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Informist, Wednesday, Aug. 19, 2026

 

By Astha Oriel

 

NEW DELHI – While Indian steelmakers could potentially increase tariff-free exports to the UK by around 1.1 million tonnes under the India-UK Comprehensive Economic and Trade Agreement, the additional access is unlikely to materially lift their margins, analysts said. Steel exports to the UK are also likely to face the challenge from the carbon border adjustment mechanism, which will come into force on Jan. 1.

 

The government expects steel exports to the UK to reach $1 billion in 2026-27 (Apr-Mar) under the free trade agreement. In FY26, India exported steel worth $900 million to the UK. This was equivalent to 140,000 tonnes of steel to the UK, out of India's total steel exports of 6.6 million tonnes, according to data from the Ministry of Steel.

 

"The India-UK Comprehensive Economic and Trade Agreement (CETA) is a positive development for Indian steel exporters and could provide an incremental opportunity to increase the overall steel export to the UK market," said Sumit Jhunjhunwala, Vice President - Sector Head, Corporate Sector Ratings, ICRA Ltd.

 

As per the UK's steel quota, which came into effect on Jul. 1, the UK government will limit tariff-free steel imports, reducing the overall quota volume by 51% from the level under the earlier steel safeguard measures. Any import above the country-specific quota would face a tariff of 50%. The measures apply to imports of steel products that can be made in the UK.

 

CARBON COST CHALLENGE

Despite the increase in tariff-free access, Indian steelmakers might have a competitive disadvantage owing to carbon border adjustment mechanism. The average carbon intensity for the Indian steel exporters at around 2.4-2.5 tonnes of CO2 per tonne of steel, remains significantly higher compared with the overseas benchmarks, Jhunjhunwala said.

 

In the European Union, the cost disadvantage is expected to be around $65-$70 per tonne, which will gradually increase over the years. A similar consideration would also emerge in the UK market, Jhunjhunwala said.

 

In the June-quarter earnings conference call with analysts, Arun Maheshwari, director (commercial and marketing), JSW Steel Ltd., had said that Europe will remain a very high-priced market because of the impact of the carbon border adjustment mechanism.

 

The carbon border adjustment mechanism comes as the domestic steel industry is undertaking significant capacity expansion to meet domestic and global demand. Tata Steel Ltd., the country's largest steel manufacturer, is increasing its crude steel capacity to 40 million tonnes per annum from 27.4 million tonnes per annum. Similarly, JSW Steel is planning to expand its capacity to 50 million tonnes from the current 29.7 million tonnes by FY31.

 

At the same time, domestic steel demand is expected to moderate in FY27, Sehul Bhatt, director, Crisil Intelligence, told Informist. "Steelmakers are therefore likely to continue balancing supply through higher exports, which, together with safeguard duties, should keep domestic steel prices above export prices," Bhatt said.

 

The UK market is, therefore, expected to support prices for domestic steel manufacturers through higher realisations in value-added products.

 

In the June-quarter post-earnings conference call, Koushik Chatterjee, executive director and chief financial officer, Tata Steel, said prices have increased and certain value-added products like galvanised or tubes in the UK, still have very high quota, especially compared with Southeast Asian mills and Asian mills.

 

T.V. Narendran, chief executive officer and managing director at Tata Steel, said prices in the UK market have been well below European prices. "So, we are seeing a rebalancing of prices, and we have been talking about this for some time. This not only reflects the costs in those markets but also addresses the high imports both in Europe and in the UK," he added.

 

However, realisations for hot-rolled coil exports to the UK remained rangebound, broadly in line with domestic prices, Bhatt said.

 

With UK steel demand at around 7.5 million tonne and import dependence of around 70%, imports are likely to remain an important component of the UK's steel supply over the medium term, Jhunjhunwala said. "Nonetheless, as per the agreement, India's total country-specific quota under the new framework is now elevated at 168,029 tonnes, complemented by the exclusive 9.45 lakh (945,000) tonnes under the Authorised Use Scheme (AUS), which could support the Indian steel export," Jhunjhunwala said.

 

However, Jhunjhunwala noted that countries with lower carbon intensity could gain market share from Indian exporters. "Exporters with low carbon intensity would be better positioned to gain market share, particularly as environmental considerations increasingly influence market access and competitiveness," Jhunjhunwala said.  End

 

US$1 = INR 95.61

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Edited by Akul Nishant Akhoury

 

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