Steel Capacity Expansion May Deepen Met Coal Import Dependence: IEEFA

(MENAFN- KNN India) New Delhi, Feb 21 (KNN) India's plan to scale up crude steel capacity to 300 million tonnes per annum (mtpa) by 2030 could heighten its dependence on imported metallurgical (met) coal, with about 90 percent of current requirements met through overseas supplies, according to a recent report by the Institute for Energy Economics and Financial Analysis (IEEFA).

Despite efforts to raise domestic coal output, much of the new steel capacity is being developed through the coal-intensive blast furnace route. IEEFA said 182 mtpa of upcoming BF capacity could require an additional 140 mtpa of metallurgical coal, increasing India's exposure to global price swings and supply risks.

India's Mission Coking Coal aims to raise domestic metallurgical coal output to 140 mt by 2030 from 66 mt in 2025. However, S&P Global projects that the deficit may continue as steel capacity grows, indicating imports will remain necessary. This has bolstered the push for alternative steelmaking routes with lower coal dependence.

Green Hydrogen Emerges as Strategic Option
An alternative is the direct reduced iron–electric arc furnace (DRI–EAF) route, which cuts metallurgical coal use by relying on natural gas or green hydrogen. While gas-based DRI still depends on imports, green hydrogen from domestic renewables offers a more sustainable option.

Ernst & Young projects India's green steel demand at 4.49 mt by 2030, with steelmaking potentially requiring about 5 mt of hydrogen annually.

Policy Support and Cost Trends
Bain & Company estimates that mandating 10-15 percent green steel in public procurement could create 0.4-0.6 mt of hydrogen demand by 2030, spurring private investment. Although green hydrogen currently costs USD 4-12 per kg versus USD 1-2 for grey hydrogen, BloombergNEF says India could achieve cost parity in the 2030s.

JSW Energy has commissioned a 3,800 tpa green hydrogen plant supplying JSW Steel's Vijayanagar facility under a seven-year SIGHT-backed offtake pact. A June 2025 IOCL tender also discovered prices at Rs 397 per kg (USD 4.67), underscoring India's potential to become a low-cost producer by 2030.

Export Ambitions Face Structural Challenges
India aims to secure 10 percent of global green hydrogen exports, but shipments require conversion to ammonia, specialised transport and reconversion, raising costs.

IEEFA has warned that varying global standards could further limit export prospects. Reflecting these headwinds, SECI cancelled its mid-2025 tender for two 100,000 mtpa hydrogen hubs amid weak demand and policy uncertainty, signalling a shift towards strengthening domestic demand.

Domestic Demand Key to Energy Security
Government estimates indicate India may produce about 3 mtpa of green hydrogen by 2030, below the earlier 5 mtpa target, making the domestic steel sector a key scalable use case to bolster energy security.

India–Sweden pilot projects are testing hydrogen in steel and cement, tailored to Indian ores and smaller producers. TERI research also suggests hydrogen use in rotary kilns can lower costs, align with renewable energy variability and suit coal-dependent steel MSMEs.

Policy Pathways for Transition
IEEFA and industry experts have called for targeted policies to speed up green hydrogen use in steel, including green procurement mandates, hydrogen purchase obligations, dedicated hydrogen-steel clusters and concessional finance to support early projects.

As India expands steel capacity while pursuing energy security, green hydrogen could cut import reliance and strengthen its position in low-carbon steel production.

(KNN Bureau)

MENAFN21022026000155011030ID1110770731