By: Caroline Arkalji and Piyush Verma
The global race to decarbonize steel is beginning to reshape energy security, industrial competitiveness, and trade corridors. Steel is crucial for modern economies and essential for construction, manufacturing, the automotive industry, and appliances. But steel production is also extremely energy intensive and contributes to about 8% of global greenhouse gas emissions: it is in fact the single largest source of industrial emissions worldwide. However, most emissions in the steel sector do not come from final steelmaking, but rather earlier in the production process, during ironmaking. Today, around 90% of global ironmaking still relies on blast furnaces that use metallurgical coal, which means that green iron is at the center of the transition to decarbonize the steel industry.
One technology to develop this involves replacing coal with hydrogen — particularly green hydrogen produced from renewable energy — in the process of removing oxygen from iron ore. This could also change the geography of the industry: ironmaking can move away from traditional steel hubs to regions with high quality ore, abundant renewable energy, and the ability to produce green hydrogen at scale, such as Australia. Australian companies such as Rio Tinto, Fortescue, and BHP are already exploring hydrogen ready ironmaking, renewable powered mining, and early green iron projects. Similarly, Brazil’s high-grade iron ore reserves are especially suited to direct reduction and could become an important source of green iron for both Asian and European markets.
In this sense, green iron could become to industrial decarbonization what liquefied natural gas became to energy security: a traded commodity that creates new dependencies, new corridors, and new forms of economic and strategic leverage. This is particularly important for Japan and South Korea, where domestic renewable energy potential is constrained relative to industrial demand and dependence on imported energy and raw materials remains high. Cost studies suggest that importing green iron from renewable rich partners could be cheaper than producing hydrogen-based iron domestically. In Japan, using H2-DR (hydrogen-based direct-reduced iron) sourced from Australia or Canada rather than producing it domestically could reduce steelmaking costs by around 30%. In South Korea, savings of around 20% may be possible compared with large scale domestic hydrogen based ironmaking. For Tokyo and Seoul, access to competitively priced green iron may become essential for protecting automobiles, shipbuilding, machinery, and advanced manufacturing. Their role could also extend beyond importing green iron: long term offtake agreements and procurement commitments from major Japanese and Korean steelmakers and manufacturers could help create the demand certainty needed for new green iron projects to reach commercial scale.
India will be one of the decisive countries in this transition. It is among the fastest growing steel markets in the world and is seeking to expand industrial capacity while reducing dependence on imported metallurgical coal. Green iron could become an important energy security and industrial competitiveness issue. Reducing dependence on imported coal, building domestic clean industrial capacity, and preparing for future export markets could all strengthen India’s long-term position. But India also faces a serious risk of coal lock in. A significant volume of blast furnace capacity is currently planned or undergoing relining, enabling operations for another 15 to 20 years. Investment decisions being made now could therefore keep coal-based ironmaking alive well into the 2040s. This leaves a narrow but important window to redirect investment toward cleaner ironmaking pathways.
China will shape the pace and direction of the global transition even more directly. It is the world’s largest steel producer and the largest importer of iron ore. Chinese firms have already launched hydrogen-ready direct reduced iron projects, and China’s dominance in renewable energy deployment and electrolyzer manufacturing gives it a strong platform for future scale. At the same time, China’s blast furnace fleet is relatively young, making early retirement economically difficult. While China remains deeply locked into coal-based steelmaking, it also has the industrial capacity to accelerate hydrogen-based ironmaking if policy incentives and market demand align.
Concerns about the implications of industrial decarbonization for labor markets and employment also require a more balanced understanding. Critics often frame steel decarbonization as a threat to jobs, but ironmaking itself accounts for a relatively small share of employment across the broader steel value chain. The bigger employment risk may come from failing to secure competitive low-emissions inputs. If countries cannot access green iron, downstream sectors such as steel finishing, automotive production, shipbuilding, construction equipment, and industrial exports may lose competitiveness in markets that increasingly value cleaner materials. This makes the challenge not only one of producing green iron at lower cost, but also of connecting production to large and predictable markets that can sustain investment, protect jobs, and keep downstream industries competitive.
This is where new industrial corridors could emerge. Resource rich economies such as Australia and Brazil could supply green iron to manufacturing centers such as Japan and South Korea. India could combine rapidly growing domestic steel demand with an expanding clean industrial base, while China, because of the sheer scale of its steel sector, could determine how quickly new technologies reach commercial scale. Long term procurement commitments, interoperable emissions standards, and reliable demand for low emissions materials will be essential in linking these different roles. Green iron could therefore reshape energy security not by replacing existing industrial centers, but by reorganizing the steel value chain around the places where resources, clean energy, industrial capacity, and demand are most competitive.
Caroline Arkalji is a Junior Fellow at ORF America and Piyush Verma is a Senior Fellow for the Energy & Climate program at ORF America.