How the demand for green steel in India is shaping future trends

Green steel is no longer optional—it is the key to decarbonizing India’s fastest-growing industrial sector.

In brief

• India’s steel industry is at a pivotal moment, balancing rapid growth with sustainability goals.
• Steel consumption is projected to nearly triple by 2050, making green steel demand a strategic priority.
• Green steel demand in India is gaining momentum, driven by sectoral decarbonization needs, advancing technologies, and supportive policy mechanisms.
• Embracing green steel aligns with India’s climate goals and positions the country to become a global leader in sustainable industrial development.

The steel sector is a cornerstone of the Indian steel market, contributing significantly to infrastructure and industry while also being a major source of greenhouse gas emissions. Currently, it accounts for approximately 8% of India's total carbon emissions, underscoring the urgent need for decarbonization in the steel industry as the country pursues its climate goals. With India's steel consumption standing at 136 million metric tons (MMT), projected to increase to 220 MMT by FY30 and further to 390 MMT by FY50, the growing demand is driven by key sectors—automotive, construction, and infrastructure—which together account for over 70% of consumption.

Although the demand for green steel in India's automotive sector is currently negligible, it is expected to rise significantly over the coming decades. The green steel assessment is based on steel emission intensity of less than 0.5 tons CO2 per ton of crude steel. By FY30, demand is projected to reach 4.49 million tons, driven primarily by the construction sector at 2.52 million tons, followed by infrastructure at 1.5 million tons, and automobiles at 0.48 million tons. This early uptick will be fueled by growing urbanization and a shift towards eco-friendly steel and sustainable building practices. By FY35, demand is set to reach 24.89 million tons and will more than double again to 73.44 million tons by FY40, largely due to the green transition in infrastructure and automotive manufacturing. By FY50, the demand for green steel is projected to peak at 179.17 million tons, with construction accounting for more than half.

The transition towards low-carbon steel is driven by a notable price premium due to its higher production costs and the impact of carbon pricing on traditional fossil-based steelmaking. Currently, the premium on carbon-neutral steel produced through hydrogen-based Direct Reduced Iron (H₂ DRI) technology stands at US$210 per ton. However, as green hydrogen costs decline and technology scales up, the premium is projected to drop significantly. 

The future demand for green steel in India is projected to increase exponentially over the next few decades, driven by ambitious net-zero targets of end-use sector companies, especially regarding Scope 3 emissions. Public procurement also plays a crucial role in driving demand for green steel by setting sustainability benchmarks in government projects. The government plans to roll out policies around public procurement, facilitating the adoption of green steel as a staple in construction and infrastructure projects. These policy implications for green steel demand in India will be vital in shaping the future of sustainable infrastructure.

Despite the optimistic projections, challenges in meeting the demand for green steel in India remain. The Indian steel industry should adopt sustainable manufacturing practices and innovative technologies to bridge the anticipated supply-demand gap. The adoption of green hydrogen-based DRI technology, along with sustainable production methods such as electric arc furnaces and molten oxide electrolysis, will be essential.

The transition towards green steel is not merely a response to external pressures; it presents a significant opportunity for India to lead in sustainable development. As global investors and trade associates become increasingly sensitive to the carbon footprint of industrial goods, integrating low-carbon steel production pathways into India's steel growth narrative will not only enhance international competitiveness but also alignment with India’s climate commitments.

The role of green steel in sustainable development in India is closely tied to the nation's broader aspirations of self-reliance, sustainability, and global leadership.

This expansion is expected to be propelled by the construction sector, which will benefit from an increasing urbanization rate and a higher steel intensity in construction practices. This will significantly impact the demand for green materials and the impact of green steel on the Indian construction industry.

As India faces the challenges and opportunities associated with rising steel demand and the global shift towards sustainability, developing a robust policy framework is essential. By adopting strategic regulatory measures, fostering innovation, and aligning with international standards, India can enhance its competitive position in the global steel market while contributing to a sustainable future. 

The transition to green steel is not merely a technological ambition; it is rapidly becoming a market necessity. With the construction, infrastructure, and automotive sectors driving demand, innovative green hydrogen-based DRI steelmaking and alternative green steel applications are poised to transform the industry. As India navigates the path towards decarbonization, the trends in green steel demand across Indian sectors will play a pivotal role in shaping a sustainable and resilient steel industry, allowing India to remain a key player in the global market while meeting its climate goals.