Steel Industry Still Betting Big on Coal Despite Climate Targets: Report

The global iron and steel industry is facing a coal lock-in crisis that threatens international net-zero targets. According to the ‘Pedal to the Metal 2026’ report by Global Energy Monitor (GEM), the industry is struggling to pivot away from traditional, high-emission production methods.

Currently, the sector is responsible for 11% of global CO2 emissions, according to the report. And more emissions are projected to come with 319 million tonnes per annum (mtpa) of blast furnace (BF) capacity under development globally. If all planned projects proceed, the world will see a net gain of 178 mtpa in blast furnace capacity, directly contradicting the urgent need to phase out coal-based ironmaking.

While Electric Arc Furnace (EAF) technology now accounts for 34% of global operating capacity, these gains are overshadowed. 

The report also highlighted a hidden threat to decarbonisation through blast furnace relining. Approximately 80 mtpa of existing capacity is scheduled for relining, a process that extends the life of coal-reliant assets for decades, further delaying the transition to green steel.

Decarbonisation epicenter

The future of the steel industry’s climate impact will largely be decided in Asia, where the majority of new capacity is being built. The report found that India has emerged as the world's primary driver of steel development, accounting for 42% of all capacity currently in the pipeline. 

India is developing over 60% of all upcoming coal-based Blast Furnace-Basic Oxygen Furnace (BF-BOF) capacity globally, and about 93% of India's developing ironmaking capacity relies on coal-based technology. 

But there is a silver lining, which can be turned into an opportunity with the right policies. Less than 8% of this new capacity has actually broken ground, meaning immediate policy interventions could still redirect India toward lower-emission pathways.

Parallely, the world's largest steel producer, China, operates a steel capacity of 1,073 mtpa, 83% of which is coal-based, found the report. While 39% of China's new developments utilise EAF technology, its existing fleet is so vast that the overall shift remains gradual. China remains the second-largest developer of new blast furnaces after India.

“The outlook remains bleak for steel’s transition away from fossil fuels. The ball is in India and China’s court, as the two countries plan 86% of new coal-based capacity. Pivoting to lower-emissions technologies and using existing EAF capacity more effectively are two immediate steps the countries can take to have a profound effect on the direction of the steel industry,” said Astrid Grigsby-Schulte, Project Manager of the Global Iron and Steel Tracker at GEM.  

The primary alternative to coal is Direct Reduced Iron (DRI) using green hydrogen. While global DRI capacity could grow by 141% if all developments proceed, 98% of current DRI production is still fossil-based. Green hydrogen currently acts as a primary reductant for only 2% of the operating DRI fleet., found the report. Bridging this gap will require massive investments in renewable energy and hydrogen infrastructure to ensure that the next generation of steel is truly green.