What the India-EU FTA Steel Quota Actually Delivers

India will be able to export up to 1.64 million metric tons of steel a year to the European Union under the free trade agreement. The pact adds a preferential quota of 694,853 tons on top of the existing 946,616-ton WTO quota, according to the legal text released on Friday.

The combined quota covers about 68.4% of India's 2.4 million tons of steel exports to the EU in 2025. That is a substantial increase from the 39.4% covered by the old WTO quota alone. Shipments above the quota remain subject to the EU's 50% tariff.

The preferential quota does not exempt Indian steel from the EU's Carbon Border Adjustment Mechanism, which applies to all steel imports. The Global Trade Research Initiative estimates that CBAM could average around 35% of the value once fully phased in.

Most of the quota is allocated to flat-steel products. Hot-rolled sheets and strips receive the largest allocation at 509,605 tons. The additional quota will become available once the India-EU FTA enters into force, expected by year end, and will still depend on product coverage, rules of origin and quota availability.

Why the Carbon Levy Blunts the Quota Win for Indian Steel

The quota gain is real, but it is still managed trade

The shift from 39.4% to 68.4% of India's 2025 EU export volume covered by preferential access is material. It moves roughly 694,853 additional tons from the 50% tariff zone into the quota zone, assuming those shipments meet origin rules and product definitions.

The remaining gap still matters. Based on India's 2025 export level of 2.4 million tons, about 760,000 tons would remain outside the combined quota and subject to the EU's 50% tariff. Any export growth beyond 1.64 million tons would face the same barrier.

The carbon levy is the more important long-term cost

Because the quota does not exempt Indian steel from the EU's Carbon Border Adjustment Mechanism, the commercial value of improved market access will depend heavily on carbon intensity. GTRI estimates the CBAM liability could average about 35% of the value once fully phased in.

On that estimate, the carbon charge could outweigh the tariff advantage for quota-covered steel. The 50% tariff applies only beyond the quota, while CBAM applies to every ton. That makes low-carbon production an increasingly important determinant of EU competitiveness for Indian mills.

Flat-steel allocations concentrate the benefit

The largest single allocation, 509,605 tons for hot-rolled sheets and strips, suggests the negotiated package is built around India's flat-steel trade with EU buyers. But utilisation is not automatic; product coverage, rules of origin and quota availability will determine how much of the allocation becomes actual exports.

What Indian Steel Exporters Should Price Into the New EU Quota

  • Model landed EU prices with a carbon-cost line: GTRI estimates CBAM at roughly 35% of value once fully phased in, and the quota does not exempt that charge. For any shipment above 1.64 million tons a year, add the EU's 50% tariff.
  • Prioritise hot-rolled sheets and strips within the 509,605-ton allowance only after checking the final legal text's product coverage, rules of origin and quota availability, since the additional quota opens only when the FTA enters into force, expected by year end.
  • Treat the agreement as provisional for budgeting: the text was released Friday and could still be revised, so avoid committing multi-year EU volumes on today's quota terms.

Risk & Opportunity Assessment

Commercial RiskMediumThe quota covers only 68.4% of India's 2025 EU steel exports; remaining volumes and any growth face the EU's 50% tariff, and GTRI estimates CBAM could add about 35% of value.
Competitive RiskMediumIndian mills gain tariff relief on a larger quota, but EU producers retain both a quota cap and a carbon cost applied to all imports, limiting India's full price advantage.
Regulatory RiskMediumThe legal text released on Friday could still be revised, and access depends on product coverage, rules of origin and quota availability once the FTA enters into force.
Reputation RiskMediumNo direct reputational event is reported, but CBAM makes carbon intensity a commercial criterion for EU buyers, creating longer-term positioning risk for high-carbon mills.
Technology DisruptionLowThe deal does not change steelmaking technology, but the carbon levy reinforces pressure toward low-carbon production methods over time.
Commercial OpportunityHighThe additional 694,853-ton preferential quota raises covered 2025 export volume from 39.4% to 68.4%, opening a materially larger lower-tariff channel once the FTA enters force.