Supplier-specific CBAM costs are reshaping European procurement of Indian steel. Buyers are negotiating the carbon bill and assessing emissions data alongside the steel quotation, while quarterly quotas govern customs clearance timing. Nilesh Bhattad, Founder & CEO of CleanCarbon.ai, told SMM that European customers are seeking contract terms that pass additional carbon costs back to mills. The commercial test is the carbon-adjusted landed cost, supported by reliable emissions data and clear terms on who bears the cost.
I. Quarterly quotas drive the European import pattern
EU-27 imports of Indian non-alloy HRC recovered to 517,315 tonnes in January–July 2026 from 89,641 tonnes a year earlier, a 477.1% increase from a low base. Full-year imports fell 62.2% to 441,633 tonnes in 2025 from 1.169Mt in 2024. January, April and July accounted for 99.5% of the seven-month 2026 volume. SMM's assessment is that quarterly quota access is driving this concentrated clearance pattern, with buyers organizing customs entries around the fresh allocation.
The low 2025 base formed against declining European steel demand and trade-remedy uncertainty. The Commission's March 2025 review cited decreasing demand and tightened safeguard access from April. From July 1, 2025, annual quota liberalisation fell from 1% to 0.1% and unused-quarter carry-over was removed for Category 1A. India was also under an EU HRC anti-dumping investigation, which closed in September 2025 without duties. Pending that decision, buyers faced uncertainty over the eventual duty treatment of Indian material. These were the trading conditions surrounding the weak comparison period, before CBAM certificate obligations began in 2026.
The monthly figures show why the January–July denominator is particularly small. EU imports in January–May 2025 totalled just 6,861tonnes. About 79.7% of the year's 441,633 tonnes was recorded in August–December, including 188,174tonnes in October. The 477.1% increase in January–July 2026 therefore compares renewed quota-window entries with an exceptionally weak early-2025 flow. It measures the rebound in customs imports; assessing CBAM's commercial effect still requires the supplier's emissions, the quota window and the contract's allocation of carbon costs.
Quota timing has a direct cost consequence. Under the regime effective from July 1, 2026, India's basic quarterly allocation for Category 1A hot-rolled flat products is 149,318.61 tonnes, including the October–December 2026 window in the July 2026–June 2027 quota year. Unused quota carries forward within that year. Imports outside available quota face a 50% ad valorem duty, compared with 25% under the previous safeguard. Category 1A covers a broader product range than the non-alloy coiled HRC series shown here.
CBAM exposure now shapes supplier comparisons and contract negotiations for Indian steel. Buyers assess chargeable emissions using verified product and installation data or the applicable default, account for the free-allocation adjustment and any eligible deduction for a carbon price effectively paid, and agree who absorbs the resulting certificate cost. Clearing within quota avoids the additional steel duty while retaining the CBAM obligation. The customs clearance quarter also determines the applicable 2026 certificate-price reference; Waiting for a later quota window can change the carbon-cost reference while adding storage and financing charges.
India's wider export recovery provides the market context. Provisional JPC figures released by the Ministry of Steel on October 6, 2026, put finished-steel exports to all destinations at 3.5478Mt in April–September 2026, up 26.2% year on year. September exports fell 3.8% to 561,800 tonnes. These figures cover all finished steel and destinations; the European series measures EU customs imports of non-alloy HRC coils at least 600mm wide, excluding alloy HRC, plate and the UK.
II. Buyers negotiate who carries the carbon cost
CBAM's definitive regime began on January 1, 2026, attaching carbon obligations to covered imports made this year. Certificate purchases start in February 2027, and the first annual declaration and surrender deadline is September 30, 2027. The authorised CBAM declarant, normally the EU importer or an eligible indirect customs representative, carries the legal obligation. Procurement must therefore price the exposure on 2026 imports ahead of the cash settlement.
Bhattad said some European buyers are seeking clauses that require suppliers to absorb additional carbon costs above the agreed steel price. Bargaining power determines how much of that cost moves back to the mill. A supplier with scarce quality approvals or limited qualified competition has greater room to resist a deduction. A smaller exporter dependent on a large customer faces stronger pressure to accept it.
The CBAM clause consequently matters as much as the headline FOB or CFR quotation. Bhattad had not seen a consistently identifiable carbon premium embedded in the prices reviewed; buyers were instead addressing additional costs through contract wording. For a mill, a later carbon deduction reduces export realization even if the agreed steel price remains unchanged. Negotiations need to specify the calculation basis, supporting emissions data and the treatment of later adjustments.
III. Emissions boundaries determine the liability
In his work with producers, Bhattad sees emissions of around 2.0–2.2 tonnes of CO₂ per tonne of steel at the lower end, near 2.5 tonnes in the middle and approximately 3.0–3.2tonnes at the higher end, depending on route and technology. He estimates additional downstream processing emissions at roughly 0.2–0.3tonnes. These indicative ranges explain the commercial differences between suppliers; shipment calculations require the relevant product and installation data.
For HRC, billets and slabs, the relevant CBAM boundary covers direct emissions and required embedded emissions of precursors. Electricity emissions from melting or rolling are generally excluded under the current direct-emissions scope for these goods, while relevant indirect emissions in certain precursors, such as sintered ore, can carry through. Buyers therefore need a product-specific CBAM figure alongside any broader corporate footprint. Renewable electricity improves a mill's wider footprint, with the effect on CBAM determined by the applicable accounting boundary.
