Steel decarbonisation in 2025: stagnant but far from static
The transition of the global steel industry to near-zero emissions production made little progress in 2025. This year was defined not by decisive movement toward steel decarbonisation, but by the dominance of tariffs, cost pressures, uncertainty over policy incentives, and politicisation of steel within national security debates.
Introduction and top line story
The transition of the global steel industry to near-zero emissions production made little progress in 2025. This year was defined not by decisive movement toward steel decarbonisation, but by the dominance of tariffs, cost pressures, uncertainty over policy incentives, and politicisation of steel within national security debates.
Emissions intensity remained flat. Investment in newer, cleaner plants continued to be outpaced by investment in conventional coal-based blast furnaces. Several previously announced low-emissions production projects have stalled or even been cancelled. Expectations of a leap from coal to green hydrogen have lost lustre.
It seems transforming to cleaner steel production will be slower and more complex than many anticipated only a few years ago.
Yet describing the steel sector as static would be misleading. In fact, 2025 felt turbulent. What is mere froth on the surface, driven by commercial pressures and corporate opportunity, and what is underlying change in the structure of the industry is not yet clear.
SteelWatch has examined the signals of change. These are the moments, vibrations, or shifts that can turn into trends. The seeds of the future are embedded in the present — sometimes visible, sometimes harder to detect.
Many of these signals of change point toward progress in creating a near-zero emissions industry, some illustrate regression or entrenching resistance to change. Whether the positive signals of change gather momentum and start to transform the structure of this emissions-heavy industry is not yet fixed.
Decarbonisation of steelmaking is inevitable, and the question is whether it happens in time in the face of the escalating climate crisis. Momentum can build rapidly, if companies and policymakers build on these signals of positive change rather than dig deeper into the narrative of delay to protect the status quo.
So the first part of our annual review examines the major sectoral indicators, depressingly similar to last year. The second part calls out the signals of change that we regard as significant this year, and potentially for the future.
Global indicators of the industry transition
SteelWatch tracks a set of key indicators that reflect both sector-wide emissions and the pace of the shift to clean production routes, as summarised in Figure 1. In 2025, emissions intensity and global blast furnace operating capacity remained unchanged. The newly-announced blast furnace (BF) capacity still exceeded the newly-announced direct reduced iron (DRI) capacity.
The main piece of positive news is not, in itself, a sign of decarbonisation. Total sector emissions of CO2 and metallurgical coal consumption have both fallen but these changes are driven primarily by reduced steel production, particularly in China which is now arguably past peak steel production.
Where progress exists — new DRI plants, more SBTI-verified targets — the developments are valuable but too small in the context of a USD 1.9 trillion global industry that is estimated to need over USD 1 trillion for investment in decarbonisation.
The volume of new blast furnace capacity that started construction declined compared to a year ago, yet the pipeline of announced blast furnace projects yet-to-be-built remained extensive, continuing to pose significant risks of long-lived, high-emissions lock-in. This divergence between lower construction and higher announcements illustrates the deep uncertainty shaping investment decisions around blast furnaces.
So beyond the aggregated data, what are the signals of change that we see?
Signals of a tilt towards low-emissions steel in China
China remains the world’s largest steel producer, accounting for just over half of global crude steel output in 2024, and more than 60% of the global industry’s greenhouse gas (GHG) emissions. That scale means any movement in China’s steel sector has outsized implications for global emissions.
It has also long shaped the politics of steel decarbonisation, with Chinese overcapacity and coal-based production regularly invoked by producers elsewhere as a reason to delay their own transitions.
In 2025, China took early steps that point towards a gradual reorientation of its steel sector. The first wave of DRI investments in China amounts to roughly 6 million tonnes per year of DRI capacity. Most installations rely on fossil-derived gases today, but the shift to DRI has begun with potential to gather pace.
China’s national emissions trading system’s expansion to include steel was confirmed officially in April 2025. For steelmakers in China, this is the first time that higher emissions intensity is structurally linked to higher costs at national level.
