A buyer’s guide to sustainable steel in India

India’s steel industry is growing at an unprecedented pace. According to the National Infrastructure Pipeline, India will need millions of tonnes of steel over the next five years. Initiatives like Make in India and the production-linked incentive (PLI) schemes are further boosting domestic manufacturing. These programmes aim to increase steel usage in automotive, machinery, and industrial goods production.

For buyers, this growth presents a challenge. Low-cost steel is tempting, but it often hides environmental and health costs. Sustainable steel procurement ensures that buyers not only get reliable materials but also protect themselves from regulatory, social, and market risks.

Why choose sustainable steel?

Buying sustainable steel is important because it helps businesses reduce long-term risks and stay ready for future rules. It also supports cleaner production and improves the quality and reliability of materials used in projects. Choosing sustainable options protects communities, strengthens supply chains, and builds trust with customers and investors.

Why it matters:

• Better compliance with upcoming environmental standards.
• Lower risk of delays, shutdowns, or penalties.
• Improved material quality and performance in the long run.
• Cleaner air and fewer health impacts for nearby communities.
• Stronger brand reputation and greater confidence from clients.

The drivers of steel demand in India

Steel demand in India is influenced by government policy, industrial growth, and urbanisation trends. Understanding these factors is crucial for buyers and producers aiming to make cost-effective and sustainable procurement choices.

Infrastructure expansion

Large infrastructure projects, including expressways, freight corridors, and airports, consume massive quantities of structural steel. While cost-effective coal-based steel meets immediate budget requirements, it also contributes significantly to environmental degradation.

Urban development and housing

Urbanisation and affordable housing schemes drive demand for reinforced steel and standardised components. However, relying on older coal-reliant plants can exacerbate local pollution and public health concerns.

Industrial and manufacturing growth

Initiatives like “Make in India” increase demand for domestic flat and specialty steels. Producers focused only on low-cost, coal-heavy supply risk losing competitiveness in markets increasingly prioritising low-carbon steel.

Why cheap steel can cost more later

While cheaper steel may reduce upfront expenses, it often carries hidden environmental, health, and economic costs. For instance, coal-intensive production is a major source of industrial CO₂ emissions, and older plants may lack modern pollution controls.

Environmental impact: Coal-based steel production contributes heavily to India’s CO₂ emissions, which currently total around 240 million tonnes annually. Older plants may lack modern pollution controls, leading to higher emissions of particulate matter, sulphur dioxide, and nitrogen oxides. Water consumption is also high, and untreated effluents can affect soil and groundwater.

Health risks: Communities near steel plants are frequently exposed to high levels of PM₂.₅ and PM₁₀. Studies have shown increased respiratory and cardiovascular illnesses among residents and workers in coal-heavy plants. Long-term exposure can lead to chronic health issues, reducing community well-being and increasing public health costs.

Economic risks: Cheap, coal-based steel may lock buyers into suppliers that struggle to meet emerging global standards. Retrofitting older plants to adopt low-carbon technology is costly. Moreover, buyers relying on non-compliant steel may face restrictions in export markets, particularly where carbon intensity is a key factor.

Practical implication for buyers: Even if steel is cheaper per kilogram, these environmental, health, and economic risks must be considered when making procurement decisions. Strategic planning now can avoid substantial costs later.

Market pressures in India

Steel buyers in India face multiple pressures that influence procurement choices.

Competition from imports: Countries like China export cheaper steel to India, reducing domestic margins. This price pressure can discourage investment in cleaner production technologies.

Price vs. quality: Low-cost steel may be cheaper upfront, but coal-heavy production can compromise quality, regulatory compliance, and future export potential.

Regional variation: Electricity costs, scrap availability, and local logistics influence steel prices across states. For instance, mills in Maharashtra or Gujarat may offer better pricing for EAF-produced steel due to lower energy costs and access to scrap.

