As South Korea advances its shift from coal-based steel production to green technologies like electric arc furnaces and hydrogen, Indonesia risks losing competitiveness unless it accelerates its adoption of sustainable practices and secures strategic investments.
Indonesia’s steel industry faces a critical juncture as South Korea accelerates its transition away from coal-based production towards green steel technologies. Industry experts and economists warn that without a strategic shift, Indonesia risks losing its competitiveness in the global steel market, which is increasingly defined by carbon intensity rather than cost alone.
Bhima Yudhistira, executive director of the Center of Economic and Law Studies (CELIOS), emphasises the profound implications for Indonesia, a major supplier of metallurgical coal and a pivotal player in the Asian steel supply chain. Indonesia’s steel sector currently emits about 1.6 tons of CO₂ per ton of steel, categorising its output as “high-carbon steel” by international standards. South Korea’s decisive move to abandon coal-powered blast furnace methods in favour of Electric Arc Furnace (EAF) and hydrogen-based Direct Reduced Iron (H-DRI) technologies presents a strategic model Indonesia must consider if it wishes to sustain industrial relevance and market access.
South Korea’s energy transformation, supported by a substantial increase in nuclear power and renewables, is notably reducing its dependence on fossil fuels like coal and liquefied natural gas (LNG). Recent reports highlight that as of early 2025, nuclear power generation in South Korea outpaced coal and gas-fired plants, enabling a 20% reduction in fossil fuel imports and a 26% curtailment of coal-fired power generation. This shift is closely tied to South Korea’s ambitious targets to achieve 70% carbon-free electricity generation by 2038, reflecting an integrated approach to industrial and energy transition policies. Alongside this, South Korean steelmaker POSCO has partnered with mining giant BHP to develop “near zero emissions” iron production facilities utilising hydrogen and electric smelting. This project aims to start by 2028 with a capacity of 300,000 metric tons, signalling cutting-edge advances in green steel production.
In contrast, Indonesia’s response has been mixed. While state-owned PT Krakatau Steel has secured a significant Rp 8.28 trillion (roughly US$497 million) working capital facility from the sovereign wealth fund Danantara to expand production capacity, concerns remain about aligning such investments with low-carbon trajectories. Bhima and other analysts urge that financing must prioritise green steel technologies to avoid becoming locked into carbon-intensive production that global markets are moving away from.
Supporting this transition, the International Finance Corporation (IFC) made a landmark $60 million investment in PT Gunung Raja Paksi, Indonesia’s leading private steel producer, to expand EAF-based low-carbon steel production. This financing includes plans to upgrade electric arc furnace technology and phase out traditional blast furnaces, aiming to significantly reduce greenhouse gas emissions. IFC’s engagement marks its first major steel industry investment in Asia for over a decade and highlights the growing importance of decarbonising steel to meet both environmental goals and evolving market demands.
These shifts in industrial practice align with global trends where policymakers and investors increasingly prioritise sustainability metrics. The European Union’s Carbon Border Adjustment Mechanism (CBAM) exemplifies emerging regulatory pressures that impose tariffs on carbon-intensive imports, raising the stakes for producers in countries like Indonesia. Experts warn that unless Indonesia adopts robust environmental standards, accelerates the deployment of green steel technologies, and expands domestic demand for low-carbon steel through green public procurement, the nation risks losing critical export markets.
The Institute for Essential Services Reform (IESR) highlights the steel industry’s significant environmental impact, contributing nearly 5% of Indonesia’s industrial emissions with around 430 million tons of CO₂ annually as of 2022. Considering the sector’s rapid expansion and export growth, IESR stresses the urgent need for a comprehensive decarbonization roadmap to ensure alignment with global climate commitments and sustain economic growth.
Policy strategist Dwi Wulan Ramadani from CERAH underscores that green steel is not merely an environmental imperative but a strategic economic opportunity for Indonesia. Transitioning to low-carbon steel production could enhance domestic value-added, boost export stability, and generate new employment in modern manufacturing chains. She emphasises that global competitiveness will increasingly hinge on carbon intensity rather than traditional cost advantages.