These signals are still small relative to the size of the industry, but they mark meaningful departures from previous trajectories. Combined with a ban on new steel capacity backed up by production reduction policies, signals from China could start to accelerate momentum and competitive pressure for decarbonisation.
Signals of progress and pushback in EU industrial policy
Steel and Metals Action Plan launched.
Business groups lobby the EU: some in favour of keeping the timeline for emissions trading, and others calling for delay other.
Transition planning requirement removed from the Corporate Sustainability Due Diligence Directive.
“Decarbonisation” removed from the title of the Industrial Accelerator Act.
The EU continues to hold one of the most advanced policy frameworks for industrial decarbonisation, with steel at its heart. 2025 saw both progress and pushback, exposing the importance and fragility of the EU’s decarbonisation architecture. Some elements of the EU’s framework were diluted or reframed, yet the year ends with fundamentals of progressive policy largely still in place.
The debate over the future of the EU Emissions Trading System (ETS) was emblematic: with phase-out of free allowances to start in January 2026, lobbying intensified. Progressive companies within the steel transition (Stegra, Hydnum, LKAB) were notable in the newly-created Business for CBAM launched in October, urging the Commission to ‘stay the course.’ Other steelmakers, notably thyssenkrupp and Voestalpine, joined a contrasting industry lobby led from Germany, calling for delay to the timetable.
In November, the European Parliament adopted a proposal to remove transition plan requirements from the Corporate Sustainability Due Diligence Directive (CSDDD), representing a major dilution of requirements that are cross-sectoral but particularly needed in the steel transition.
Even symbolic decisions told a story. The removal of “decarbonisation” from the title of the Industrial Accelerator Act in October was in line with the false narrative that competitiveness, resilience, and industrial security is at odds with deep decarbonisation. It’s not. Transformation is future proofing.
As the EU moves toward the December Clean Industrial Deal Implementation Package, the central question is whether Europe can maintain the clarity and direction of its decarbonisation framework in the face of mounting pressure. The ETS–CBAM architecture continues to set the pace internationally, shaping expectations for steelmakers far beyond Europe’s borders.
What happens next, in Europe and in the response from other regions, will be critical for the global trajectory of steel decarbonisation.
Signals of early momentum for transportable green iron in MENA, Australia and global conversations
Over a dozen reports on transportable green iron potential around the globe1.
The concept that ironmaking and steelmaking can be decoupled — to locate ironmaking where renewable energy is more abundant — is still radical and sensitive to many actors, but there are signs of increased traction in 2025. And while most existing transportable iron (such as hot briquetted iron or HBI) is made with fossil gas, the shift to low-emissions HBI, or ‘transportable green iron’ was also firmly on the agenda. Industry leaders increasingly acknowledge that green-hydrogen DR iron can be produced where renewable energy is cheapest and then shipped to demand centres for conversion in electric arc furnaces.
Signals of this change were strongest in the Middle East and North Africa (MENA) region, now emerging as a focal zone for transportable green iron production. Oman’s emerging green industrial strategy explicitly links new DRI capacity with future green-hydrogen supply, signalling that hydrogen-readiness is expected “from day one” for major iron projects. Jindal Steel & Power placed an order for a second hydrogen-ready DRI plant at Duqm, showing this momentum through investment.
Activity to catalyse Australia’s green iron industry continued, with a strong signal in the Australian government’s allocation of AUS 1 billion (USD 636 million) to a fund that will support the production of green iron and its supply chains.
The conversation on green iron edged onto a more global stage, with the launch of the green iron principles at the COP30 in Belém. In a year of contested debate on green steel definitions, it was notable that the task of defining green iron has begun.
Most debates and analysis so far have focused on potential green iron producers, but the flurry of reports and conversations now includes potential importing regions too — another important start in building a new green iron value chain.
Signals of early deal-making for offtake of transportable green iron
Baowu and Fortescue sign a memorandum of cooperation to advance green iron production.
Namibia’s HyIron Oshivela stars to supplying green iron to Germany’s Benteler as its production comes online.
