India is considering the prospect of mandating procurement of green steel among auto-mobile companies, for premium or ultra high-end models, including luxury car manufacturers like Audi or BMW.

Additionally, the proposal – currently, put forward as a suggestion - aims to promote use of green steel, characterised by low-carbon emissions during production, in government projects too.

An official, aware of discussions, said, the recommendation is that premium car makers or luxury manufacturers could utilise green steel, particularly for their high-end products. The broad rationale: demand for premium or luxury vehicles are less sensitive to price fluctuations resulting from technological changes.

“If not in full, part of the supplies for high-end offerings or luxury cars should include green steel. But right now that is a suggestion which is still on the drawing board. Let’s say it is a recommendation which is being heard,” the official told businessline.

In general, there is no specific definition of ‘green steel’. It refers to the metal produced using methods that have minimal carbon emission which include use of hydrogen, renewable sources of power, use of recycled scrap, among others.

While the cost of setting up a traditional integrated steel plant in India works out at $1 million per one million tonne production capacity, a switch-over in tech leads to costs more than doubling, that is, to $2 – 2.5 million per million tonne of steel produced.

“Green steel will come at a premium. But, the argument put forward is, as usage increases and more steel makers adopt low carbon-emitting tech, the premium on steel comes down. Apart from luxury cars, the government will also look at the possibility of procurement across its own projects so the manufacturing facilities in India, become commercially viable and there is an incentive to invest too,” the official said.

European example

European car makers like Volkswagen are partnering up with Salzgitter AG to source green steel. Volkswagen plans to use the low-CO2 steel from the end of 2025 across important future projects.

Mercedes-Benz AG became the first car manufacturer to take an equity stake in Swedish start-up H2 green steel as a way to introduce CO2 free steel into series production.

BMW and Ford are also exploring introduction of green steel as a part of their supply chains too. The latter has a supply tie-up, after 2030, with Tata Steel’s Dutch arm (Netherlands unit) at no specified quantity and price; apart from tie-ups with ThyssenKrupp and Salzgitter. While the former has tie-ups in Europe and now also in China and the USA.

“So, it was pointed out that certain car manufacturers in Europe, who also have operations in India, are already exploring partnerships for green steel within their supply chains. If Indian mills establish production facilities, why not pursue a similar initiative here? This is especially feasible for premium products, provided final prices are manageable,” another official in the know said.

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