India vs Turkey for Steel & Heavy Manufacturing: Cost, EU Access & Risk

India vs Turkey Steel Manufacturing: Why This Comparison Matters Now

India produced 151.14 MT of crude steel in FY25 to rank as the world's second-largest steel producer, while Turkey produced 36.9 MT in 2024 to rank eighth globally but lead on EU access with 75% scrap-based electric arc furnace (EAF) production. That EAF advantage matters because the EU's Carbon Border Adjustment Mechanism (CBAM) enters its definitive phase on January 1, 2026, reshaping where steel destined for European markets should be produced.

For investors and manufacturers evaluating steel and heavy manufacturing capacity, the India-Turkey comparison cuts across production costs, FDI frameworks, EU market access, carbon compliance costs, and supply chain risk. This article provides the data-driven comparison needed to inform that decision.

The stakes are significant. Steel and heavy manufacturing investments are capital-intensive—a greenfield integrated steel plant can cost $1-3 billion for a 1-2 MT facility—and these investments lock companies into a location for 20-30 years. Getting the location decision wrong means decades of suboptimal economics.

Production Scale and Global Position

India: The World's Second-Largest Producer

India produced 151.14 MT of crude steel and 145.30 MT of finished steel in FY25 on Ministry of Steel provisional data, firmly holding its position as the world's second-largest producer behind China. Among the large producers India has been the principal source of volume growth, while output in China, Japan and the EU has been flat or falling. Take the current month's figure from the Ministry of Steel's monthly economic report before quoting a run rate — monthly output is seasonal and provisional numbers are revised.

The National Steel Policy 2017 targets 300 MTPA of steelmaking capacity and 160 kg of per capita steel demand by 2030-31. Major investments are underway: JSW Group announced a Rs. 1,00,000 crore ($11.60 billion) investment for a 25 MT plant in Maharashtra's Gadchiroli district, announced as one of the largest single-site steel projects anywhere. Tata Steel, SAIL, and ArcelorMittal-Nippon Steel India are all expanding capacity significantly.

India has been the fastest-growing large steel market, with demand pulled along by infrastructure spending—national highways, dedicated freight corridors, metro rail projects, smart cities, and affordable housing schemes. Take the current growth figure from the World Steel Association's Short Range Outlook or the Ministry of Steel's monthly economic report rather than from a dated projection. This domestic demand provides a built-in market that reduces export dependency and protects margins during global downturns.

Turkey: The EU's Steel Gateway

Turkey produced 36.9 MT of crude steel in 2024, a 9.4% increase that restored its position as the world's eighth-largest producer, and 38.1 MT in 2025, up a further 3.3% (Turkish Steel Producers Association, TÇÜD). Turkish steelmaking capacity is roughly 60 MT a year, and the plant mix is dominated by electric arc furnaces over a small integrated (basic oxygen furnace) base, with a set of induction-furnace producers alongside — close to the mirror image of India's mix.

Turkey's strategic advantage lies in its role as the EU's largest non-EU steel supplier: the customs union means Turkish steel enters the EU without the tariff that applies to third-country steel, and the EU is by a wide margin Turkey's largest steel export destination. Published shares of EU finished-steel imports move quarter to quarter with the safeguard quota cycle, so take the current figure from the European Commission's steel safeguard quota data or EUROFER's import monitor rather than from an annual average.

However, Turkey's domestic steel demand dropped 5.5% in 2024 to 36 million tons, with a further 1.7% decline expected in 2025. This domestic weakness makes Turkey more dependent on export markets, particularly the EU, creating vulnerability to trade policy changes and CBAM costs.

Production Costs: India's Edge, Turkey's Challenges

Cost Structure Comparison

These are illustrative planning ranges, not published survey data. Get current quotations for your own situation before putting them into a budget.

India's labour costs below $10 per tonne of crude steel represent a significant structural advantage. ICRA has pegged the Indian steel industry's operating profits at US$108 per tonne in FY2026, marginally below the $110 per tonne in FY2025. Operating margins are expected to remain at approximately 12.5%. Turkey's currency devaluation historically made exports more competitive in dollar terms, but rapid minimum-wage indexation and import-dependent raw materials (scrap above all) are squeezing margins. Check the current year's minimum wage decision and the TurkStat labour cost index before building a Turkish cost model — both move sharply from year to year.