Balancing risk: Buyers must assess both the immediate cost and long-term implications of sourcing from coal-heavy or low-carbon suppliers. Understanding regional differences and supplier capabilities is crucial for strategic procurement.

Low-carbon steel technologies

Sustainable steel reduces environmental and health impacts while preparing buyers for future regulations. Key options include:

Hydrogen-Based Direct Reduced Iron (H₂-DRI)

H₂-DRI uses hydrogen to reduce iron ore instead of coal. It significantly lowers CO₂ emissions. Pilot projects in India, such as those in Odisha and Chhattisgarh, show technical feasibility but are limited by the high cost of green hydrogen (~USD 3.5–5/kg) and infrastructure availability.

Buyer tip: Consider H₂-DRI for long-term sourcing or as part of a mixed procurement strategy. Supporting pilot programmes can help scale production and reduce future costs.

Electric Arc Furnace (EAF) Using Scrap

EAF melts recycled steel using electricity, reducing reliance on coal. Effectiveness depends on scrap quality, electricity costs, and local availability. EAF is already operational in several Indian mills, including those in Maharashtra and Gujarat.

Buyer tip: EAF is ideal for medium-term procurement, particularly when scrap and electricity are accessible. It provides a practical low-carbon option without major upfront investment.

Carbon Capture, Utilisation, and Storage (CCUS)

CCUS captures CO₂ from existing blast furnaces or DRI plants. While it retains current assets and reduces emissions, it is energy-intensive and costly. Water use and land requirements also limit its large-scale deployment.

Buyer tip: CCUS is suitable for large integrated plants with long-term investment horizons. Buyers can leverage CCUS-equipped suppliers to lower carbon footprint while maintaining production capacity.

Incremental measures

These include energy efficiency improvements, electrification of auxiliary processes, and co-firing with biomass. While individual measures produce smaller emission reductions, they are cost-effective and feasible for mid-sized plants.

Buyer tip: Use incremental measures to complement other low-carbon technologies. They provide immediate environmental benefits without major capital outlay.

Technology	Advantages	Challenges
Green Hydrogen (H₂-DRI)	– Can nearly eliminate coal use. – Cuts process CO₂ when H₂ is truly green (renewable-powered electrolysis). – Demonstrated at pilot scale in Europe and India.	– High cost: LCOH in India (2024–25) ~USD 3.5–5/kg, far above grey hydrogen. – Raises steel production costs materially until costs fall. – Requires policy support, capped offtake, or premium pricing from buyers.
Electric Arc Furnace (EAF)/Scrap route	– Mature low-carbon route where scrap is available. – Reduces dependence on coal. – Can be cheaper than H₂ steel with scrap and cheap electricity. – Already used in India for a significant share of production.	– Limited by scrap availability and quality. – Long products and structural steels may need virgin iron. – Scaling scrap collection and sorting is challenging.
Carbon Capture, Utilisation and Storage (CCUS)	– Retrofit option for existing blast-furnace and DRI plants. – Retains current assets while reducing emissions. – High theoretical capture rates for point sources.	– High capital and operating costs. – Energy, water, and land penalties. – Long-term storage and permit economics uncertain. – Large-scale viability questioned by analysts.
Hybrid and Incremental Measures	– Improves energy efficiency. – Electrifies auxiliary processes. – Co-firing with biomass or waste gases. – Adopts best available technology. – Positive paybacks.	– Smaller absolute CO₂ reductions than H₂-DRI or EAF.

How steel buyers can evaluate suppliers

Evaluating suppliers for sustainability is essential. Buyers should consider:

• Environmental compliance: Check emission reports, pollution control systems, and adherence to regulations.
• Technology adoption: Assess use of H₂-DRI, EAF, CCUS, or incremental measures.
• Contract structures: Long-term contracts can incentivise suppliers to invest in low-carbon technologies.
• Materials: Prioritise suppliers using recycled steel or renewable energy.

