Indian trade negotiators are pushing for easier access to steel scrap from the European Union as part of the upcoming trade agreement, The Indian Express has learnt.
The demand comes after Indian manufacturers flagged concerns that the new levy, known as the Carbon Border Adjustment Mechanism (CBAM), along with the EU’s recycling rules, is creating hurdles for metal exports. They argue that these policies are blocking exports to the 27 EU countries and also limiting the supply of EU scrap to other nations.
If India gets easier access to the steel scrap, it could help reduce the impact of the EU’s new carbon-linked import tax that came into force on January 1, the IE report said.
Why is India demanding easier access to EU steel scrap?
Steel scrap is an important raw material for making low-carbon steel and EU is it’s largest producer in the world. Steel made in traditional blast furnaces produces the most pollution, gas-based methods create less, and scrap-based electric arc furnaces cause the least emissions. Most Indian steel makers still rely on blast furnaces and are not fully ready to meet the EU’s new carbon rules under CBAM, the IE report said.
Raising the issue at a Board of Trade meeting of the Union Commerce Ministry on November 25 last year, the Engineering Export Promotion Council said the India-EU free trade talks had highlighted a key problem. It said the EU’s carbon rules would push Indian companies to shift to arc furnace technology that needs steel scrap, but the EU’s recycling policy makes scrap hard to access. As a result, the council said, these rules effectively act as a non-tariff barrier, the report said.
India’s iron, steel, aluminium exports to be hit?
According to the IE report, the government plans to increase steel output by using more steel scrap and electric arc furnace technology as part of its green steel push.
The European Union’s CBAM applies extra charges on imports made using processes that release more carbon than what EU producers are permitted to emit. A study by the Global Trade Research Initiative warns that this measure will hit India’s exports of iron, steel and aluminium to the EU, adding an estimated 20 to 35% tax on certain products.
To address this, the government wants scrap to make up half of all steel production by 2047 under the green steel initiative. According to the World Steel Association, making steel through electric arc and induction furnaces using scrap can cut carbon emissions by about 1.5 tonnes for every tonne of scrap used and reduce energy use by 75% compared to traditional blast furnace methods that rely on fresh iron ore, the report added.