Taken together, these developments frame Indonesia’s steel sector at a pivotal crossroads. South Korea’s aggressive pivot away from coal-based steel production and towards green steel highlights the industrial competition now emerging around sustainable technologies. For Indonesia, maintaining the status quo risks marginalisation in global markets that are rapidly adopting stringent environmental standards. However, by embracing Electric Arc Furnace and hydrogen-based technologies, supported through strategic investment and policy reforms, Indonesia can reposition itself as a viable player in the decarbonised steel economy of the future. This transition not only mitigates environmental impact but also safeguards export competitiveness and attracts vital international financing amid changing global industrial norms.
- https://indonesiabusinesspost.com/5724/energy-and-resources/indonesia-risks-losing-steel-competitiveness-as-s-korea-abandons-coal-based-production-experts – Please view link – unable to able to access data
- https://www.ifc.org/en/pressroom/2024/ifc-promotes-decarbonization-of-indonesias-steel-sector-with-inv – In September 2024, the International Finance Corporation (IFC) announced a loan to PT Gunung Raja Paksi Tbk (GRP), a leading Indonesian steel producer, to advance decarbonization in Indonesia’s steel industry. The $60 million investment aims to expand low-carbon steel production using Electric Arc Furnace (EAF) technology, significantly reducing greenhouse gas emissions and supporting Indonesia’s climate goals. This partnership marks IFC’s first steel investment in Asia in over a decade and underscores the importance of decarbonizing the steel sector to meet growing demand and reduce reliance on high-carbon steel imports.
- https://www.reuters.com/business/environment/world-banks-ifc-signs-green-financing-deal-with-indonesian-steel-mill-2024-09-04/ – Reuters reported in September 2024 that the International Finance Corporation (IFC) signed an agreement with PT Gunung Raja Paksi Tbk (GRP), Indonesia’s largest private steel manufacturer, to support its transition to low-carbon production. The $60 million investment from IFC aims to upgrade GRP’s electric arc furnace (EAF) and improve energy efficiency, with plans to decommission GRP’s blast furnace. This collaboration seeks to reduce CO₂ emissions in the steel industry and could serve as a model for similar projects across the sector.
- https://www.reuters.com/sustainability/climate-energy/bhp-posco-sign-deal-advance-hydrogen-based-low-emissions-iron-2025-10-30/ – In October 2025, BHP, the world’s largest mining company, and South Korean steelmaker POSCO signed an agreement to develop ‘near zero emissions’ iron as part of an effort to produce green steel. The project involves constructing a demonstration plant at POSCO’s steelworks in Pohang, South Korea, utilizing hydrogen-based production methods along with an electric smelting furnace. The facility is expected to start operations by early 2028, with an annual output capacity of 300,000 metric tons, marking a significant step towards decarbonizing the steel industry.
- https://www.reuters.com/sustainability/climate-energy/south-korea-plans-70-carbon-free-power-generation-by-2038-draft-shows-2024-05-31/ – Reuters reported in May 2024 that South Korea aims to generate 70% of its electricity from carbon-free sources, including renewables and nuclear power, by 2038, according to a draft energy blueprint. This plan involves adding four more nuclear plants, reaching a total of 30 by 2038, and increasing solar and wind power output to 72 gigawatts by 2030 from 23 gigawatts in 2022. The initiative underscores South Korea’s commitment to reducing fossil fuel dependency and expanding both nuclear and renewable energy sources.
- https://iesr.or.id/en/decarbonization-of-the-iron-and-steel-industry-needs-a-comprehensive-roadmap/ – The Institute for Essential Services Reform (IESR) highlighted in March 2024 that Indonesia’s iron and steel industry contributes approximately 4.9% of total industrial emissions, amounting to about 430 million tons of carbon dioxide in 2022. The report emphasizes the need for a comprehensive roadmap to decarbonize the sector, which is experiencing consumption growth and increased exports. The IESR calls for strategic planning to address the environmental impact and align with global efforts to reduce greenhouse gas emissions.
