Day: 29 January 2026

The endorsement of the “Towards 2030: A Joint India-European Union Comprehensive Strategic Agenda” on Tuesday marks a structural shift in how steel features in the bilateral relationship. The framework moves beyond trade volumes and places steel within a wider agenda covering decarbonisation, standards alignment and steel-intensive downstream demand, Kallanish notes.

This agenda builds on the India-EU FTA announcement on 27 January, where the end-user steel outlook is expected to see an uplift, while near-term steel trade upside remains capped by CBAM constraints.

The new EU trade regime, expected to come into effect from 1 July, proposes no favourable treatment for FTA partners in quota negotiations. However, Commissioner Sefcovic implied India will get preferential treatment as a new FTA partner, indicating there are some tough negotiations ahead before the FTA comes into effect from 2027. Sources estimate a tariff-rate quota (TRQ) relaxation under the FTA may be “possible” by 30 June.

Direct steel trade impact remains limited. The strategic agenda does not alter CBAM or tariff treatment for steel. Instead, its relevance for the sector lies in regulatory convergence and long-term investment signals.

Steel is explicitly identified as a hard-to-abate, energy-intensive industry. Both sides have committed to cooperation on low-carbon material definitions, including steel, with the aim of creating comparable benchmarks and a level playing field. This is paired with experience-sharing between India’s Carbon Credit Trading Scheme (CCTS) and the EU Emissions Trading System (ETS).

This builds on earlier EU confirmation that any carbon price effectively paid in India under its CCTS would be deductible against CBAM liabilities, subject to alignment on pricing, timelines and verification frameworks. While this does not ease near-term export costs, it improves planning visibility for Indian producers investing in decarbonisation.

Hydrogen forms another core pillar. The India-EU Task Force on Green Hydrogen focuses on heavy industry applications, providing a technology bridge for hydrogen-based direct reduced iron and lower-emission steelmaking over the medium term.

The more immediate transmission channel is downstream end-user demand. Infrastructure and connectivity feature prominently, including the India-Middle East-Europe Economic Corridor. Rail cooperation, covering high-speed standards, automation and maintenance systems, supports long-term demand for steel rails, structural sections and specialised plate.

Maritime cooperation also carries steel implications. The agenda promotes a green shipbuilding ecosystem and green shipping corridors. Recognition of Indian ship recycling yards under EU-compliant frameworks is expected to support domestic scrap availability and circularity.

Energy transition initiatives add further support. Cooperation on wind energy, smart grids and energy storage is steel-intensive, lifting demand for heavy plate, electrical steel and more.

Defence manufacturing emerges as a growing end-user. Deeper industrial cooperation, co-development and localisation under the strategic partnership are likely to raise demand for alloy steel, special grades and precision forgings over time.

India-EU Strategic Agenda: steel-relevant markers

Sector/Driver	Strategic action point	Impact on Indian steel industry
Regulation	Low-carbon material definitions & CCTS/ETS alignment	Standardises “green steel” for global exports
Railways	High-speed rail standards & IMEC links	Drives demand for high-tensile and specialised rail steel
Maritime	Green shipbuilding ecosystem & ship recycling	Increases marine-grade demand and scrap availability
Energy	Wind energy scaling & Green Hydrogen Task Force	Transitions mills to H2-DRI and supports renewable infra
Innovation	Horizon Europe & advanced materials research	Supports R&D for next-generation steel alloys

Source: India external affairs ministry, Kallanish

The agenda deploys a multi-pronged financial strategy which could bridge the significant capital expenditure gap for India’s “green” steel transition.

An Investment Protection Agreement (IPA) anchors investor confidence with predictable standards, while the Team Europe Global Gateway and European Investment Bank may provide large-scale project funding. The Global Green Bonds Initiative and the Blue Valleys programme can also collectively ensure liquidity and accelerate private sector engagement in hard-to-abate sectors.

The strategic agenda thus amplifies the impact of the FTA by reframing steel exposure towards financing, inputs and standards.

 

 

Leonard spoke during the “Automotive and Construction Demand Outlook” panel at Fastmarkets’ Circular Steel Summit 2026 on Wednesday January 28 in Houston, Texas, offering a forward-looking assessment of the main demand drivers for steel.

Steel production and prices
Section 232 tariffs have supported US steel production, which increased through 2025 even amid subdued end-market demand, Leonard said, adding that this has come at the expense of output in other developed regions, particularly Europe.

