By Kunal Bose
China, no doubt, is having success in restraining production and capacity management, an important aspect of which is to progressively increase the share of electric arc furnaces (EAF) in the country’s steel production. The rapid promotion of EAF based steel production will help the country in reducing its unacceptably large share of over 60% of the global steel industry’s greenhouse gas emissions. Since in the process of making 1 tonne of finished steel, the carbon emission in China at 2.33 tonnes is considerably higher than the global average of 1.92 tonnes and the country has the target to become carbon neutral by 2060, it has to along with rapidly building EAF capacity, the mills armed with BF-BOF will have to be comprehensively modernised.
In spite of its leadership of the world steel industry, China does not have much to show when it comes to making the metal using EAFs. In fact, in this segment, the Chinese capacity of about 15% of the industry capacity trails the world average of 31%. Then, the EAF share in Chinese steel production is approximately 10% compared with the world average of 29%. (Presently, the Chinese EAF capacity is approximately 150m tonnes. New capacity being created is 48m tonnes. At the same time, 28m tonne unviable capacity has been identified for closing down.)
The principal reasons why China has continued to trail EAF capacity and production targets are: (1) Slow pace of capacity building and existence of inefficient EAF capacity of over 20m tonnes. (The positive here, however, is Beijing is not sanctioning any new coal-based steel projects.) (2) Combination of high electricity prices and lower production efficiency compared with the BF-BOF route. (3) Shortages in supply of scrap and then just about 30-35% of that is available to EAFs. A good portion of the scrap availability goes to BF-BOF mills. Year after year, China is not able to achieve the scrap procurement target leading the authorities to offer incentives consumers when they buy new cars and household appliances as replacement of the old ones. If China is to make EAFs play a significant role in decarbonisation of the steel industry, then it will have to go about the job of domestic procurement of scrap from all sources in a scientific environment friendly way and at the same time promote scrap imports but with quality checks.
Unlike in China, steel capacity in India is more evenly distributed. Giving the breakup of capacity among three segments, Poundrik says while BF-BOF has 88.5m tonnes, induction arc furnace (IAF) 74m tonnes and EAF 43m tonnes. Going forward when a government policy has given Indian steel industry a capacity target of 300m tonnes by 2030-31, capacity distribution should be in the order of BF-BOF 60% to 65% and EAF and IAF 35% to 40%. While push is given to government and private agencies to step up procurement of quality ferrous scrap from local sources, including shipbreaking yards, India has for a long time remained the world’s largest producer of direct-reduced iron (DRI). The other feedstocks for EAF and IAF are hot briquetted iron (HBI) and pig iron. Steel production through EAF and IF using scrap cuts carbon emissions by 1.5 metric tons per tonne of scrap employed and energy consumption by 75% compared to BF-BOF production route.(IPA Service)
Among India’s large steel groups producing steel through BF-BOF, Tata Steel is the first off the blocks to be in the steel recycling business and also in the way of building its maiden 0.75m tonne plant at Ludhiana in Punjab. The company CEO and MD TV Narendran will use every forum to promote cyclicality in the steel industry. (Tata Steel’s commitment to promote low emission production extends to its foreign shores operations. For example in the UK, it is building a 3.2m tonne EAF-based steel making facility where once stood a BF-BOF complex. In the Netherlands too, it is seeking ‘tailormade funding and policy support’ to build a DRI-EAF based complex. In Thailand, the company’s entire steel production is EAF based.)
As EAFs will promote recycling, reduce logistical cost, cut carbon emissions, it will help in meeting regional demand in India quickly. In pursuit of its goal to become a net zero emissions group by 2045, Tata Steel will also have EAF units in the west and south of the country. But EAF project location decision will be based on availability of scrap in the area. The reason why Tata Steel or for that matter other major groups such as JSW Steel, the majority government owned SAIL to JSPL have so far confined themselves to using BF-BOF route for making steel is the plentiful local availability of iron ore. But for metallurgical coal, the Indian industry is largely dependent on imports since the limited fuel available locally has very high ash content.
Moreover, as a report by E&Y Parthenon says, India currently meets around 90% of its coking coal demand through imports. But expanded domestic beneficiation, enhanced washed coal capacity output of 15 MT, and new supply corridors are aimed at reducing import dependency to under 80% by 2030. The government has launched ‘Mission Coking Coal’ to raise domestic production from 66.8m tonnes of raw coal in 2024 to 140m tonnes 2030.Then again despite holding large reserves of iron ore, the supply of high-quality ore from local mines is increasingly falling short of BF-BOF requirements. No wonder, the BF-BOF mills in western and southern India are importing high grades of iron ore mostly from Australia and Brazil. Yet another reason why India should place greater reliance on making scrap-based steelmaking.
