For the first time, India has surpassed China as the leading developer of coal-based steel capacity, as reported by Global Energy Monitor (GEM). This comes at a critical time when the steel industry needs to decarbonize to meet the goals set by the Paris climate agreement. Despite the need for cleaner production methods, the report reveals that steelmakers increased the construction of polluting coal-based plants by 8% last year. The capacity for coal-based steelmaking using the 'blast furnace' production method grew to 380 million tonnes per annum (mtpa) in 2022, up from 350 mtpa in 2021.

The majority of the coal-based capacity under development is concentrated in Asia (99%), with India and China accounting for 79% of those developments (40% and 39% respectively). This makes Asia the primary battleground for coal-based steel production, posing significant challenges to carbon neutrality commitments.

Despite the growing shift towards cleaner production methods, the steel industry still faces a risk of stranded assets, estimated at $554 billion, due to countries increasing coal-based capacity while also aiming for carbon neutrality. The transition away from coal-based steelmaking is progressing slowly, and there is a need for steel producers and consumers to accelerate their decarbonization plans. Developers investing in coal-based capacity now could face substantial write-downs in the future.

According to the International Energy Agency (IEA) scenario for achieving net-zero emissions by 2050, the share of 'electric arc furnace' capacity should reach 53% by that year. This would require retiring or cancelling 347 million tonnes of coal-based capacity and adding 610 million tonnes of electric arc furnace capacity to the current fleet.

The GEM report coincides with the recent launch of a global watchdog called SteelWatch, which focuses on monitoring carbon emissions from steelmakers. The director of SteelWatch, Caroline Ashley, emphasized the importance of shifting investment decisions rapidly across Asia to avoid climate calamity. The global market is already shifting towards new technologies, green steel demand, and carbon prices, giving Asian producers a choice between investing in more decades of coal or embracing the future of the steel sector.