Looking ahead, the firm expects US steel production growth to remain positive but muted, reflecting sluggish automotive demand and only selective strength in construction.

Steel prices have risen following recent tariff measures, but not to the same extent seen after the initial Section 232 tariffs in 2018. Leonard attributed this to weaker underlying demand conditions and greater cost absorption within supply chains.

“Compared with previous cycles, the demand environment today is fundamentally different,” Leonard said, adding that steel prices are expected to edge higher, but without sharp upside.

Automotive: Demand resilient but structurally constrained
Oxford Economics maintains a relatively bullish outlook for the US economy overall, with gross domestic product growth expected to outpace most other developed economies. But Leonard cautioned that this strength is narrowly concentrated in areas such as data centers and artificial intelligence (AI), rather than broad-based consumer demand.

In the automotive sector, fears that tariffs and inflation would significantly curb vehicle demand have not materialized so far. Leonard said that higher costs linked to tariffs have largely been absorbed by automakers and overseas suppliers, limiting the impact on final vehicle prices.

Oxford Economics estimates that roughly $20 billion in costs have been absorbed upstream in automotive supply chains, supporting demand in the short term. But Leonard warned that this dynamic is unsustainable and said price pressures could intensify if tariffs persist.

Automotive demand remains constrained by high financing costs, which have not fallen meaningfully despite a stabilization in the Federal Reserve’s policy rate. Vehicle affordability remains weaker than pre-pandemic levels, particularly as electric vehicle (EV) tax credits expire and interest costs stay elevated.

Looking ahead, Oxford Economics’ forecast for US automotive production through 2027 is flat, with total output growth of around 1% — well below historical norms. Any incremental growth is expected to come primarily from hybrid and electric vehicles.

Leonard highlighted that EVs, while lighter in steel share, actually contain more steel per unit on a weight basis due to heavier battery systems, creating limited but positive tailwinds for steel demand.

Construction: Cost pressures and uneven growth
Construction remains the largest single source of steel demand, accounting for roughly half of total consumption, Leonard said. But the outlook is mixed and uneven across segments.

Effective tariff rates on building materials remain elevated due to Section 232 tariffs on steel and additional duties on lumber imports, particularly from Canada. These material cost pressures, combined with persistent labor shortages, continue to weigh on project viability.

Structural labor tightness in construction has been exacerbated by demographic trends and immigration enforcement, Leonard said, further pushing up project costs and limiting new starts.

While residential construction is expected to recover modestly as long-term interest rates ease, growth is concentrated in less steel-intensive segments, such as single-family housing. High-rise residential construction — a more steel-intensive segment — is not expected to see meaningful growth, Leonard said.

Non-residential construction presents a more complex picture. Manufacturing-related construction surged following policy support such as the CHIPS and Science Act, driving strong steel demand in recent years. Meanwhile, traditional office construction remains structurally weak.

Leonard said that growth in commercial construction is now being driven almost entirely by data centers linked to AI and cloud computing. These projects are classified as office construction but differ significantly in structure and steel usage.

Energy and infrastructure support steel demand
The expansion of data centers is also driving strong demand for power generation and grid infrastructure, creating indirect but meaningful steel demand. Oxford Economics expects substantial investment in power generation capacity toward the end of the decade, although permitting constraints will slow deployment.

Transport infrastructure is another source of growth, supported by government spending programs.

At a regional level, Oxford Economics sees non-residential construction growth concentrated in states such as Pennsylvania, Nebraska and Louisiana, with other pockets of growth across the western US.

Spanish seamless tube supplier Tubos Reunidos (TR) is developing a seamless pipe capable of meeting the specific requirements of the hydrogen sector. As part of its participation in the H2SKID project, the company aims to support the expansion of “green” hydrogen use and industrial decarbonisation in Spain, Kallanish notes.

The project aims to develop a 1.25 MW experimental portable electrolyser, conceived as an enabling solution for the supply of green hydrogen to final industrial users. The initiative is being led by a Basque consortium including Tubos Reunidos, ArcelorMittal Sestao, Sarralle, ABC Compresores, Matz-Erreka, Flubetech Coatings, Mugape, Sener, Team Group, Torraval Cooling, and Zigor Corporación.

