Adjustment Mechanism (CBAM). The CBAM applies not only to steel but also to cement, electricity, fertilizers, and other carbon-intensive products, aiming to level the playing field between domestic producers and importers based on their carbon footprint.

A government source, speaking on condition of anonymity, confirmed the shift in strategy. For exports, we are looking at new markets and we are trying to get agreements with countries in the Middle East where a lot of infrastructure is coming up, and also in Asia, the source said. Till now, our exports were focussed on Europe but we are trying to diversify. The source indicated that the government is prepared to take action to support exports affected by the EU’s carbon tax.

Roughly two-thirds of India’s steel exports historically go to Europe, making the region a crucial market for Indian steelmakers. The CBAM poses a significant challenge, particularly as much of India’s steel production relies on blast furnaces, a process known for generating higher carbon emissions. Sandeep Poundrik, the top civil servant at the Ministry of Steel, highlighted this concern in September, also noting the potential issues with further expansion of blast furnace capacity.

The potential for increased carbon emissions from expanded capacity is substantial. According to Global Energy Monitor, a U.S.-based research group, additional planned capacity could add approximately 680 million metric tons of carbon-dioxide-equivalent emissions to the sector. This underscores the need for Indian steel mills to adopt more sustainable production methods, a process that is underway but will take time and investment.

Industry executives and analysts acknowledge the complexities of adapting to the CBAM. Aruna Sharma, India’s former steel secretary, stated, We recognise that we have to do environment-friendly production and companies are gearing up to comply, but they are also looking at alternative markets too. The transition will require significant investment in decarbonization technologies and a re-evaluation of export strategies.

While Indian steelmakers are exploring options for compliance, the immediate focus is on securing alternative markets. China’s continued dominance in non-EU markets presents a challenge, with Chinese steel exports remaining resilient and even reaching record highs in December 2025. Indian mills are seeking government support to compete effectively in these regions, particularly in securing favorable terms and addressing logistical hurdles.

The diversification effort extends beyond simply finding new buyers. Indian steel mills are also emphasizing quick delivery and flexible payment terms to attract customers in the Middle East and Asia. This responsiveness is seen as a key advantage in a competitive global market.

The situation is further complicated by the broader geopolitical landscape. The potential for a historic trade deal between the EU and India, even amidst U.S. Tariffs, adds another layer of complexity to the situation. While such a deal could offer long-term benefits, the immediate priority remains mitigating the impact of the carbon tax.

The Indian Ministry of Steel has not yet publicly commented on specific measures to support exporters. However, the government’s acknowledgement of the issue and the active exploration of new markets signal a commitment to protecting the country’s steel industry. The coming months will be critical in determining the effectiveness of these efforts and the long-term impact of the EU’s carbon tax on India’s steel exports.

The carbon tax and import quotas imposed by the European Union are expected to continue impacting India’s steel exports, according to reports from February 9, 2026. Despite these challenges, the Indian government is committed to supporting steel exports affected by the EU’s carbon taxes.