IV. Higher certificate prices sharpen the cost sensitivity
The European Commission published a Q3 2026 CBAM certificate price of 82.32EUR/tonne of CO₂ on October 5, 2026, up from 75.36EUR in Q1 and 75.28EUR in Q2. The Q3 price applies to July–September imports. The October–December price is scheduled for publication on January 4, 2027. Buyers assessing October clearance must therefore allow for a pending Q4 price, using 82.32EUR as the latest published reference.
At the Q3 price, the following scenarios illustrate the certificate cost of emissions remaining chargeable after the applicable free-allocation adjustment and any eligible deduction for a carbon price effectively paid in the country of production. The scenarios show cost sensitivity; each mill's liability requires its own calculation.
Published certificate prices and illustrative costs for emissions remaining chargeable after applicable deductions.
For a 1,000-tonne shipment with 1.0 tonne of CO₂ per tonne of steel remaining chargeable, the certificate component is 82,320EUR. A reduction of 0.1 tonne of chargeable CO₂ per tonne of steel lowers the cost by 8.23EUR/tonne at the same price. That difference enters a buyer's supplier comparison directly. The final bill varies with embedded emissions, applicable deductions and the certificate price for the import period.
V. Free allocation declines through 2034
Product and process benchmarks determine the free-allocation adjustment across the relevant production chain. The 2026 CBAM factor is 97.5%, falling to 95% in 2027 and 51.5% in 2030, with the current legislated schedule reaching zero in 2034. The factor scales the benchmark-based deduction. Chargeable emissions are calculated from the supplier's embedded emissions after that adjustment and any eligible carbon-price deduction. As the benchmark deduction declines, reducing verified emissions becomes more valuable in European procurement.
VI. Verified data determine the value of cleaner steel
Emissions data are now a commercial input to supplier qualification. Bhattad identified missing information from purchased inputs and outsourced processes as a reason exporters may have to use default values. Reliable precursor data allow a lower-emission supplier to demonstrate its advantage. Where defaults are required, the calculation must use the official value for the relevant goods and origin. Buyers need that distinction established before comparing carbon costs.
Actual values in a CBAM declaration require verification by an independent verifier accredited by an EU national accreditation body. Mills need a consistent monitoring record supporting both embedded emissions and the free-allocation adjustment. The verification framework applies a 5% materiality threshold to misstatements, distinct from measurement uncertainty. Measurement, data preparation and verification also add costs alongside certificate purchases, making early data readiness part of a credible export offer.
Bhattad said producers with several production options are looking to direct lower-emission steel towards Europe. The commercial benefit depends on compliant installation accounting. For goods with the same functional unit made through multiple routes within an installation, the Commission's guidance requires a weighted average across those routes. Buyers must assess the reportable installation figure when comparing suppliers, rather than assume the cleanest production line sets the emissions of a European consignment.
VII. CBAM costs shape supplier comparisons
CBAM adds a supplier-specific carbon component to European buyers' landed-cost comparisons. The emissions data behind that component and the contract's allocation of the CBAM bill directly affect the commercial offer. Established quality approvals, specifications and supply relationships keep Europe an active outlet for Indian mills, Bhattad said. Within those relationships, buyers negotiate the carbon component and assess the reliability of supplier emissions data. Quota availability then shapes when material can be cleared without an additional steel duty. SMM's assessment is that a competitive offer combines suitable material, a documented carbon cost and an available quota window.
The EU's 50tonne exemption threshold applies annually per importer across the relevant covered goods. Importers must track cumulative volume over the year. For bulk HRC and slab trade, procurement therefore needs to address the full carbon obligation rather than rely on an allowance for individual consignments.
A carbon-adjusted European HRC quotation should identify the supplier and installation, grade and CN code, planned import period, verified emissions or applicable default, free-allocation adjustment and certificate-price reference. The steel price and estimated CBAM component should be shown separately, with the contract stating who bears the cost and any later adjustment. Freight, customs duties, bonded-storage costs, financing and verification complete the landed-cost comparison and the Indian mill's netback.
VIII. India ratings and wider carbon requirements
India's green-steel taxonomy defines qualifying steel below 2.2tonnes of CO₂ equivalent per tonne of finished steel, with three-, four- and five-star ratings. It covers Scope 1, Scope 2 and specified Scope 3 emissions, so buyers still require a separate calculation on the EU CBAM boundary. India's Carbon Credit Trading Scheme adds emission-intensity obligations for designated entities. A CBAM deduction depends on an eligible carbon price effectively paid and documented; a rating or an emissions target alone establishes no credit.
The UK CBAM starts on January 1, 2027, and includes covered iron and steel products, extending the commercial importance of emissions data beyond the EU. Bhattad urged exporters to begin measurement even where Europe represents only a small share of sales. Reliable data support emission-reduction decisions and prepare suppliers for buyers' carbon requirements across markets.
The EU's Operators of Third-Country Installations module, or O3CI, allows non-EU producers to share installation and emissions information with declarants while protecting business-sensitive data. It provides controlled data sharing rather than a public directory of supplier footprints. Bhattad also described industry-led efforts in India to consolidate information for smaller exporters; those efforts remained under development at the time of the interview.
IX. The next booking turns on quota and emissions readiness
Quota, verified emissions and contractual CBAM terms will shape the next booking cycle; Q4 pricing will set October–December carbon costs. Bhattad urged mills to measure now and document cost terms to protect realizations.
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