Steel Exports to Europe Set to Fall 40%, Pushing Indian Manufacturers Towards Domestic Markets

Indian steelmakers are pivoting to the domestic market to offset a projected 40% drop in exports to Europe and Britain this fiscal year. The strategic shift faces intense pressure at home from a surge in cheap Chinese steel imports, according to a Reuters report.

India is the second-largest crude steel producer globally after China. The country traditionally ships roughly two-thirds of its steel to European markets. Exports fell to 0.5 million tons in May, dropping well below the six-month average, after India shipped 6.6 million metric tons of finished steel in the fiscal year ended March 2026.

The European Union unveiled quotas on June 30 to limit duty-free steel imports. Britain will also tighten tariff-free imports from July 1, forcing mills to rely on local consumption.

Global Trade Barriers Tighten

The new European quotas follow the introduction of carbon charges in January. The EU implemented these charges on steel and emissions-intensive goods under its Carbon Border Adjustment Mechanism. 85% of India's exports to Britain remain protected under their existing free trade agreement.

Abhyuday Jindal, managing director of Jindal Stainless, told Reuters that due to the export curbs, tariffs and safeguard mechanisms in the UK, EU and US, along with other markets, "companies will have to place greater emphasis on markets where long-term demand visibility is more certain."

Indian mills are now targeting alternative markets in East Asia and the Middle East to offset the European decline. They face growing competition in the Middle East from Chinese producers and local manufacturers, Shankhadeep Mukherjee, principal analyst at London-based CRU Group, said.

Domestic Market Under Pressure

Chinese steel currently prices $52-$63 per tonne below domestic grades. The price gap makes it difficult for Indian mills to absorb output diverted from foreign markets.

The Indian government investigated hot-rolled steel imported from China, Japan and Russia for dumping.

Jindal added that low-priced Chinese imports are creating an imbalanced competitive environment for domestic producers.

India remains the only major market globally where steel consumption stays strong, a senior government official said on condition of anonymity. Mills could seek further anti-dumping measures to curb cheap imports, especially from China, the official added.

Capacity Expansion Amid Growth

Rapid economic growth and infrastructure spending continue to drive long-term expansion. India aims to increase crude steel capacity to 400 million tons by 2035-36, up from a current output of about 168 million tons.

Hui Ting Sim, vice-president and senior analyst at Moody's Ratings, said, "Tata Steel and JSW Steel are focusing the majority of their investments in India, which they see as a growth market." Profit margins remain unlikely to improve without a substantial hike in import duties, she added.

Domestic demand expectations drive most new steelmaking capacity additions across the country, rather than export projections, Ravi Sodah, executive vice-president at Elara Capital, said.

Finished steel consumption rose 55% over the past five years. The demand increase outpaced a 42% rise in production, commodities consultancy BigMint reported.