Raw Material Dynamics

A fundamental difference in production technology drives raw material economics. Turkey's steel industry is 75% EAF-based, relying primarily on ferrous scrap as feedstock. Turkey is the world's largest importer of ferrous scrap, and the great majority of the scrap its mills consume is bought abroad. This dependency on imported scrap creates a structural vulnerability—scrap prices are set globally in US dollars, while Turkish production costs are partially in lira. When the lira depreciates, scrap costs rise in local currency, squeezing margins even as finished steel becomes more competitive in dollar terms.

India's production mix includes both integrated (blast furnace-BOF) and EAF routes, with domestic iron ore reserves providing a cost advantage for integrated producers. India is the world's fourth-largest iron ore producer, reducing import dependency for blast furnace operations. Premium hard-coking coal prices eased year on year into FY2026, giving some relief on the import-dependent input side; price it from the current seaborne index on the day you model rather than from a forecast.

Energy Cost Dynamics

Energy costs represent 20-40% of steel production costs depending on the production route. India benefits from low-cost domestic coal for blast furnace operations, with thermal coal prices significantly below international benchmarks. Indian steel producers including JSW and Tata Steel are investing in captive solar and wind power to reduce electricity costs and carbon intensity.

Turkey's competitive electricity rates support its EAF production, but the country imports a significant share of its natural gas and coal, creating exposure to global energy price shocks. Turkey's Akkuyu Nuclear Power Plant, expected to be fully operational by 2028, may reduce long-term energy costs, but this benefit remains years away.

CBAM and EU Market Access: Turkey's Hidden Advantage

How CBAM Changes the Game

The EU's CBAM imposes carbon costs on imported steel, cement, aluminium, and other carbon-intensive products starting January 1, 2026. The mechanism is designed to equalise the carbon cost between EU-produced and imported steel, preventing carbon leakage. For steel exporters, CBAM fundamentally changes the competitive landscape based on the carbon intensity of production.

Here is where Turkey's EAF-dominated production becomes a strategic asset. EAF steelmaking using scrap produces far lower CO2 emissions per tonne than blast furnace routes: on the World Steel Association's sustainability indicators, about 0.70 tonnes of CO2 per tonne of crude steel cast for the scrap-EAF route against about 2.32 tonnes for the integrated BF-BOF route. Analysis indicates that Turkish steel will become cheaper than Chinese steel in 2026 under CBAM, precisely because Turkey uses electric arc furnaces.

CBAM Cost Projections

Absolute CBAM cost estimates for Turkey vary widely between studies because they turn on assumptions about the EU carbon price and about how much export volume stays in the EU; treat any single headline number as scenario output rather than as a forecast. The robust point is relative, and it does not depend on the price assumption: because CBAM charges the gap between an import's embedded emissions and the EU benchmark, Turkey's lower-emission EAF production carries a substantially lower burden per tonne than competitors relying on coal-based blast furnaces — including much of India's integrated steel production.

Turkey is also launching a pilot national emissions trading system (ETS) in 2026. In 2025, Turkey adopted a landmark climate law paving the way for the national ETS. Establishing a domestic ETS could reduce Turkey's CBAM exposure by providing recognised carbon pricing that offsets the EU border charge. This strategic positioning gives Turkey a potential path to minimising or eliminating CBAM costs entirely for steel exports to the EU.

India's CBAM Challenge

India's steel sector, which includes a significant share of blast furnace production, faces higher per-tonne CBAM costs for EU-destined exports. On those figures the blast furnace-BOF route emits more than three times the CO2 per tonne of the scrap-EAF route, translating to proportionally higher CBAM charges. India's Ministry of Steel published the 'Greening the Steel Sector in India: Roadmap and Action Plan' in March 2025, targeting net-zero emissions by 2070—but this timeline is far longer than the EU's carbon pricing trajectory.

India's PLI Scheme for Specialty Steel, notified in July 2021 with a Rs. 6,322 crore outlay over five years, was reopened for a second round (PLI 1.1) in January 2025, under which the Ministry of Steel signed memoranda with a further set of producers. It is aimed at value-added grades rather than at decarbonisation as such. India has not yet established a domestic carbon pricing mechanism or ETS, which means Indian steel exporters cannot claim a domestic carbon cost offset against CBAM charges.

For Indian steel producers targeting EU markets, investing in EAF capacity powered by renewable energy is the most viable path to CBAM competitiveness. Several Indian producers are already moving in this direction, but the transition will take 5-10 years to materially alter India's production mix.

