India's Dream To Become A Global Steel Power Faces Green Challenge

On the other hand, steel makers in the United States and Europe, in a bid to tackle the climate change challenge, are gradually transiting towards making green steel in order to meet net zero emission targets to be environmentally friendly.

Analysts believe this dichotomy of goals -- India’s bid to become the largest steel producer using coal-burning furnaces and the Western world’s bid to shift to costlier electric and gas furnaces -- could create an eventual problem for Indian exports as Indian steel may well be branded as the product of a polluting system and trade barriers created to shut them out of lucrative markets.

A report by the Indian Steel Association (ISA) suggests that India and South East Asia will be in the driving seat in contributing to global demand for steel in the coming years, owing to the infrastructure developments planned by countries in these regions.The report adds that India’s steel demand is expected to increase to around 370 to 400 million tonnes per annum by 2050.

“We have ambitious expansion plans of doubling our production capacity by 2030 from the current level of 154 MT to 300 MT, as also envisaged in National Steel Policy 2017,” Union Minister Jyotiraditya Scindia had said at an event in New Delhi last year.

In FY2022-23, the production of crude steel stood at 125.3 million tonnes, whereas the production of finished steel stood at 121.3 million tonnes. Furthermore, the exports of finished steel stood at 6.7 million tonnes in the same financial year, according to a report of India Brand Equity Foundation.

Therefore, moving forward, it is imperative for the country to keep an eye on aligning its technology to the global shift in steelmaking while scaling up the production capacity.Notably, like other countries, India too shares the ambition to have a net zero emission level by 2070. But to reach the goal, it is important for India to revamp India’s steel sector, which accounts for about 12 percent of India’s carbon dioxide (CO2) emissions, according to a report by Institute for Energy Economics and Financial Analysis.

Shift In Steel-Making Technology

Going by the trend toward green steel production and demand, the US and the European Union will represent almost half of all global demand for green steel, whereas North America could represent around 25-30 percent of global demand for green steel by 2030, according to the ISA report.

The ISA report forecasts that the global demand for ‘green steel’ would be 450-475 million tonnes by 2040, rising from a demand forecast of 50-60 million tonnes two years from now.

The shift towards green steel is not only driven by regions but also by various sectors, including the automotive sector. With automakers transitioning from internal combustion engine (ICE) vehicles to electric vehicles (EV), the demand for green steel by manufacturers is likely to rise to make EVs even greener.

Besides the transport sector, which is expected to account for 34 per cent of the demand by 2030, the construction sector is expected to need another 32 per cent of the low-carbon emission steel.

Western nations, in their desire to promote green steel as well as protect domestic steel makers from cheaper Asian steel, are likely to create trade barriers that insist on decarbonising the steel sector across the world.

The EU has already introduced policies such as Carbon Border Adjustment Mechanism (CBAM), a tariff imposed on importers from outside of Europe to import carbon-intensive goods. The US and China have also come up with similar carbon-related taxation to reach the goal of net zero according to the report by Indian Steel Association.

What Is India Doing?

Given the resources required and the expanding demand for steel in India, India is at a nascent stage to scale on the green steel front. However, the Indian Government is progressively stepping up to the task, which one can say is in tandem with the global shift in steel production.

The government has already stressed on the need to walk the line to Prime Minister Narendra Modi’s net zero emission vision by 2070 while committing toward capacity enhancement. The industry has been officially urged to transition toward the costlier gas-based DRI-EAF route to ensure a successful shift toward green steel.

The gas-based DRI-EAF route for steelmaking won't be dependent on coal but on natural gas or hydrogen, which emits less carbon.

Minister Scindia recently convened a meeting with the two Advisory Committees constituted under the Ministry of Steel for Integrated Steel Plants (ISP) and the Secondary Steel Industry (SSI) and announced the approval of 13 task forces that will work to delineate the roadmap for green steel in India.

The National Green Hydrogen Mission, set up in 2021 for which the steel sector is a stakeholder, is encouraging the adoption of newer technologies in the steel industry such as the use of hydrogen in the steel-making process to reduce carbon emission.

More initiatives such as the National Solar Mission, launched in 2010; the Perform, Achieve and Trade (Pat) scheme; Japan’s New Energy and Industrial Technology Development Organization (NEDO) Model Projects for Energy Efficiency Improvement have been adopted to decarbonise the steel industry in the country.

Challenges Ahead For India

The Indian steel industry, like many others, traditionally uses the fossil fuel-intensive BF-BOF (Blast Furnace – Basic Oxygen Furnace) route and coal-based DRI-EAF/IF (Direct Reduced Iron-Electric Arc Furnace/Induction Furnace) route to produce steel.

However, of late, countries are looking to utilise natural gas and green hydrogen in the BF-BOF route to reduce emissions for decarbonising the steel industry, according to a report by ISA.

That said, the challenge that may inhibit India from shifting from a coal-based reduction of iron ore to a gas-based reduction of iron ore is the lack of accessibility of natural gas and green hydrogen in the country.

The Electric Arc Furnace (EAF) and Induction Furnace (IF) route results in very low CO2 emissions. However, the production through this route is dependent on the availability of scrap or sponge iron.

“Scrap can only be reused a limited number of times without any loss in its strength or yield. The challenge is in getting the right kind of scrap and in adequate amounts. So it is more economics, demand, and supply. Moreover, the challenge is in proper segregation of scrap and availability,” Arnab Hazra, Deputy Secretary General of Indian Steel Association, said referring to the limitations of scrap.

“India needs to use more scrap to procure steel. The use of CCUS technologies, which capture the C02 emitted during the production of steel, need to be employed. Furthermore, India’s steel industry needs a transition fuel like natural gas for DRI making,” he added, while speaking on the way forward for India.

However, Rakesh Gupta, former head of International trade at steel giant Steel Authority of India Ltd. told The Secretariat, “I don’t think the shift toward green steel will impact much as India largely exports steel to developing and third world countries in west Asia and Africa. We do export to Europe, but a very small quantity. Developing countries won't seek to switch to green steel as it will be more costlier for them. Therefore, I don’t foresee any impact on India's steel exports in the next 5 years,”

“Europe too will need to meet their need for steel, which won’t be possible by only depending on green steel, given the global production capacity. Therefore, Europe would have to provide relaxation on carbon taxation policies to meet their demands. Till the time green steel gets competitive, I don’t see it affecting India in regards to export,” he added.

Further, speaking on the challenges for India to shift toward green steel, Gupta highlighted, “It will be very challenging for India to transit to green steel as the country has already invested heavily on the BF-BOF route. Now, till the country doesn't get a return on those investments, it won't be desirable to invest further to expand the production of green steel. I can’t see India switching to green steel in the next 5-6 years,”