Global steel industry doubles down on coal, as new capacity outpaces retirements

The Steel Paradox: Why the World is Still Betting on Coal Amid a Climate Crisis

Steel is the backbone of modern civilization. From the skyscrapers of New York to the bridges of Shanghai, We see the invisible skeleton of our urban existence. But there is a dirty secret hiding in the forge: the global steel industry is currently locked in a paradoxical struggle. While the world screams for decarbonization, the industry is doubling down on the very technology that fuels the climate crisis.

According to recent data from the Global Energy Monitor (GEM), the transition to “green steel” is not just lagging—it is being actively undermined. With 319 million tonnes per annum (mtpa) of coal-based blast furnace capacity either announced or under construction, the industry is expanding its carbon footprint even as net-zero deadlines loom.

The Giants in the Room: India and China’s Pivotal Role

If we want to understand where the future of steel is headed, we have to look at Asia. India and China are not just the largest producers; they are the primary architects of the industry’s future. Together, they plan a staggering 86% of all new coal-based capacity.

India: The Global Bellwether

India is currently the epicenter of this industrial tension. The country is developing over 60% of new coal-based blast furnace capacity globally. Perhaps more alarming is that 93% of India’s ironmaking capacity under development is slated to use coal-based technology.

However, there is a glimmer of hope. A significant portion of these projects—roughly 95%—have not yet broken ground. This creates a critical “intervention window” where policy shifts or financial incentives could pivot these projects toward lower-emission alternatives before the concrete is poured.

China: The Scale of Inertia

China remains the world’s largest steel producer, but its challenge is different: inertia. Around 94% of China’s massive existing blast furnace capacity has no plans for retirement. When you combine this with their role as the second-largest developer of new blast furnaces, the path to decarbonization looks like an uphill climb.

The Tech War: Blast Furnaces vs. Electric Arc Furnaces (EAF)

The battle for the future of steel is essentially a battle of technologies. On one side, we have the traditional Blast Furnace (BF), which relies heavily on coking coal. On the other, we have the Electric Arc Furnace (EAF), which can melt scrap steel using electricity.

The trend is moving toward EAF, but at a glacial pace. The share of global operating capacity for EAF grew by only 1% last year, moving from 33% to 34%. While this is progress, it is far outweighed by the net growth of blast furnace capacity, which is projected to increase by 88 mtpa by 2035.

Future Trends: The Path to Truly Green Steel

Despite the bleak outlook, several emerging trends could accelerate the shift away from fossil fuels. The transition will likely follow three distinct paths:

1. The Hydrogen Revolution

The “holy grail” of steelmaking is replacing coal with green hydrogen as the reducing agent. This process eliminates CO2 emissions entirely, releasing only water vapor. While currently limited to 4 mtpa of capacity, scaling this technology is the only way to achieve true net-zero steel.

2. The Circular Economy and Scrap Scaling

As more infrastructure from the 20th century is decommissioned, the availability of high-quality steel scrap will increase. This fuels the EAF model, reducing the need for primary ironmaking from ore, and coal. We expect to see “scrap hubs” emerge as strategic assets in the global supply chain.

3. Carbon Border Adjustment Mechanisms (CBAM)

Policy is becoming a powerful weapon. The European Union’s Carbon Border Adjustment Mechanism (CBAM) essentially taxes carbon-intensive imports. This forces producers in India and China to green their production if they want to maintain access to high-value Western markets.

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