An economist and an energy-transition analyst warn that the country’s steel sector is at risk of falling behind global competition as South Korea accelerates its shift away from coal-based blast furnace technology toward green steel production.

Executive director of the Center of Economic and Law Studies (CELIOS), Bhima Yudhistira, said South Korea’s structural shift carries significant implications for Indonesia, which remains a major supplier of metallurgical coal and a key part of the Asian steel supply chain. Indonesia’s current carbon intensity in steel production reaches 1.6 tons of CO₂ per ton of steel, placing it in the category of “high-carbon steel” under global benchmarks.

“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,” Bhima said on Friday, November 28, 2025.

Bhima noted that Seoul’s policy shift underscores a worldwide transition away from coal-dependent blast furnaces toward Electric Arc Furnace (EAF) facilities and hydrogen-based Direct Reduced Iron (H-DRI) technologies that significantly reduce carbon emissions.

“That is the direction Indonesia must pursue if we want our steel industry to remain competitive globally,” he said.

The warning comes as Indonesia’s largest state-owned steelmaker, PT Krakatau Steel, has secured a Rp 8.28 trillion (US$497 million) working-capital facility from Sovereign wealth agency Danantara, aimed at expanding national steel production. Bhima said such financing must be aligned with global industrial trends, especially as demand for low-carbon steel surges.

“Opportunities are opening rapidly, driven by the automotive sector, which is moving faster than current green steel production capacity worldwide,” he said.

Momentum for steel decarbonization is also increasing with foreign investors redirecting financing toward green steel producers. One example is the US$60 million investment by the International Finance Corporation (IFC) in PT GunungRaja Paksi to expand EAF-based low-carbon steel output.

However, analysts warn that Indonesia could lose access to key export markets if emissions are not curbed. National steel sector emissions reportedly surged 75 percent between 2019 and 2020 due to rapid production expansion.

High emission steel is increasingly exposed to global carbon-pricing mechanisms such as the European Union’s Carbon Border Adjustment Mechanism (CBAM), which will impose tariffs on carbon-intensive imports.

Experts argue that Indonesia’s competitiveness will hinge on whether its industrial and energy policies move in the same direction including accelerating adoption of EAF and H-DRI technologies, enforcing green industry standards aligned with global norms, and expanding green public procurement to stimulate domestic demand for low-carbon steel.

“This decision by South Korea to move away from coal-fired power and blast furnaces is both a warning and a critical momentum for Indonesia,”Policy strategist at CERAH, Dwi Wulan Ramadani, said.

“Global competitiveness will increasingly be determined by carbon intensity. Producers that fail to adapt will lose export market access and Indonesia is no exception,” Dwi added.

Dwi said that transitioning to green steel could bring substantial economic benefits: higher domestic value-added, stronger prospects for stable export markets, and expanded employment in modern production chains.

“Seen through the lens of market trends, energy policy shifts, and global investment flows, decarbonizing Indonesia’s steel industry is no longer merely an environmental agenda. It is an economic strategy to protect export competitiveness, attract investment, and ensure national downstreaming efforts do not remain locked into high-emission industries,” she said.