India unveils classification criteria for green steel

India has released guidelines to classify "green steel" with carbon dioxide emissions of less than 2.2 mt of carbon dioxide equivalent (CO2e) per ton of finished steel (tfs), the steel ministry said Dec. 12.

"The greenness of the steel shall be expressed as a percentage, based on how much the steel plant's emission intensity is lower compared to the 2.2 mtCO2e/tfs threshold," the ministry said.

"Globally, there is no commonly accepted definition of green steel," it said, as the ministry unveiled its "Taxonomy of Green Steel."

Under the taxonomy, green steel with emissions of less than 1.6 mtCO2e/tfs will be defined as five-star green-rated steel.

Green steel with emissions of 1.6-2.0 mtCO2e/tfs will be rated as four stars, while steel with emissions of 2.0-2.2 mtCO2e/tfs will be rated as three stars.

A major Indian steel mill source said, "Depending on the scrap usage in the blast furnace-basic oxygen furnace route, the total carbon emission can vary between 2.2 mt and 2.7 mt [for per mt of steel produced, accounting for scopes 1, 2 and 3]."

"I don't believe domestic mills will shift toward the green steel target anytime soon, as it would result in increased expenditure on their part. The cost viability simply doesn't support such a move," a Mumbai-based trader said.

"Steel with emission intensity higher than 2.2 mtCO2e/tfs shall not be eligible for (a) green rating," the ministry said. "The threshold limit for defining the star rating of green steel shall be reviewed every three years."

The National Institute of Secondary Steel Technology (NISST) will be the main body "for measurement, reporting and verification (MRV) as well as for issuing the greenness certificates and star ratings for the steel," the ministry said.

The certificate will be issued annually on an Indian financial year basis, which typically runs from April to March.

"In case the steel plants opt for MRV more frequently, then the certificate may be issued more than once in a year as per the requirement," the ministry said.

Market participants said that while green steel is a commendable initiative, they doubt Indian producers are prepared for this transition, as the profit margins for these producers are already quite narrow.

The classification of green steel supports India's goal to decarbonize its domestic steel industry by 2070.

Major steelmakers seen benefitting from green steel

"India is a growing economy, and the government should currently prioritize policies that bolster the demand in the market. Our production levels are not substantial, nor are our prices competitive in international markets. Green steel is likely to come at a premium," a second Mumbai-based trader said.

Nevertheless, Indian steelmakers are adopting various methods to produce eco-friendly steel, such as Jindal Steel's DRI (direct reduced iron) approach, fueled by green hydrogen. Also, Steel Authority of India Ltd. (SAIL) and JSW Group have teamed up with foreign steelmakers and raw material companies to decarbonize their steelmaking processes.

An India-based trader viewed the local big steelmakers as directly benefitting from the green steel development, saying, "The induction furnaces that are powered by coal-generated electricity will be impacted negatively by the green steel definition. While the local big steelmakers can potentially get more policy support by meeting green steel standards, they can take this as an advantage to compete with imports."

Over 2023-24, induction furnaces accounted for about 35% of overall crude steel production of 144.3 million mt, data from the ministry showed, while blast furnaces accounted for 43% and electric arc furnaces took up the remaining 22%.

Platts, part of S&P Global Commodity Insights, assessed Northwest European hot-rolled coil carbon-accounted at Eur615/mt ($644) ex-works Ruhr on Dec. 12, up Eur2.5/mt day on day. On Dec. 11, the weekly Rebar CASP (Carbon-Accounted Steel Premium) was assessed at Eur50/mt ex-works Northwest Europe, and the weekly Medium Sections CASP was at Eur50/mt Dom Prod Dlvd Europe, both unchanged from Dec. 4.