Green steel demand to reach 4.49 MT by 2030: EY-Parthenon report

From a negligible level at present, the demand for green steel in the country is expected to reach 4.49 MT by 2030, driven by sectors like construction, infrastructure and automobiles, Ernst & Young (EY)-Parthenon said in a report.

Five years from now, 2030 is seen as an important year for Indian steel as the government aims to achieve ambitious target of 300 million tonnes (MnT) annual steel making capacity under its National Steel Policy 2017.

Although demand for green steel in India is currently negligible, it is expected to rise significantly over the coming decades, said the report titled 'Unlocking Green Steel Demand: An assessment of India's automotive, infrastructure and construction sectors.'  Steel produced through low carbon emitting process is referred as green steel.

The report has been prepared in collaboration with WWF-India & CII-Green Business Centre (GBC).

"By FY 2029-30, the demand for green steel is projected to reach 4.49 MT, driven primarily by the construction sector at 2.52 MT, followed by infrastructure at 1.5 MT, and automobiles at 0.48 MT," the Ernst & Young (EY)-Parthenon report said.

This early uptick will be fuelled by growing urbanisation and a shift towards sustainable building practices, it said. 

The demand is set to reach 24.89 MT by FY35, and is expected to more than double to 73.44 MT by FY40, largely due to the green transition in infrastructure and automotive manufacturing.

By FY50, green steel demand is projected to peak at 179.17 MT, with construction accounting for more than half, and infrastructure and automobiles continuing to contribute significantly.

Meeting this demand will require widespread adoption of green hydrogen-based DRI (directly reduced iron) technology, along with sustainable production methods such as electric arc furnaces and molten oxide electrolysis.

The transition towards green steel is driven by a notable price premium due to its higher production costs and the impact of carbon pricing on traditional fossil-based steelmaking.

Currently, the premium on green steel produced through H22 DRI (hydrogen-based Direct Reduced Iron) technology stands at $210 per tonne, translating to a 3.7 per cent increase in construction project costs, 5.2 per cent in infrastructure projects, and 4.1 per cent in automotive manufacturing.

However, as green hydrogen costs decline and technology scales up, the premium is projected to drop significantly.

By 2030, the green steel premium will fall to USD 7 per tonne, reducing cost impacts across sectors to below 1 per cent by 2035-2040. In contrast, the continued use of carbon-intensive BF-BOF steel will lead to rising costs due to escalating carbon taxes, the report said.