The global steel industry is rapidly shifting toward low-carbon production as governments, steelmakers, and investors accelerate investments in cleaner manufacturing technologies. According to analyses by Simon Nicholas, Soroush Basirat, Saumya Nautiyal, and James Bowen from the Institute for Energy Economics and Financial Analysis (IEEFA), the growing adoption of coal-free steelmaking, renewable energy, and energy security strategies is reshaping the long-term outlook for metallurgical coal. The analysts argue that while BHP continues investing in long-life coal assets, global capital is increasingly flowing toward cleaner steel technologies that support decarbonization and long-term sustainability.
BHP Extends Metallurgical Coal Production Beyond Net-Zero Timeline
BHP has reaffirmed its long-term commitment to metallurgical coal by extending the operational life of major Queensland mines.
The Cavil Ridge metallurgical coal mine is planned to operate until 2076, while the Peak Downs mine is expected to continue until 2116, allowing production to extend 66 years beyond Australia’s legislated 2050 net-zero emissions target.
According to IEEFA, these long-term investments reflect BHP’s expectation that conventional blast furnace steelmaking will continue to support demand for metallurgical coal despite accelerating decarbonization across the global steel sector.
Scope 3 Emissions Remain BHP’s Biggest Climate Challenge
The analysts identify downstream Scope 3 emissions as BHP’s largest sustainability challenge.
During FY2025, the company’s downstream emissions reached 378 million tonnes, primarily generated by customers using metallurgical coal in blast furnace steel production.
IEEFA argues that reducing these emissions will require structural transformation across the steel industry through wider deployment of coal-free steelmaking technologies rather than relying solely on efficiency improvements at mining operations.
Renewable Energy and Higher-Grade Iron Ore Projects Delayed
The report highlights that several major sustainability investments identified in internal “BHP Files” were postponed or scaled back between 2022 and 2025.
Among them was a proposed $3 billion renewable energy program designed to develop 500 MW of renewable generation across the Pilbara, including an initial $400 million renewable energy project at the Jimblebar mine.
BHP also delayed a proposed $1.7 billion beneficiation plant capable of producing higher-grade iron ore that could reduce downstream Asian steelmaking emissions by an amount equivalent to approximately 75 percent of emissions generated across the company’s Pilbara operations.
According to IEEFA, delaying these investments slows progress toward cleaner steel supply chains while competitors continue expanding low-carbon industrial infrastructure.
Carbon Offsets Replace Immediate Industrial Decarbonization
Rather than investing immediately in large-scale emissions reduction projects, BHP primarily met Australia’s Safeguard Mechanism obligations by purchasing Australian Carbon Credit Units (ACCUs).
During the 2024-2025 compliance period, emissions covered by the mechanism increased 6 percent, while the company reportedly spent less than $8 million on carbon offsets.
The analysts suggest that relatively inexpensive offsets reduced incentives for immediate investment in renewable energy and industrial emissions reduction projects.
Coal-Free Steelmaking Attracts Stronger Investment
One of the report’s strongest findings is the widening investment gap between coal-free steelmaking and carbon capture technologies.
According to Agora Industry data, global projects scheduled by 2030 include approximately 96 million tonnes per annum (Mtpa) of Direct Reduced Iron (DRI) capacity using coal-free technologies.
By comparison, only 1 Mtpa of Carbon Capture, Utilisation and Storage (CCUS) capacity is planned for traditional blast furnace steelmaking.
IEEFA concludes that steel producers increasingly view coal-free technologies as more commercially attractive than retrofitting blast furnaces with carbon capture systems.
Carbon Capture Faces Commercial Challenges
The analysis indicates that CCUS has yet to demonstrate commercial viability for metallurgical coal-based steel production.
Currently, there are no commercial-scale CCUS facilities operating on blast furnaces fueled by metallurgical coal anywhere in the world.
Steel accounts for only 2 percent of operational CCUS projects globally and just 1 percent of projects under development.
Existing industrial demonstration projects have captured only 19 percent to 26 percent of total facility emissions while failing to address methane emissions generated during coal mining.
These limitations continue to raise uncertainty over whether CCUS can provide an effective long-term pathway for decarbonizing conventional blast furnace steelmaking.
NeoSmelt and Renewable Energy Support Cleaner Steel
While maintaining its metallurgical coal business, BHP continues investing selectively in cleaner industrial technologies.
Its NeoSmelt electric smelting furnace project is expected to reach a Final Investment Decision during the second half of 2026, with commercial operations targeted for 2029.
The company has also committed to sourcing 70 percent of electricity for its South Australian copper operations from renewable energy by 2030.
According to IEEFA, these investments demonstrate BHP’s participation in the industry’s lower-carbon transition while maintaining confidence in long-term metallurgical coal demand.
India’s Energy Security Strategy Drives Cleaner Steel Transition
India remains one of the most important markets shaping the future of metallurgical coal.
The country currently imports approximately 90 percent of its coking coal requirements, exposing steel producers to international price volatility.
During previous energy market disruptions, premium hard coking coal prices exceeded $600 per tonne, significantly increasing production costs.
To strengthen resource security while expanding domestic steel production to 300 million tonnes per annum by 2030, the Indian government has launched a 343 billion rupee (approximately $3.7 billion) Critical Minerals Mission spanning seven years.
According to the analysts, the strategy encourages diversification of coking coal imports beyond Australia toward suppliers including Russia, the United States, and Mozambique, while supporting greater investment in cleaner steelmaking technologies that could gradually reduce dependence on imported metallurgical coal.
Low-Carbon Steelmaking Reshapes Industry Sustainability
IEEFA concludes that the global steel industry is entering a new phase where decarbonization, technological innovation, renewable energy, and energy security increasingly determine investment decisions.
With 96 Mtpa of coal-free Direct Reduced Iron projects planned by 2030, compared with only 1 Mtpa of blast furnace CCUS capacity, the report highlights a decisive shift toward sustainable steel production. Combined with delayed fossil fuel investments, renewable energy expansion, 378 million tonnes of downstream Scope 3 emissions, and India’s 343 billion rupee clean industrial strategy, the findings suggest that sustainability is becoming a key driver of competitiveness across the global steel industry. As governments tighten climate policies and manufacturers accelerate investments in cleaner production technologies, the transition to low-carbon steelmaking is expected to reshape future demand for metallurgical coal and redefine the long-term outlook for the global mining sector.
SHAFANA FAZAL