EU Trade Access: Customs Union vs FTA

Turkey's customs union with the EU, in force since 1996, provides tariff-free access for industrial goods including steel entering EU markets. India cannot match that today. Negotiations on an India-EU free trade agreement were concluded on 27 January 2026 (European Commission), but the agreement has still to be signed and ratified and its tariff schedules are not yet in force — so an investment decision taken now should assume most-favoured-nation duty on Indian steel entering the EU, and should treat any specific steel concession as unconfirmed until the legal text is published. Indian steel exporters to the EU therefore face both a tariff and a CBAM charge that Turkish competitors largely avoid.

Additionally, Turkey's geographic proximity means steel shipments reach EU ports within 3-7 days, compared to 18-25 days from Indian ports. For construction steel and rebar—products with thin margins and high freight sensitivity—this logistics advantage can determine which supplier wins the contract. Turkey's steel exports to the EU include a substantial share of long products (rebar, wire rod, sections) used in construction, where transit time and freight cost directly affect delivered price competitiveness.

The EU's steel safeguard measures (import quotas) also affect both countries, but Turkey's customs union status and its established position as the largest non-EU supplier mean it faces less restrictive treatment in practice.

FDI Frameworks and Investment Setup

Investing in India's Steel Sector

India permits 100% FDI in the steel sector through the automatic route, requiring no government approval. The setup process involves incorporating a Private Limited Company via SPICe+, filing FC-GPR with RBI, and obtaining sector-specific environmental clearances and mining rights where applicable.

Tax modelling for a steel investment decided today has to start from the fact that the 15% concessional manufacturing regime is closed to new entrants. Section 201 (Table, Sl. No. 1) of the Income-tax Act, 2025 (section 115BAB of the Income-tax Act, 1961) carries the 15% rate forward, but condition (c) in column D requires that the company "has commenced manufacturing or production of an article or thing on or before the 31st March, 2024" — a window the Finance Act, 2026 did not reopen. A greenfield steel company incorporated now falls instead under section 200 of the Income-tax Act, 2025 (section 115BAA of the Income-tax Act, 1961): 22% plus a 10% surcharge and 4% cess, an effective corporate tax rate of 25.17%.

The SEZ income-tax holiday is likewise not available to a new project. Section 144 of the Income-tax Act, 2025 is a grandfathering shell for units that had already begun manufacturing under section 10AA of the 1961 Act; no new unit can enter it, and the Finance Act, 2026 went on to strip the cross-references to section 144 out of sections 164, 165 and 270. An SEZ location today is a customs and procedural proposition — duty-free import of plant and inputs, single-window clearance — not an income-tax one. The incentive case therefore rests on the PLI scheme for specialty steel (Rs. 6,322 crore outlay) and on state-level capital and power subsidies, not on a concessional headline rate or a tax holiday.

Steel projects also require environmental impact assessments, consent from the State Pollution Control Board, and forest clearances if applicable. For mining-linked steel projects, obtaining mining leases through the mineral auction process adds 6-12 months to the project timeline. FEMA compliance and transfer pricing documentation are mandatory for all cross-border transactions.

For companies structuring their India entry, our FDI advisory services can guide the process from entity formation through FEMA and RBI compliance.

Investing in Turkey's Steel Sector

Turkey permits 100% foreign ownership in steel manufacturing. The standard corporate tax rate is 25%, with manufacturers eligible for a 24% rate. Turkey's regional incentive system offers corporate tax reductions of 50-90% depending on the investment zone, and Organized Industrial Zones provide ready-to-use infrastructure with VAT exemptions on land purchases and real estate tax exemptions for five years after plant construction.

Turkey's investment approval process is generally faster than India's for steel projects—environmental impact assessments and construction permits can be obtained in 3-6 months in most OIZs, compared to 6-18 months for equivalent approvals in India. The Turkey-EU customs union provides tariff-free access for steel entering the EU — an advantage India will not match until the agreement whose negotiations concluded on 27 January 2026 is signed, ratified and in force.