Step-by-step evaluation checklist:

1. Verify the proportion of steel produced using low-carbon methods.
2. Examine energy sources and efficiency practices.
3. Assess local environmental impacts of production sites.
4. Review supplier alignment with national and global carbon standards.
5. Structure contracts to encourage continuous improvement in sustainability.

Practical tip: Small audits and supplier visits provide valuable insights into operational practices and environmental performance.

Timeframe	Recommended actions for buyers
Short-term (0–12 months)	• Conduct supplier audits for environmental compliance. • Prioritise suppliers using low-carbon technologies. • Include sustainability incentives in contracts.
Medium-term (1–3 years)	• Support suppliers investing in EAF or H₂-DRI. • Incorporate recycled steel into procurement plans. • Monitor energy use and emission data regularly.
Long-term (3–5+ years)	• Align procurement with global carbon standards. • Diversify technology adoption across suppliers. • Track policy changes and adjust sourcing strategies accordingly.

Policies and incentives in India

Government initiatives provide support for sustainable steel production:

• Hydrogen DRI pilot projects: Funded by the Ministry of Steel to reduce emissions in demonstration plants.
• Renewable-powered EAF incentives: Financial support for mills adopting electricity from renewable sources.
• Scrap recycling initiatives: Encourages circular use of steel, reducing the need for virgin iron.
• State-level subsidies: For example, Maharashtra and Gujarat provide incentives for clean energy integration.

Trade regulations such as the EU Carbon Border Adjustment Mechanism (CBAM) are also influencing procurement. Buyers sourcing sustainable steel now will be better positioned for future compliance and export opportunities.

Case studies

Hydrogen DRI pilots: Odisha-based pilot plants have reduced CO₂ emissions by 80–90% for small-scale production. While costs are high, these projects demonstrate technical feasibility.

EAF plants: Mills in Gujarat and Maharashtra using scrap-based EAF have maintained competitive prices while reducing emissions by 30–40%. These examples show that low-carbon options can be economically viable.

Incremental energy efficiency: Mid-sized plants in Chhattisgarh improved furnace efficiency and adopted biomass co-firing, achieving measurable reductions in emissions and operating costs.

Key lesson: Working with suppliers that invest in low-carbon methods benefits buyers by reducing risk, improving compliance, and positioning them for global market opportunities.

Conclusion

Sustainable steel procurement is critical for India’s industrial future. Buyers who focus on environmental impact, supplier capability, and long-term value can reduce risk and gain a competitive edge.

By combining low-carbon technologies, strategic supplier evaluation, and proactive engagement with policies and incentives, buyers can secure steel that is both affordable and responsible. This approach builds resilience, ensures compliance, and supports India’s transition to a low-carbon steel sector.

FAQs

What is sustainable steel?

Sustainable steel is produced using cleaner technologies that lower emissions, reduce energy use, and minimise pollution. 

Why should buyers care about low-carbon steel?

It reduces long-term risks, helps meet upcoming regulations, and improves material quality. 

Is sustainable steel more expensive than regular steel?

It can cost slightly more today, but it often saves money later by avoiding penalties, delays, and compliance issues. 

What is the easiest low-carbon option for buyers to start with?

Steel made through Electric Arc Furnaces (EAF) using scrap, as it is already common and widely available. 

How can I check if a supplier is environmentally compliant?

Ask for emission reports, audit certificates, and details of pollution-control systems. 

Do low-carbon technologies affect steel quality?

No. In many cases, cleaner processes produce more consistent and reliable steel. 

What are the main risks of buying cheap coal-based steel?

Poorer environmental performance, higher long-term costs, and possible restrictions in global markets. 

How do government policies affect steel sourcing?

Policies on hydrogen, renewable power, and recycling can change pricing and availability, so buyers should keep track of updates. 

What practical steps can buyers take right now?

Run supplier audits, request low-carbon options, and include sustainability clauses in contracts. 

Will sustainable steel help with exports?

Yes. Many export markets reward low-carbon materials and penalise high-emission products, making sustainable steel a safer choice.