India's steel industry, already grappling with lower exports, higher imports, and Europe's carbon tax, is expected to face new challenges from Germany's proposed Low Emission Steel Standard (LESS), according to a report by the Global Trade Research Initiative (GTRI) released on Friday.
The report highlighted a significant decline in India's steel exports, which dropped by 31.2% from $31.7 billion in 2021-22 to $21.8 billion in 2023-24. In contrast, imports surged by 37%, rising from $17.3 billion to $23.7 billion during the same period, turning India into a net importer of steel.
While the Indian steel industry is not legally bound to adopt the new German steel standard, GTRI cautioned that ignoring it could adversely affect domestic exports. "Global markets are increasingly demanding low-carbon products, and Indian steel producers who do not align with LESS may struggle to compete," said GTRI Founder Ajay Srivastava.
Srivastava urged the Indian steel industry to prepare for compliance with the new standards, which, though introduced by Germany, may soon be adopted by other developed nations.
LESS, a voluntary labelling programme developed by the German Steel Federation (WV Stahl) and the Federal Ministry of Economics and Climate Protection (BMWK), classifies steel products based on the carbon dioxide emissions released during their pre-production and production stages. Set to be introduced in late 2024, LESS categorises steel into five classes, from ultra-low emission Class A to high emission Class E.
GTRI's report warned that Indian steel, much of which is likely to be categorised in the lower grades (C, D, and E), may face difficulties in global markets. "This categorisation could lead buyers to avoid purchasing from companies with higher-emission steel, potentially causing more harm than the CBAM (carbon border adjustment mechanism) tax on high-carbon steel," the report noted.
Unlike CBAM, which imposes a carbon cost on foreign firms at the EU's border, LESS is a voluntary programme that could create a perception problem for Indian firms. The report suggested that a public list showing companies and their steel categories might soon be available, potentially affecting their ability to secure orders from developed countries.
To address these challenges, GTRI recommended that Indian steel producers invest in low-carbon technologies such as electric arc furnaces, hydrogen-based steelmaking, and carbon capture and storage. Additionally, the industry should conduct comprehensive carbon footprint assessments to identify opportunities for reduction.
GTRI also called on the Indian government to play a pivotal role in supporting the transition to low-carbon steel production. This could include developing clear and supportive policies, such as tax incentives, Production-Linked Incentives (PLI), and research funding. Investing in infrastructure to support the transition, including renewable energy sources and efficient transportation networks, was also deemed essential.
India's steel industry primarily relies on the blast furnace-oxygen steelmaking (BF-BOS) method, which has a higher carbon footprint compared to electric arc furnaces (EAFs). Transitioning to low-carbon steel production will require significant investment in new technologies and infrastructure.
South Korea remains India's largest steel supplier, though imports from China and Vietnam have grown significantly. Meanwhile, the CBAM or carbon tax, set to take effect on 1 January 2026, will require domestic companies from seven carbon-intensive sectors, including steel, cement, fertiliser, aluminium, and hydrocarbon products, to report their carbon emissions data to the EU starting from 1 October this year.
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