Halving the quota for duty-free imports and 50% tariffs on imports beyond those proposed by the European Commission threaten to make Indian steel exports to the common market uncompetitive, analysts and industry representatives said.
“This (higher duties on steel and reduced quotas) should be the focal point of free trade negotiations between the EU and India,” Pankaj Chadha, chairman of the Engineering Export Promotion Council, told ET. EU steel tariffs pose a bigger challenge than US tariffs, as Indian steel exporters are “highly exposed to the European market”, he said.
This fiscal year, India exported 1.06 million tonnes of steel to the EU till August, accounting for around 47% of its total alloy shipments. Italy, Belgium and Spain are among the top five destinations for Indian steel exports.
According to Vinayak Vipul, Metals and Mining partner at EY Parthenon, the higher tariffs and the Carbon Border Adjustment Mechanism (CBAM), which is expected to come into force from January 1, will be a double whammy for Indian metals exporters.
“The combined impact of a 50% tariff and CBAM is expected to increase the landed cost of Indian steel to Europe by more than 60%, reducing its competitiveness vis-à-vis regional producers,” it said. Under the proposal, the quota for duty-free steel imports into the EU will fall to 18.3 million tonnes per year, 47% lower than the current quota. It is not clear how much of this amount will be reserved for India. Industry observers say there is a need to find new markets, otherwise Indian steel exports will decline. “New markets in Asia, Africa and Latin America will be essential for trade diversification. At the same time, continued engagement with EU stakeholders remains important,” said Rajib Maitra, partner at Deloitte India.
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