Understanding India’s steel industry: peculiarities, challenges, and decarbonization efforts

We’ve just wrapped up the latest edition of wire & Tube India, held alongside METEC India and India Essen Welding & Cutting.
On this occasion, a comprehensive analysis of the Indian steel industry was released, covering its current state and structure, as well as the government's planned steps to meet decarbonization targets.

Economic growth and the role of steel in India

Economic development is a key promise of the government under Narendra Modi, who aims to transform India into a developed nation by 2047. Central to this goal is the Indian steel industry, which plays a critical role as a growth driver. The challenge, however, is aligning this growth with reducing CO₂ emissions.

India’s economic growth outlook

India is not only the most populous country in the world but also one of the fastest-growing global economies. The OECD expects economic growth of 6.2% this year and 6.5% next year. A key growth driver is the steel industry, which contributes around two percent to the national GDP. The Indian steel industry has grown by an average of 7% per year since 2004 and, according to an official statement, will reach a steel production capacity of 179.5 million tonnes in the current financial year with a crude steel production of 144.3 million tonnes. Growth is largely driven by the demand for steel in infrastructure, housing construction, and the automotive industry.

The subcontinent is pursuing a clear growth strategy while still taking its climate targets into account. According to the Indian government, the country has already made considerable progress in expanding its renewable energy capacities. However, to meet ambitious climate targets such as the net-zero target for 2070, India must also decarbonize its industrial sector. The country's steel industry is responsible for 10–12% of India's total CO₂ emissions.

Dominant players and production stats in the Indian steel market

A few large steel companies such as Tata Steel, JSW Steel, Jindal Steel and Power (JSP), as well as state-owned companies like Steel Authority of India (SAIL), dominate the Indian steel market, supplemented by several smaller manufacturers. In the ranking of the world's largest steel-producing countries issued by the international steel organization worldsteel, India's crude steel production of 140.8 million tonnes in 2023 places it in second place after China (1,019 million tonnes), but well ahead of Japan (87 million tonnes), the United States (81.4 million tonnes), and Germany (35.4 million tonnes). However, the per capita consumption of steel in India was only 97.7 kg in 2024, compared to the global average per capita consumption of 221.8 kg in 2022. The national steel policy aims to increase per capita consumption to 160 kg by 2030.

The government plans to invest heavily in infrastructure. Steel is needed to build new houses, roads, and railway lines. The Indian government's ambitious goal of increasing steel production capacity to over 300 million tonnes by 2030, almost double the current level, highlights the crucial role the steel industry plays in the country's development. According to the Indian Ministry of Steel, domestic production is expected to exceed this target. Decarbonization of the sector is therefore imperative if India is to achieve its climate targets. As at other steel locations, the focus is on CO₂-intensive pig iron production.

Key steelmaking processes in India: methods and challenges

The very heterogeneous Indian steel industry essentially pursues three methods of iron production: in blast furnaces (BF) that use coke for the reduction and smelting of iron ore to liquid pig iron, as well as two processes for the production of solid, directly reduced iron (sponge iron or DRI). The first process uses shaft furnaces, which work with natural gas, syngas, or sometimes industrial waste gases, and the second works via rotary kilns, which use coal as a reducing agent for iron ore.

The pig iron produced is then converted into steel via three main processes. Molten blast furnace pig iron is turned into steel in a basic oxygen furnace (BOF), while DRI is smelted into steel in an electric arc furnace (EAF) or, more rarely, in an induction furnace (IF). Steel scrap is also converted into steel in electric arc or induction furnaces. The larger integrated steel plants (ISP) generally use the BF-BOF and DRI-EAF methods, while smaller plants use the coal-based DRI-IF method. The crude steel is then processed into flat or long products in rolling mills.

India is not only the second-largest producer of steel in the world but also built up the world's largest production capacity for sponge iron (direct reduced iron, DRI) of 55 million tonnes in 2023. India is one of the few countries in the world where coal-based DRI technology predominates, accounting for almost 20 percent of the country's total steel capacity. The importance of coal-based DRI in India is primarily due to the easy availability of a type of coal that is not very suitable for coke production, relatively low investment costs, especially with regard to the widespread DRI production with rotary kilns, and the limited access to natural gas, which is the preferred option for direct reduction in many industrialized countries.