Stegra announces two agreements with Microsoft.
Thyssenkrupp Materials Services signs offtake agreement to purchase all green iron from Australia’s 1.4 GW green hydrogen project.
ACME India signs its first 100% green iron (produced in Oman) offtake agreement with Stavian Metals in Vietnam.
Electra’s early announcement of its early commercial offtake agreements with Meta, Nucor, Toyota Tsusho and Interfer Edelstahl.
Meranti Green Steel secures 5 Mtpa of HBI offtake from its Oman Duqm project.
2025 marked the first real wave of commercial contracts for transportable low-emissions iron. Across regions as diverse as Australia, Namibia, Oman, Europe and North America, a series of multi-year offtake agreements and strategic partnerships began to take shape, not only between steelmakers and suppliers, but also involving hydrogen developers, miners, energy providers, technology companies and large industrial buyers.
What stands out is the diversity and geographic spread of these early market players. Australia, Namibia, and Oman started to position themselves as emerging exporters of low-emissions iron, while buyers ranged from established steelmakers to new entrants.
These partnerships are still embryonic, but they represent the earliest architecture of a traded green iron value chain. Long-term commitments help de-risk hydrogen-DRI projects. These early offtakes help define the first global green-iron corridors which will influence the pace and geography of the transition away from coal-based ironmaking.
Signals of growing significance of green steel demand and the battle over definitions
Indian government develops green public procurement.
Industry lobbying on definitions intensifies throughout the year1 2.
Japan Iron and Steel Federation pushes a lax – greenwashing – definition of green steel.
Civil society organises to challenge creative accounting in defining green steel.
Demand for green steel as a driver of decarbonisation was a hot topic in 2025. Policymakers across the world, including the European Union and India, advanced measures to stimulate demand for low-emissions steel, create lead markets and support the emergence of green steel premiums that can close the cost gap between conventional and cleaner production.
At the same time, high-profile offtake agreements (such as Microsoft’s arrangement with Stegra) combining physical deliveries with environmental attribute certificates, signalled that more commercial steel buyers are acting on green steel in their supply chain.
As demand signals strengthen, so too has competition around what counts as “green steel.” In 2025, the Japan Iron and Steel Federation (JISF) promoted a so-called “mass-balance”3 proposal that enables emissions cuts in one place to be attached to dirty steel, which is then labelled clean. In Europe debates on the role of scrap in definitions raged. It was clear that what is at stake is not just words, but definitions that attract green premiums with a clear financial impact on steel producers.
As ‘green steel’ brands multiply and industry lobbying intensifies, 2025 also saw the start of civil society action to counter industry attempts to dilute the definition of green steel. Campaigns in South Korea against POSCO and broader scrutiny of JISF’s proposals are raising questions and creating pressure to counter greenwashing.
This contest over definitions has become one of the most consequential battlegrounds of 2025. The integrity of demand signals — and therefore their ability to drive real change and substantive investment in new production pathways — depends on ensuring that green-steel premiums reward transformation to low emissions production, not accounting exercises or marginal process tweaks.
This highly contested area is unresolved and looks set for continued battles in 2026, with significant implications for the incentives that will shape the next phase of decarbonisation.
Signals of continued addiction to coal
Nippon Steel plans to invest billions for blast furnace relining and the refurbishment of related facilities at the U. S. Steel site, Gary Works, Indiana.
Aggressive blast furnace expansion plans continue in India accounting for 57% of global coal-based BOF capacity development.
2025 was marked by investments and announcements that will lock parts of the global steel sector into coal-based production for decades to come.
One of the most consequential signals came from Nippon Steel, when it announced the first major investment after acquiring U. S. Steel was to reline Blast Furnace #14 at the Gary Works in Indiana. This USD 3.1 billion decision will extend the furnace’s operating life well into the 2040s, reinforcing an older, emissions-intensive pathway just at a moment when climate scenarios call for accelerated retirement of blast furnaces.