“Material performance in hydrogen environments is a critical factor in ensuring the safety, reliability and durability of industrial infrastructures, making this contribution essential to transforming technological innovation into solutions ready to operate under real conditions,” TR says. “Through initiatives such as this, the Group consolidates its role as a technological partner in the development of advanced industrial solutions that drive the energy transition and enhance the industrial competitiveness.”

The H2SKID project will validate the use of green hydrogen in a controlled environment in the ladle preheating burner and/or tunnel furnace area at ArcelorMittal Sestao.

 

The European Parliament’s Committee on International Trade (INTA) has voted to approve the proposed new steel trade regime and start interinstitutional negotiations between Parliament, Council and Commission. Unused quota volume carryover to the following quarter has been rejected, Kallanish notes.

The proposal to implement the melted and poured rule “only where justified by circumvention risks” was also rejected. INTA voted to maintain the original wording that gives the European Commission the power to lay down “the detailed rules for identifying the country in which the steel used in the production of the product is melted and poured and to amend Annex II to this Regulation”.

The total proposed annual tariff quota volume remains at 18,345,922 tonnes. Russia and Belarus product remains banned.

The committee approved the motion for the Commission to engage in “proactive and transparent communication with trade partners to clearly explain the reasons for adopting this measure and to identify ways to maintain equal and fair conditions so as not to disrupt the existing spirit of genuine trade cooperation, particularly with existing and future FTA partners affected by this instrument.”

However, it rejected the proposal that trading partners that have free trade agreements with the EU should receive preferential quota distribution. It also rejected the exclusion of Switzerland from the application of the out-of-quota duty.

This, however, seemed to be contradicted by European trade commissioner Maroš Šefčovič who told CNBC TV18 on Tuesday after the EU-India FTA was concluded that India, as an FTA partner, would have a privileged position in negotiations over access to the EU steel market.

The new trade regulation proposal raises the big question of how quota allocations will be negotiated with the EU’s multitude of FTA partners. This is likely to be a highly complex procedure since FTAs protect preferential trade with the EU and will be very difficult to change, Van Bael & Bellis trade lawyer Yuriy Rudyuk pointed out last month.

INTA also rejected the proposal that a defined minimum share of value added, components or materials should be sourced from within the Union for publicly funded projects, and that, in general public procurement, contracting authorities should give preference to steel and steel-containing EU-produced products.

The proposed regulation will now be voted on by the European Parliament in plenary next month, which will either endorse the committee’s decision to enter into negotiations or refer the report back to the committee.

 

The conclusion of the India-EU Free Trade Agreement (FTA) marks a strategic shift in India’s trade engagement with Europe, but its immediate impact on the steel sector remains limited, with carbon regulation, tariff structures and timing emerging as binding constraints, Kallanish understands.

Market participants broadly agree that steel trade is unlikely to receive a near-term boost, as CBAM remains fully intact. CBAM does not provide exceptional treatment for individual countries or industries and the FTA does not alter its application.

This pressure has intensified following the withdrawal of EU Generalised System of Preferences (GSP) benefits for India from 1 January 2026, under the bloc’s graduation rules. An industry veteran stresses that this move is not part of the FTA but materially reshapes market access conditions.

The EU removed GSP tariff preferences on around 87% of Indian exports, including iron and steel. As a result, these products now face most-favoured nation (MFN) duties of 2-7%. Sources estimate these translate into an average competitiveness loss of around 20%, once duty impact, logistics and pricing effects are combined with CBAM compliance costs.

India’s commerce ministry highlights the FTA includes forward-looking MFN assurances under CBAM, enhanced cooperation on carbon pricing recognition, verifier accreditation, best available technology and decarbonisation pathways, alongside access to EU technical and financial support. Market participants acknowledge these elements improve long-term visibility, but stress they do not ease near-term cost pressures.

“[Steel] exporters are set to face significant pressure following the withdrawal of GSP benefits and implementation of CBAM. However, a recovery may emerge by 2030 if FTA quotas [TRQs] can offset these costs, provided India successfully scales green steel production to meet CBAM standards for sustained EU market access,” an industry veteran notes.

“But we are happy after India declared the new FTA as the ‘mother of all deals’,” he adds.

Some participants see greater downside than upside risk in the near term, as improved access under the FTA could support inflows into India of specialised EU-origin steel, particularly plate and rail-linked products.

