Asia's coal-reliant steel giants stall green transition: panellists

Business Times

01-06-2025

[SINGAPORE] Asia's steel giants are slowing the global green transition, as top producers China and India drag their feet on decarbonisation amid high costs and weak market demand – stalling progress in one of the world's top-emitting industries.
During a panel discussion at Singapore International Ferrous Week last week, Claire Chong, senior analyst at shipbroker Thurlestone Shipping, said the steel industry's carbon-cutting efforts are being 'significantly delayed' largely due to the market's continued preference for cheap, low-grade iron ore over higher-grade alternatives essential for cleaner production.
'In the longer run, we are expected to move towards the higher grades. But right now, we are still not really seeing that demand very significantly… especially from China. I think their emphasis is still on cost-cutting,' she added.
China, the world's dominant steel producer accounting for more than half of the global output, has been delaying its decarbonisation commitments. It continues to rely on coal-dependent blast furnaces and prefers cheap, low-grade iron ore over the high-grade variety essential for less carbon-intensive steelmaking.
Jitendra Nanda, managing partner at Polish trading firm Balta, noted in a panel discussion that India, the world's second-largest steel producer, imported 5.1 million tonnes of metallurgical coke in 2024, up 35 per cent on the year.
While the steel industry is responsible for 10 per cent of human carbon dioxide emissions, about 70 per cent of the global steel today is still produced by coal-fired blast furnaces, said Dr Lars Schernikau, shareholder of Germany-based commodity trading firm HMS Bergbau in his keynote speech last week.
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Alongside this, tepid demand for premium-priced green steel in Asia and the steep capital outlay required to overhaul production methods are further dimming prospects of cleaning up one of the world's most carbon-intensive industries.
Industry players told The Business Times that Chinese buyers, a critical market force, have become increasingly 'price-sensitive' and are willing to buy low-grade ore as long as the price is attractive. This has driven up the supply of low-grade iron ore, and further stalled the already sluggish green transition.
Not fired up by other options too
Shifting to high-grade iron ore to enable steelmaking with cleaner energy sources, such as hydrogen, is widely seen as a viable path forward. The industry could also reduce emissions by recycling steel scrap through electric arc furnaces and capturing carbon from coal-based blast furnaces.
However, China still lacks a carbon market, and the creation of one will not be happening anytime soon, highlighted Rodrigo Echeverri, director of Carbon Research. Since there is no penalty for the emissions, low-grade ore will be around for a long while, he noted.
Meanwhile, replacing coal-powered furnaces to facilitate scrap recycling remains a costly hurdle, with the high capital expenditure proving prohibitive for many mills.
Zhang Xinzhi, trader at Sino Crown International, pointed out that with Chinese steelmakers projecting declining margins, they are not willing to 'invest in air' and, hence, are delaying high-cost efforts that could result in lower returns.
Dilemma is bad news for green goals
The same story is being told about India. Amita Khurana, group chief of raw material procurement at Tata Steel, noted that relying on coal is still 'the most economical and optimal' way to produce steel.
'Coking coal is here to stay in the foreseeable future,' she said, highlighting the importance of coal for India's energy security and the need for a balance between decarbonisation and industry survival.
Other parts of Asia have also been dealing with challenges related to the green transition.
Hiromasa Yamamoto, executive vice-president of Japanese trading firm Hanwa, highlighted that securing a sufficient amount of quality scrap for recycling is another impediment given the current production needs.
Meanwhile, the demand for green steel is also insignificant in Asia as major steel buyers are unwilling to swallow the premium prices, which could be more than US$200 per tonne.
Yamamoto noted that while demand for green steel is high in Europe, it is still soft in the East, including Japan. He added that no country in Asia, except for Singapore, can afford the premiums for green steel.