The International Finance Corporation (IFC) has signed an agreement to support Indonesian steelmaker PT Gunung Raja Paksi (GRP) to support its transition to low-carbon steel production. The agreement represents IFC’s first investment in the Asian steel sector in more than a decade.
As part of the agreement, IFC will provide USD 60 million to upgrade GRP’s electric arc furnace (EAF) and increase its energy efficiency. IFC will also explore ways to finance the decommissioning of GRP’s blast furnace.
The partnership is part of an initiative to drive decarbonization across the sector by using EAF technology that relies on electricity instead of the coal used in traditional blast furnaces, said Antonio Della Pelle, IFC’s senior operations officer.
GRP CEO Kimin Tanoto shared that IFC plans to invest up to USD 600 million to modernize the entire facility, aiming to make GRP a leading green steel producer in the region.
Tanoto acknowledged that the closure of the new blast furnace was a difficult decision for shareholders, but stressed that the entire industry will eventually face the same challenge.
The steel sector, which accounts for around 8% of global greenhouse gas emissions, has come under pressure as more countries implement carbon tax regimes. Europe’s Carbon Border Adjustment Mechanism (CBAM), which comes into effect in 2026, will require importers to pay a tax on steel products based on their carbon emissions.
GRP previously exported around 80% of its flat steel products to Europe, struggling to compete with larger Chinese producers. However, with CBAM raising the cost of traditional high-carbon steel, GRP expects to regain its competitiveness in European markets as demand for green steel increases. Tanoto expressed confidence that the introduction of carbon taxes and policies such as CBAM will make CTP competitive in the future.
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