India could be approaching a turning point in steelmaking economics. Green hydrogen-based steel may become cheaper than production from newly commissioned blast furnace plants by 2030, potentially altering the economics of the country’s planned capacity expansion. The India Energy and Climate Center (IECC) estimates a cost advantage of around USD 90 per tonne, based on a hydrogen price of USD 3 per kg and a comparison of new plants commissioned in 2030.
The projection comes against the backdrop of India’s target to raise crude steelmaking capacity to 604 million tonnes by 2047 under the draft National Steel Policy Vision 2047.
The policy envisages crude steel production of 531 MT and finished steel consumption of 505 MT by 2047, alongside a reduction in average emissions intensity from 2.54 tonnes of carbon dioxide per tonne of crude steel to 1.54 tonnes. However, the proposed expansion also raises questions about raw material security, particularly India’s dependence on imported coking coal.
Coking Coal Dependence Raises Cost Risks
Neelima Jain, Director, Industrial Trade Policy at IECC, said the projected expansion in blast furnace-based production could increase India’s coking coal requirements more than threefold over the next two decades. The draft policy projects coking coal demand at 236 MT by 2047, against approximately 72 MT in 2025-26.
India currently imports around 90 per cent of its coking coal requirements, exposing domestic steelmakers to international commodity prices and currency fluctuations. At the benchmark price of around USD 236 per tonne cited in IECC’s analysis, the import bill could reach USD 50 billion under the projected expansion scenario.
“First, we import 90 per cent of our requirements today, and it’s priced in dollars, which also means that all the sectors, including steel, are exposed to the volatility of import prices. If India were to build that 2047 BF-BOF capacity, the import bill at today’s benchmark price, which is about USD 236 per tonne, would go up to USD 50 billion,” said IECC’s Director, Industrial Trade Policy, Neelima Jain.
The exposure to international prices also creates considerable cost uncertainty. Every USD 10 movement in coking coal prices adds around USD 2 billion to the projected import bill, according to Jain. She also questioned the timing of the transition outlined in the draft steel policy, which places greater emphasis on green hydrogen-based steelmaking from 2035.
“”By 2035, India’s import bill will already be USD 27 billion. By then, we would have already built half of the 2047 capacity. So the question for the industry today is not the plans of 2040. It’s really these steel plants that are being planned now,” said Jain.
Green Steel Economics
IECC’s assessment compares new steel plants commissioned in 2030 under different fuel and technology assumptions. The analysis assumes a hydrogen price of USD 3 per kg and factors in slower increases in international coal prices and a lower rate of rupee depreciation than historical trends.
Under these assumptions, green hydrogen-based steel becomes cheaper than new blast furnace-based production in the first year of operation. The analysis estimates a cost advantage of around USD 90 per tonne of steel.
Jain said India’s renewable energy prices and emerging long-term hydrogen supply contracts could support the transition. She cited a 25-year hydrogen supply contract at Rs 279 per kg, with operations expected to begin in 2028, as an example of the pricing arrangements that could provide long-term visibility to industrial consumers.
She argued that the domestic hydrogen price benchmark, combined with renewable electricity procurement, could improve the economics of green steel production. However, she identified the absence of assured buyers as a key commercial constraint for new projects. “Our analysis says the economics are there, but finally we need a buyer who can sign before the plant is built,” said Jain.
Jindal’s Transition Strategy
While the cost comparison points to a potential shift in the economics of new steel capacity, existing industrial infrastructure presents a separate challenge. Steelmakers are exploring intermediate pathways to reduce emissions without waiting for the complete replacement of conventional production systems.
Naveen Ahlawat, President and Head of Sustainability and Decarbonisation at Jindal Steel, said the company operates a coal-gasification-based direct reduced iron (DRI) plant at Angul, Odisha. The facility uses domestically sourced coal to produce syngas for iron production. Ahlawat said the company’s strategy involves increasing hydrogen use in the existing production process before moving towards its longer-term green steel objective.
“India imports close to 85 per cent of coking coal, and the forex against sourcing of this coking coal is USD 55 billion per annum. When we started this work, the idea was exactly to use indigenous coal, gasify it, make clean coal syngas and then make a DRI,” said Ahlawat.
The company’s existing syngas contains around 55 per cent hydrogen, and its objective is to increase the hydrogen content to 80 per cent. Ahlawat said the company has already conducted a pilot by introducing two tonnes of hydrogen into the syngas and feeding the blend into the DRI furnace.
“The initial results are very encouraging. Now we want to scale it to 30 MW and inject close to 5 per cent of hydrogen. That is how we want to reduce our carbon intensity,” he added. Ahlawat further mentioned that increasing hydrogen blending to 30 per cent could reduce carbon intensity by around 35-40 per cent. When combined with renewable electricity, the transition could bring emissions down to approximately 1.5 tonnes of carbon dioxide per tonne of crude steel.
For a 2 million tonne DRI-based steel plant, a 30 per cent hydrogen addition would require around 250 MW of electrolyser capacity, he said. Jindal Steel is also pursuing renewable energy capacity to support the transition. Ahlawat said the company is commissioning a 1.5 GW solar park in Bikaner, Rajasthan, with another 1.5 GW planned.
Renewable Power Constraint
Despite the improving economics of renewable electricity, the availability of reliable round-the-clock power remains a significant challenge for green steel production. Abhijit Basu, CEO and Founder of SmartEx, said renewable electricity supply at the required scale and frequency remains a key constraint for hydrogen-based steelmaking. He also highlighted the additional energy requirements associated with introducing hydrogen into DRI furnaces.
“First is in the domain of renewable energy. If you really want to do green steel, you have to have renewable energy transmitted at a large scale, 24 by 7, which I see as a big challenge,” said SmartEx CEO and Founder Abhijit Basu. He explained that hydrogen’s endothermic properties create additional heating requirements inside the furnace, which increase the electricity consumption of the production process.
“Hydrogen is an endothermic gas. What that means is that the moment you induce hydrogen, the furnace is going to cool down. So to keep the temperature going, you have to heat the hydrogen,” said Basu. He cautioned against evaluating green steel economics only through renewable energy tariffs. The industry requires continuous electricity supply, which could create additional pressure on grid infrastructure and procurement arrangements.
He said the renewable power requirement for a large DRI facility would need to remain available throughout the year, making round-the-clock supply a critical consideration for investment decisions. India’s proposed 604 MT crude steel capacity target therefore presents two interconnected challenges: securing the raw materials required for conventional steelmaking and developing the energy infrastructure needed for lower-carbon production.
