**Indo-Pacific region:** China’s steel overcapacity and trade disputes heighten urgency for greener steel production. India, Japan, and South Korea accelerate cooperation on green technologies, carbon trading, and supply chain resilience, aiming to overcome coal dependence and boost sustainable growth in steelmaking by 2025.
Steel production is a cornerstone of global industry, underpinning infrastructure, construction, telecommunications, and electronics. Nonetheless, it remains one of the most challenging sectors to decarbonise due to its reliance on traditional high-emission manufacturing practices. Currently, steelmaking accounts for approximately 6-7% of global greenhouse gas emissions and over 8% of energy-related emissions worldwide, driven largely by the dominant blast furnace to basic oxygen furnace (BF-BOF) method which depends heavily on coal or coke as a feedstock.
The current steel production landscape is dominated by BF-BOF technology, which contributes the majority of the sector’s CO2 emissions. Alternatives such as Electric Arc Furnaces (EAFs), which use recycled steel and reduce reliance on coal, are popular in regions with limited iron ore resources. However, in countries rich in iron ore like India, EAF adoption is less widespread, as the steel industry relies more heavily on coal-based direct reduced iron (DRI).
China’s steel manufacturing capacity, which far exceeds that of other nations, continues to influence global steel markets and supply chains. This overcapacity imposes strategic challenges, particularly in the Indo-Pacific region, where concerns over supply chain resilience have intensified amid trade tensions and the US’s imposition of tariffs during an ongoing trade conflict. These geopolitical factors have intensified the urgency to innovate and transition towards lower-emission steel production methods.
India has emerged as a significant player within this shifting dynamic, boasting an unparalleled rate of growth in steel production. Yet, the country’s reliance on coal-heavy steelmaking technologies limits its capacity to compete sustainably with China. The transition to green steel requires overcoming hurdles, notably the high cost of green hydrogen (H2), which is considered a promising alternative to fossil fuels for steelmaking but requires scaling to become economically viable. The implementation of carbon pricing mechanisms is expected to drive up production costs for traditional “grey” steel, adding pressure for the industry to shift.
The Indo-Pacific region is witnessing an eastward shift in climate leadership, with nations such as India, Japan, and South Korea taking proactive steps toward decarbonisation despite fluctuating global political dynamics. These countries are engaging in plurilateral cooperation to reduce environmental impacts while building resilience in supply chains. South Korea, with industrial emissions significantly above the global average, has a key role to play alongside India and Japan.
Bilateral talks between India and Japan, held in July 2024, highlight a strategic commitment to accelerate sustainable steel production. Further, India is expected to finalise carbon trading agreements with Japan and Singapore by 2025, aiming to incentivise investments and enhance the competitiveness of green steel. Initiatives like the October 2024 event hosted by GR Japan brought together stakeholders from battery and green steel sectors to strengthen collaboration and technology transfer.
To support the scaling of green steel, domestic policies including subsidies are considered essential to meet rising demand. India faces challenges in the lack of advanced technology and insufficient research and development investment in green steel production. Enhanced cooperation with Japan offers opportunities to transfer expertise, equipment, and capital, bolstering Indo-Japanese trade relations and regional sustainability goals.
India’s domestic steel sector also faces external pressures, including record-high imports of finished steel from China, South Korea, and Japan between April 2024 and January 2025. Additionally, Vietnamese steel overcapacity threatens to flood the Indian market at lower prices. In response, there are calls to reconsider policies such as the existing 30% export duty on high-grade iron ore, which is unusual among major steel-producing countries and may hamper competitiveness.
Further cooperation is needed to facilitate the import and export of critical steel manufacturing materials. For example, a shipment of Japanese steel manufacturing equipment was delayed at an Indian port due to communication issues, underscoring the importance of digitising customs procedures to improve transparency and efficiency.
Looking ahead, establishing a working group composed of governmental and corporate stakeholders from the Indo-Pacific region could drive innovation and decarbonisation efforts. This body would promote joint ventures, public-private partnerships, and regulatory oversight to monitor sustainability progress, while encouraging corporate accountability.
The Tradelink Publications is reporting on these developments, highlighting the evolving landscape of steel manufacturing in the Indo-Pacific and the steps being taken to transition the industry towards greener technologies amidst geopolitical and economic challenges.
Source: Noah Wire Services
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