Kallanish analysis suggests the real steel impact of the India-EU FTA is indirect, via steel-consuming sectors (see table).

The engineering exports sector, a key steel end-user, stands out as the most positively impacted. Industry estimates suggest engineering exports to the EU could rise by around 25% year-on-year, from a current base of about $21 billion, supporting structurally higher domestic steel demand.

Automobiles may also benefit from quota-based liberalisation and regulatory cooperation. Other end-user sectors, including electronics, medical instruments, pharmaceuticals, aerospace and others, similarly support incremental steel demand.

Impact analysis

Segment	FTA provision	Key data & tariffs	Impact on Indian steel
Steel Exports	Included under TRQs	GSP MFN duties (typically ~2-7%) remain; preferential access managed via quotas	Marginal/strategic: Limits direct volume but provides predictable access
Steel Imports	22% duty cut to 0% phased over 10yrs, €1.5 billon in 2024	Current ~0.3-0.4mt, mainly specialty steel	Moderate risk/opportunity: Benefits domestic mfg/infra via cheaper high-end steel as landed costs fall, but risk for domestic steel producers
CBAM	No outright exemption; technical cooperation expected	–	Structurally negative: high compliance risk for non-green steel
Engineering Goods	Current EU tariffs up to 22% removed	Estimate +25% y-o-y to $21bn	Strong Positive: Significant indirect demand for domestic steel
Mines & Minerals	Zero duty across 100% of tariff lines	Removes cost barriers for value-added mineral exports	Strategic Positive: Fuels partnerships with EU steel manufacturers
Machinery & Aerospace	Product Specific Rules with transition periods	Encourages ‘Make in India’ for complex manufacturing	Positive: Long-term growth in specialised steel consumption
Decarbonisation	Technical group for BAT, MRV, and verification	Focus on alignment with EU carbon standards	Strategic Positive: Essential pathway for sustained EU market access

Source: commerce ministry, industry estimates, Kallanish

While the India-EU FTA enhances competitiveness by eliminating tariffs, CBAM remains a critical structural hurdle, shifting the advantage toward low-carbon producers through technical cooperation rather than tax exemptions.

Overall, the India-EU FTA reshapes the downstream demand environment for steel without changing the fundamentals of steel trade. For Indian steel, the opportunity lies less in near-term exports to Europe and more in supplying a more export-oriented, higher-value and increasingly decarbonised manufacturing base domestically.

 

French steel transaction prices are edging up by an average of €5-10/tonne ($6-12/t), as long product mills attempt to implement increases linked to higher production costs, rising scrap prices and the impact of CBAM on imports, Kallanish notes.

According to market sources, mills have announced hikes of up to €20/t, but buyers have generally accepted increases of no more than €10/t, depending on their December purchase levels.

Consumption remains weak, however, with several buyers telling Kallanish that price rises are proving difficult to pass downstream. Sources agree that CBAM is having only a limited impact on the longs market, where competition among European producers remains intense. While some restocking was reported in December, demand has been weak in January.

By contrast, sheet and tube prices are increasing gradually, supported by stronger protection measures on coil. Price increases for long products, however, remain uncertain.

One buyer notes that mills with a rigid attitude on price hikes are losing orders. Another large buyer adds he has purchased around three times less rebar than usual in France, instead sourcing material from other cheaper European suppliers.

French longs increases are mild as competition with other European producers results in cheaper material available to French buyers.

Sections mill prices are increasing by €20/t officially in France but not all European producers are implementing the hikes, while producers from Spain only increased values by €10/t for sales in France.

First-category sections in France have increased slightly from €730/t delivered last month to €735-740/t this month on average.

Domestic merchant bar prices are increasing in January contracts by some €10-15/t to €220-230/t base delivered, excluding €420/t in size extras. Rebar prices also ticked up by €10/t to about €600-610/t delivered on average.

Meanwhile, France’s construction sector continues to underperform. Market sources report cautious ordering from construction companies and do not anticipate any improvement before the second half of the year.

One source notes that infrastructure projects funded by the EU’s post-pandemic recovery programme are expected to fade in the second half of 2026 and eventually disappear, as EU rules require the funds to be fully allocated by year-end. Sources add that a substantial share of construction steel produced in France last year was absorbed by EU financed infrastructure projects, leaving the sector exposed as this support comes to an end.