2025 saw India cement its place as the largest developer of new coal-based steel capacity, with the booming steel market stimulating investment. Planned capex by the four main companies — ArcelorMittal/Nippon Steel India, JSPL, JSW and Tata Steel — was assessed at a total of USD 172 billion, of which around 70% is aligned to high-risk, carbon-intensive projects with systemic lock-in.
India’s steel development pipeline was calculated to be 57% of global coal-based BOF capacity development by Global Energy Monitor, though noting one ray of opportunity: the majority is ‘announced’ but not yet ‘in construction’ leaving ‘an opportunity to pivot toward lower-emissions pathways.’ However, the Financial Times underscored the industrial and political forces driving this surge.
Together, these developments reveal a troubling misalignment: at the very moment when billions should be shifting from coal-based production toward near-zero technologies, some of the sector’s biggest players are funnelling capital into long-lived, high-emitting assets, both in emerging economies and in the US. These choices risk locking in emissions far beyond what a 1.5C-aligned future can accommodate.
Signals of reassertion of steel sovereignty in steel policy-making
US increases tariffs on steel and aluminium.
EU updates and strengthens ‘steel safeguard’ measures.
Emergency session of UK parliament seizes control of the ‘last blast furnaces’ from Chinese owners.
Jump in number of countries restricting ferrous scrap exports to 48.
In 2025, steel sovereignty was one of the defining political forces shaping the sector. Across major producing countries, governments approached steel less as a traded industrial commodity, and more as a strategic asset tied to national resilience, defence, and economic security.
This sharp rise in sovereignty-driven policymaking squeezed the political space for decarbonisation, with state attention pulled toward protecting domestic capacity rather than transforming it.
This shift was most visible in the tariff battle which raged among steel producing countries. The United States sharply raised Section 232 tariffs in the name of national security, while the European Commission strengthened its steel safeguard measures to counter “unfair overcapacity.” Similar protective steps emerged elsewhere, with India considering new import tariffs on Chinese steel, Vietnam imposing anti-dumping duties, and Brazil renewing quotas and tariffs to shield domestic producers.
But beyond tariffs, signals of steel sovereignty emerged in other ways. In the UK, an extraordinary emergency session of Parliament was convened on a Saturday to take de facto control of the country’s last remaining blast furnaces, signalling willingness to override foreign ownership to preserve “strategic capability” in steelmaking.
Strategic sovereignty was extended to scrap too. By March 2025, 48 countries had imposed restrictions on ferrous scrap exports and 38% had introduced outright bans, reframing scrap as a strategic resource rather than a freely traded commodity.
Steel has always been shaped by two competing lenses: as a globally traded commodity and as a foundational element of nation-building and industrial security. In 2025, the sovereignty lens decisively dominated.
In some countries, stronger national industrial strategies could, in principle, be harnessed to accelerate investment in clean steel capacity if governments choose to treat low-emissions production as strategically important. But elsewhere, sovereignty is being used to defend legacy coal-based assets behind rising tariff walls, narrowing the political space for international cooperation and weakening the shared standards needed for global decarbonisation.
Whether this surge in protectionism can be aligned with — rather than set against — the transition will be one of the defining questions of 2026.
Looking ahead at 2026
In 2025, the story of steel decarbonisation in industry discourse hardened into “nice to do if convenient” framing, leaving the future of many projects up in the air.
A growing number of organisations and steelmakers reframed delay not as failure, but as prudence. The reality that deep and urgent transformation is needed in the iron and steel sector barely gained traction, despite scientists increasingly ringing the alarm at the tipping points we’re passing.
The argument that change can only be incremental, gradual, and embrace every technology option (including coal-based technologies!) went largely, shamefully, uncontested. The idea that a cohort of blast furnaces will continue past 2050, and perhaps even to 2070, was not just verbalised but discussed as a fact, not the crisis-compounder it is. Instead of 2030 being seen as a first deadline for transformative change, in some quarters it is seen as a mere step towards the start line.