In the meantime, there is confidence both in industry and government circles that the 300m tonne target set for 2030 will be exceeded by some good margin. Giving an idea of how capacity creating is gathering pace in India, Poundrik said: “In the last five years, we have added more than 50m tonne capacity. But the country is currently adding annually roughly 20m tonne capacity… In the next 10 years, we will add at least another 200m tonne capacity. The investment in the steel sector during that period will be $200bn on the basis of a billion dollar for one tonne capacity.”
Then, among the members of Association of Southeast Asian Nations (ASEAN), Vietnam stands out for rapid steel demand rise and capacity creation. The Vietnamese steel demand is projected to rise from 25m tonnes in 2025 to over 32m tonnes by 2030. Last year, the country raised steel production by 12% year-on-year to a five year high of 24.7m tonnes. Vietnamese steel demand growth is fuelled by infrastructure development and construction. While the industry is now focussing on building facilities for high-value steel products, it is facing growing challenges from imports. VinMetal, part of Vingroup, which is to build a 5m tonne mill in the first phase to make EV automotive steel and rails shows where the Vietnamese steel industry is heading.
According to WorldSteel, steel will continue to meet with rising demand in the Middle East and Saudi, exactly for the reasons obtaining in India and Vietnam and till some years earlier in China. Riyadh is implementing the Saudi Vision 2030 to reduce its dependence on crude oil, whose prices keep on fluctuating by building other robust areas of economic activities, including infrastructure building and construction. All these will need growing volumes of steel. The reconstruction of damaged military bases, seawater filtration plants and pipelines and infrastructure and buildings that will follow the end of war involving the US and Israel on the one hand and Iran on the other will require huge quantities of steel and other metals. Similarly, significant steel demand will be generated as the arms manufacturers in the US, Israel and Iran get engaged in replenishing the destroyed fighter aircraft, thousands of drones and arms and ammunitions.
In his paranoiac obsession to give protection to the US steel industry, President Trump raised the import tariff on the ferrous metal along with aluminium in mid-2025 to an extent that European steel exports to the US collapsed by as much as 30% in the first half of last year. Since the tariff extended to products with a high steel content, in particular machinery and equipment, European manufacturing industry exports.US consumers too suffered a major hit because of price rises. Reacting to the fallout of irrational US tariffs and also the beating the European manufacturing industry is taking from indirect steel imports, particularly from China, European Steel Association (EUROFER) director general Axel Eggert said: “The risk of deindustrialisation in Europe has never been more evident than today. The latest news coming from Germany and eastern and central Europe are only the tip of the iceberg we have been warning about since a decade, and which is now impacting not only steel, but also key value chains such as automotive and wind. The situation is explosive.”
Worldsteel says, steel imports into the EU as part of finished products were up from 96m tonnes in 2014 to 121m tonnes in 2024. At the same time, exports of Chinese steel embedded in manufactured goods reached approximately 143m tonnes in 2025, a 7% to 8% growth over the previous year. Growth in such Chinese exports in the current year will moderate to 4% to 5% to about 150m tonnes. Eggert says: “The key requirements for the EU steel industry to remain in Europe are, firstly, immediate and comprehensive trade action stopping unfair trade practices and global overcapacity being offloaded onto, and destroying the EU steel market.” Then the region needs a waterproof Carbon Border Adjustment Mechanism (CBAM) to prevent steel imports from countries that are found to be circumventing climate protection by owning a few clean mills for exports while “selling dirty steel in the domestic and non-EU markets.”
President Trump might have shocked the rest of the world by his tariff action, but he has started achieving the goal of reviving the US steel industry, which was unable to withstand competition from Asian producers in particular. Steel production in the country in 2025 rose by 3.1% to 82m tonnes, the improvement happening following tariff hike. In the process, the US became the world’s third largest producer for the first time in over two decades. More importantly, the US steel imports fell last year by 12.6% to 25.24m tonnes, with finished steel imports down 17.1% to 18.66m tonnes. Yet another positive fallout out of the stiff import tariffis the improvement in US steel capacity utilisation, which is currently around 76% to 78%.
All the protective steps that the new Administration has taken so far has also resulted in improvement of price competitiveness of US steel. Seeing the prospect of general demand improvement and imports’ share in that falling, the US steel industry is attracting fresh investment from local and foreign companies. The most significant capacity expansion will be heralded by the US Steel and Nippon Steel joint venture. The JV’s $14bn investment will result in doubling steelmaking capacity over five years. Investment will be mainly directed at building EAFs, a new DRI plant and a new electrical steel facility in Alabama. ArcelorMittal has decided to build a new non-grain-oriented electrical steel (NOES) facility in Calvert, Alabama. The unit is designed to annually produce 150,000 tonnes. (IPA Service)
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