Risk Factors: Currency, Policy, and Market

Turkey's Risk Profile

• Currency volatility: The Turkish lira has depreciated significantly over the past decade, creating both cost advantages (cheaper exports in dollar terms) and risks (imported raw material costs, wage indexation pressure). For a steel producer importing $500 million in scrap annually, a 20% lira depreciation translates to billions of additional lira in costs.
• Inflation and wage pressure: Turkey indexes its minimum wage to inflation annually, so nominal labour costs step up sharply each January and the dollar cost of Turkish labour depends on whether the lira keeps pace. Model it from the current TurkStat labour cost index and the year's minimum wage decision, not from a trend.
• Domestic demand weakness: Turkey's domestic steel demand dropped 5.5% in 2024 with a further 1.7% decline expected in 2025, increasing export dependency.
• EU regulatory dependency: Subject to EU trade policy decisions without voting representation (customs union without membership). EU decisions on safeguard quotas and CBAM rules directly impact Turkish steel without Turkish input.
• CBAM transition costs: real but modest per tonne relative to blast-furnace competitors; the absolute figure depends almost entirely on the EU carbon price path and on how much export volume stays in the EU.

India's Risk Profile

• Infrastructure gaps: Port congestion at JNPT (Mumbai) and other major ports, power supply variability in some regions, and longer logistics chains to EU markets (18-25 days transit).
• Higher CBAM exposure: Blast furnace production faces steeper carbon border costs than Turkey's EAF route, and the charge scales with the embedded-emissions gap, so it falls hardest on blast-furnace tonnes.
• Regulatory complexity: Environmental clearances, mining rights, forest clearances, and multi-agency approvals can extend project timelines by 12-24 months compared to Turkey.
• Domestic market strength (mitigating factor): India's growing domestic steel demand provides a substantial buffer against export market volatility. Even if EU exports face CBAM headwinds, domestic demand absorbs production.
• Currency stability (mitigating factor): The Indian rupee has moved against the dollar in a comparatively narrow, managed band over the past decade — a materially different risk profile from the Turkish lira's step devaluations.

Strategic Recommendations

Choose Turkey for EU-Centric Steel Exports

If your primary market is the EU and you need zero-tariff access with low CBAM exposure, Turkey's EAF-based production and customs union access make it the stronger choice. The 3-7 day transit to EU ports and Turkey's standing as the largest non-EU supplier demonstrate proven market penetration. Turkish EAF production's low carbon intensity means CBAM costs per tonne will be a fraction of what blast furnace-based competitors face. Turkey is particularly strong for long products (rebar, wire rod) destined for European construction markets.

Choose India for Scale and Domestic Market

If you're investing for scale, long-term growth, and access to India's domestic steel demand, which the National Steel Policy 2017 frames around a 300 MTPA capacity and 160 kg per-capita consumption target for 2030-31, India's lower labour costs, PLI incentives and state-level capital support make it compelling. India's 151 MT production base and domestic iron ore reserves provide feedstock security that Turkey lacks. The domestic market alone can absorb growing production volumes without export dependency. For specialty steel products and value-added segments where CBAM costs are offset by product premiums, India can also serve EU markets effectively.

For companies evaluating India market entry for steel or heavy manufacturing, explore our Turkey-to-India registration guide and company formation services.

Key Takeaways

• Scale vs access: India produced 151.14 MT of crude steel in FY25 against Turkey's 36.9 MT in 2024 (38.1 MT in 2025, up 3.3%, per the Turkish Steel Producers Association), but Turkey is the EU's largest non-EU steel supplier through its customs union advantage and days-not-weeks transit times.
• CBAM favours Turkey: Turkey's 75% EAF production means roughly 0.70 tonnes of CO2 per tonne of crude steel cast against about 2.32 tonnes for the integrated blast-furnace route (World Steel Association sustainability indicators), resulting in substantially lower CBAM costs for EU exports.
• India wins on operating cost, not on tax: ICRA puts Indian steel operating profit at $108/tonne in FY26 on roughly 12.5% margins, and domestic iron ore keeps integrated-route feedstock cheap. But a new company pays 25.17% under section 200 of the Income-tax Act, 2025 — the 15% manufacturing regime closed to entrants that had not commenced production by 31 March 2024, and the SEZ income-tax holiday is closed to new units.
• Raw material dynamics differ: India has domestic iron ore reserves for integrated production; Turkey depends on imported scrap (25-30 MT annually), creating currency and price volatility exposure.
• FDI frameworks are comparable: Both countries allow 100% foreign ownership in steel with no sector restrictions, though India offers a dedicated PLI scheme for specialty steel with a Rs. 6,322 crore outlay.
• Dual strategy works: Companies targeting EU markets can manufacture via Turkey's EAF route for low-carbon, fast-delivery products while investing in India for domestic market growth, long-term capacity, and cost-competitive volume production.