As a result, according to the Indian Energy and Resources Institute (TERI), there are nearly 300 low-capacity (100 tonnes per day or less) coal-based direct reduction plants that use coal as their primary fuel and have low energy efficiency. Coal-based DRI production plays a key role in the Indian steel industry, as Deependra Kashiva, Managing Director of the Indian DRI association Sponge Iron Manufacturers Association (SIMA), emphasizes. According to the expert, domestic steel demand cannot be fully covered by the conventional blast furnace to basic oxygen furnace route (BF-BOF), as the investment costs are high and the availability of bituminous coal for this route is limited in India. "This is why the DRI industry has a crucial role to play when it comes to increasing India's future steel production to meet the growing demand", says Kashiva.

The structure of the steel sector in India differs considerably from that of other countries. Developed countries have a higher proportion of scrap in total steel production, the use of iron ore pellets is more widespread, the electricity grid is less carbon-intensive, and lower-carbon fuels such as natural gas are available at comparatively affordable prices. In contrast, the comparatively recent industrial development in India means that the availability of scrap metal is limited, and natural gas is very expensive. In addition, India has low-grade raw materials such as coal and iron ore, the use of which increases overall energy consumption and emissions. To summarise, a report by the Ministry of Steel concludes that the Indian steel industry will be forced to continue using coal-based blast furnaces and rotary kilns for steel production in the future due to a lack of affordable alternatives. Consequently, at 2.54 tonnes of CO₂ per tonne of crude steel (tCO₂/TCS), the carbon emission intensity of steel produced in India is significantly higher than the global average of 1.91 TCS.

India's steel decarbonization roadmap

In response to India's climate commitments and in an effort to create a globally competitive and sustainable steel industry, the Ministry of Steel has recently unveiled its decarbonization roadmap named "Greening the Steel Sector in India". The 14-point action plan set out in the roadmap includes various decarbonization measures. In addition to the development of a taxonomy for green steel, including certified monitoring to monitor emissions, the Indian government is also focusing on green priority markets, at least for public procurement. One declared aim is to focus on and optimize the entire value chain. From the procurement of raw materials to final processing, the goal is to reduce costs and increase efficiency.

One focus of the proposed decarbonization measures and India's industrial policy, in general, is carbon capture, including carbon capture and storage (CCS) and carbon capture and utilization (CCU). Renewable energies also play an important role in steel production, as does (green) hydrogen as a future technology with potential. Considering the process transition from coal-based DRI to gas-based DRI with natural gas as a bridge fuel for green hydrogen in the steel sector is also important. Specifically, this involves shifting DRI production from coal-based rotary kilns to gas-based shaft furnaces to enable a seamless transition to green hydrogen. In addition to natural gas, this also includes process conversion using other options such as industrial waste gases, synthesized gas and the injection of coal bed methane into blast furnaces, for example. Coal bed methane (CBM) is an unconventional form of natural gas that occurs in coal deposits or coal beds.

The iron and steel sector is primarily dependent on coal and coke to cover the demand for process heat and as a reducing agent in steel production. With a view to the country's decarbonization targets, the action plan also focuses on environmentally friendly and sustainable substitutes for coal and coke in steel production. Biochar, obtained from the biomass of regrowing plants, is considered a promising candidate for reducing emissions in steel production. However, its widespread introduction in the industry faces tough competition from traditional coal-based fuels, as the report points out.

How India’s steel giants are embracing green technologies

For a deeper look into India's steel sector and its decarbonization efforts, the full document details how major players like Tata Steel, JSW Steel, and SAIL are investing in carbon capture, green hydrogen, and renewable energy technologies. The analysis, written by Gerd Krause from Mediakonzept, Düsseldorf, also highlights the decarbonization strategies of JSP and Adani, who are focusing on carbon minimization and green steel technologies. Read more >>

In the Worldsteel 2023 ranking, four Indian companies are featured among the top 50 steel producers: Tata Steel Group (10th, 29.50 Mt), JSW Steel Limited (12th, 26.15 Mt), Steel Authority of India Ltd. (SAIL) (19th, 19.18 Mt), and Jindal Steel and Power Ltd. (JSPL) (47th, 7.90 Mt). The complete list of the 2023/2022 top steel-producing companies with a tonnage above 3 Mt is available at this link > 

In the picture above, Tata Steel Kalinganagar, the first Indian steel plant to be included in the World Economic Forum's Global Lighthouse Network for its Industry 4.0 technologies.