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India’s next phase of steel expansion would lock the country into more than US$1 trillion in coking coal imports, deepening India’s energy import dependence, foreign-exchange exposure, and vulnerability to carbon border measures in export markets. Our analysis finds that green steel, produced through hydrogen-based direct reduced iron with electric arc furnaces (H₂-DRI/EAF), can become cheaper than new blast-furnace steel by 2030. India’s low-cost clean power and competitive green hydrogen, give it a structural advantage that few other steel-producing nations can match.
In conventional blast-furnace steelmaking, coking coal serves as the principal reductant, converting iron ore into iron. India imports over 90% of its coking coal demand. Green steel replaces coking coal with green hydrogen, eliminating the most carbon-intensive stage of steelmaking and the associated import dependence.
The chart plots historical EU and global finished steel prices alongside cost projections for new blast-furnace and new green steel plants in India, both commissioned around 2030. Green steel costs fall over time as hydrogen costs decline and electricity contracts remain fixed in rupee terms. BF-BOF costs rise as imported coking-coal prices increase. After factoring in CBAM, the gap reaches nearly US$480/t by 2050.
Sources: European hot-rolled coil (HRC) ex-works price and World HRC free-on-board (FOB) price (historical): SteelBenchmarker. New BF-BOF and H₂-DRI/EAF projections (2030–2050): IECC (2026). Carbon Border Adjustment Mechanism (CBAM) penalty calculation assumes 2.2 tCO₂/t steel and EU Emission Trading Scheme (ETS) carbon price starting at ~US$85/tCO₂ in 2030 and growing at 2% p.a. (nominal), with the effective CBAM cost adjusted for the legislated free-allowance phase-out schedule (Regulation (EU) 2023/956: 48.5% in 2030, rising to 100% by 2034). Note: The BF-BOF + CBAM line is illustrative; actual exposure depends on verified emissions, prevailing EU ETS price, and CBAM crediting rules.
By 2030, green steel costs 5% more than new blast-furnace steel. Once coking-coal inflation and rupee depreciation are factored in, green steel is cheaper.
India plans approximately 180–195 MTPA of BF-BOF capacity by 2030–31. With coking-coal prices routinely above US$200/t and rising, this build-out locks in more than US$1 trillion in import costs over the life of these assets. Coking-coal price volatility flows directly through to domestic steel prices.
India’s low-cost clean power and competitive green hydrogen enable green steel production at approximately USD 562 per tonne in 2030, 5% above the unadjusted cost of new blast-furnace steel. Once exposure to coking coal price increases and rupee depreciation is incorporated, new blast-furnace steel rises to approximately USD 588 per tonne, making green steel roughly 4% cheaper.
The EU’s CBAM entered its definitive phase on 1 January 2026. The effective CBAM cost on Indian BF-BOF steel starts at approximately US$91/t in 2030, roughly 17% on top of its production cost, rising to over US$200/t from 2034. For a plant commissioned in 2030, this exposure applies across the asset’s entire operating life. As the EU ETS emissions cap approaches zero by 2039, Indian BF-BOF steel risks exclusion from the EU market entirely.
We estimate delivered green hydrogen in India at approximately US$3/kg by 2030. In Europe, comparable costs are two to three times higher. Hydrogen is the largest cost driver in green steel. India’s H₂-DRI-EAF production costs are among the lowest globally, comparable to China and Brazil and below Australia, Russia, and South Korea. With further declines in electrolyzer and renewable-energy costs, hydrogen reaches approximately US$2.50/kg by 2035, bringing green steel below US$500/t.
The taxonomy classifies steel with emissions below 2.2 tCO₂e per ton of finished steel as ‘green,’ across three tiers (3★ to 5★). Existing lower-emissions routes can meet this threshold through efficiency measures and renewable electricity procurement, without switching to green hydrogen. Near-zero steel, which international benchmarks place at roughly one-fifth of the taxonomy’s entry threshold, has no dedicated tier. Without one, procurement mandates can be met without creating any guaranteed demand for the first green hydrogen steel plants. We propose a Near-Zero Emissions Steel (NZ★) label at ≤0.40 tCO₂e per ton of crude steel.
Even as economics converge, three practical constraints delay investment decisions
Industry and lenders cite the absence of continuous 100% green hydrogen operation as a financing barrier. Our technical review finds that the binding constraints are economic and infrastructural, not process feasibility. Multiple projects globally have demonstrated hydrogen shares above 60% in shaft furnaces.
Industry cites that H₂-DRI performs best with high-grade pellets (~66–67% Fe), raising questions about India’s feedstock readiness.Our analysis shows that ore quality is a design and cost parameter, not an absolute barrier. Indian hematite and magnetite can be beneficiated to DR-grade using established techniques at costs competitive with imported pellets.
India’s green steel taxonomy does not yet distinguish near-zero steel from conventionally improved steel (see Key Finding 5). And no public procurement mandate or pooled offtake mechanism exists to convert the taxonomy into guaranteed demand. Without both a verifiable near-zero definition and committed offtake behind it, early H₂-DRI projects struggle to secure financing.
Three demand signals and targeted policy levers can give near-zero steel a clear, verifiable definition, create bankable early demand, and reduce early-project risk.
Immediate decisions that shape the 2030s build-out
Announce the phased NZ★-qualified procurement mandate (effective FY 2031–32). Authorize Solar Energy Corporation of India (SECI) or designated aggregator to design pooled offtake auctions with payment/performance security.
SECI-style pooled offtake auctions and contracting.
Procurement mandate takes effect. Deliveries begin. Mandate share reviewed every two years, conditional on verified supply build-out and MRV readiness.