Taken together, these narratives are doing real political work. They normalise slippage by reframing it as pragmatism; they justify backtracking as prudent risk management; and they use competitiveness and policy-readiness frames to shift responsibility outward, away from company decisions and toward external constraints.
The danger is not only the delays themselves, but the re-authoring of expectation: as markets and policymakers internalise the idea that meaningful decarbonisation can only begin when all other near-perfect conditions are in place, urgency drains from the system.
That is how the “stalled transition” narrative becomes self-fulfilling and dangerous — turning what should be a temporary slowdown into a dire new baseline.
In 2025, the climate crisis was not about mere signals of change ahead, the reality of the crisis is already unfolding. Climate Central estimates that climate-related extreme weather events cost USD 101 billion in 2025 in the US alone. In 2024 the World Economic Forum warned that climate change has already caused over USD 3.6 trillion in damage since the turn of the millennium, and without urgent action global GDP could drop by up to 22% cumulatively by 2100.
So looking ahead to 2026, the central question in steel decarbonisation will be whether steelmakers truly understand their responsibility to rapidly phase out coal, and the extreme costs of inaction. The sector has the technologies, pathways and evidence to accelerate clean production well before 2030, but the politics of expectation may prove harder to shift than the technologies themselves.
The challenge for policymakers, investors and civil society will be to re-anchor ambition in the near term — and to resist the gravitational pull of a discourse that recasts delay as destiny.
Notes
“Figure 1: Which global indicators of steel decarbonisation are shifting?” are as follows:
- Stagnant Indicators (operating BF fleet, BF to DRI ratio, Emission intensity).
- Indicators Improving for Non Decarbonisation Reasons (CO2 emissions, met coal consumption).
- Progressing (SBTi-verified steel makers, DRI capacity, hydrogen DRI).
- Mixed Indicators (new BF construction = construction started April 2023-April 2024 compared with April 2024-September 2025, new BF announcements, pipeline as of September 2025).
COP 30 Belém 1
- Green Iron Principles November 2025 – Green Hydrogen organisation
- Unlocking Asia Pacific as a first mover- Australia’s green iron opportunity November 2025 — WEF First Movers Coalition
- Call to Action on commitment to net-zero by 2050 and alignment with 1.5C pathway November 2025 — Agora, Vale, Stegra, Meranti Green Steel, Emsteel, Fortescue, GravitHy, SSAB, Jindal Steel
Focus on Australia
- A Green Iron Plan for Australia May 2025 — The Superpower Institute
- Green Iron Opportunities in Australia October 2025 — OECD
- Australian Green Iron tracker August 2025 — IEEFA
- Green Steel Forging Futures Report March 2025 — WWF Australia
Focus on other strategic geographies
- The Role of Green Iron trade in Accelerating Steel Transformation Brazil, Germany, South Africa: September 2025 – Agora2.
- Leveraging Green Trade: The MENA Region’s Opportunity in the Global Green Iron and Steel Market August 2025 – Carbon Institute
- Strategic Decarbonisation of the Canadian Iron and Steel Industry June 2025 – Trottier Foundation, SteelWatch
- Implementing the OECD Framework for Industry’s Net-Zero Transition in South Africa: Decarbonising the Iron and Steel Sector October 2025 – OECD
- Oman at the Frontline of Green Steel Transition November 2025 – IEEFA
- Green Steel Demand in Japan – Market Status and Enablers December 2025 – WWF Australia, Accenture
Signals of growing significance of green steel demand and the battle over definitions
- https://euric.org/resource-hub/position-papers/no-true-green-steel-labelling-without-circularity-at-its-core
- https://euric.org/resource-hub/position-papers/no-true-green-steel-labelling-without-circularity-at-its-core
- The variant of ‘mass balance’ championed by Nippon Steel and the Japan Iron and Steel Foundation would enable steelmakers to calculate emissions reductions across the value chain, with complex methodology, and concentrate the estimated CO2 reductions on a small batch of steel products to be marketed as low- or zero-emissions. These products could have been made through coal-based production processes and have a real CO2 intensity average that is very far from being either low or zero.