- https://www.reuters.com/markets/commodities/nuclear-growth-helps-south-korea-cut-back-coal-lng-imports-maguire-2025-03-26/ – Reuters reported in March 2025 that South Korea has significantly reduced its imports of thermal coal and LNG, thanks to a notable increase in nuclear power production. Nuclear reactors have been generating more electricity than coal and gas plants since September 2024, leading to a 20% reduction in fossil fuel imports in the first quarter of 2025 compared to 2024. This surge in nuclear energy has enabled a 26% reduction in coal-fired power, highlighting the country’s commitment to enhancing energy self-sufficiency and lowering carbon emissions.
Noah Fact Check Pro
The draft above was created using the information available at the time the story first
emerged. We’ve since applied our fact-checking process to the final narrative, based on the criteria listed
below. The results are intended to help you assess the credibility of the piece and highlight any areas that may
warrant further investigation.
Freshness check
Score:
9
Notes:
The narrative was published on 28 November 2025, making it current. The report cites recent developments, including South Korea’s shift to green steel production and Indonesia’s response, indicating timely reporting. No evidence of recycled content or republishing across low-quality sites was found. The report appears to be based on original reporting rather than a press release, which typically warrants a high freshness score. No discrepancies in figures, dates, or quotes were identified. The content does not recycle older material but includes updated data, justifying a higher freshness score.
Quotes check
Score:
8
Notes:
The direct quote from Bhima Yudhistira, “When South Korea abandons coal to safeguard its industrial competitiveness, Indonesia cannot remain trapped in the past. Green steel is the new arena of economic competition in Asia. The winners will not be the cheapest producers, but those with the lowest emissions,” appears to be original. No identical quotes were found in earlier material, suggesting potential originality. However, without access to the original source, it’s challenging to confirm the exact wording and context.
Source reliability
Score:
6
Notes:
The narrative originates from the Indonesia Business Post, a publication that appears to be a single-outlet news source. While it provides detailed reporting, the lack of broader coverage raises questions about the reliability and potential biases of the source. The report mentions Bhima Yudhistira, executive director of the Center of Economic and Law Studies (CELIOS), and references recent developments in South Korea’s steel industry, which are verifiable. However, the limited scope of the publication and the absence of corroboration from other reputable outlets suggest a need for cautious interpretation.
Plausability check
Score:
7
Notes:
The claims about South Korea’s shift to green steel production and Indonesia’s response align with known industry trends and recent developments. For instance, POSCO, a South Korean steelmaker, has announced plans to invest $14 billion in green steel technologies, including the construction of electric furnaces to replace aging blast furnaces. ([steeltimesint.com](https://www.steeltimesint.com/news/posco-to-invest-14-billion-in-green-steel-technologies?utm_source=openai)) Additionally, the OECD has been working with Indonesia on a framework for the steel industry’s net-zero transition, indicating ongoing efforts to address these issues. ([oecd.org](https://www.oecd.org/en/events/2025/06/Knowledge-Sharing-Workshop-on-Iron-and-Steel.html?utm_source=openai)) However, the lack of corroboration from other reputable outlets and the single-source nature of the report raise questions about the completeness and accuracy of the information presented.
Overall assessment
Verdict (FAIL, OPEN, PASS): OPEN
Confidence (LOW, MEDIUM, HIGH): MEDIUM
Summary:
The narrative presents timely and detailed reporting on Indonesia’s steel industry’s challenges amid South Korea’s shift to green steel production. While the content appears current and includes verifiable information, the reliance on a single-source publication without corroboration from other reputable outlets raises concerns about its reliability and potential biases. The plausibility of the claims is supported by known industry trends, but the lack of broader coverage suggests a need for cautious interpretation.
