The International Finance Corporation (IFC) has taken a significant step towards reducing carbon emissions in Indonesia’s steel industry by providing a $60 million loan to PT Gunung Raja Paksi Tbk (GRP), a leading steel producer in the country. The loan aims to support GRP’s efforts in expanding low-carbon steel production, advancing both the company’s and Indonesia’s climate goals.
The funds will enable GRP to enhance its production of flat steel using Electric Arc Furnace (EAF) technology, which significantly reduces greenhouse gas (GHG) emissions compared to conventional steel production methods. EAF technology enables the recycling of scrap metals and cuts emissions by more than half compared to the global average for steel production. This initiative is expected to not only meet Indonesia’s growing steel demand but also reduce the country’s reliance on high-carbon steel imports.
“Through this partnership with IFC, GRP will continue to set new bars for decarbonising steel production in Asia. This first-in-a-generation investment recognises GRP’s early leadership as one of the very first, and still very few, operators of low-carbon steel mills in Asia. The steel industry is critical to the prosperity of Asia and the wider world, but the science is clear, we must rapidly decarbonise as a sector to withhold and grow this prosperity for future generations,” said Kimin Tanoto, GRP’s Chairman of the Executive Committee.
Steel is a critical material for infrastructure and urban development worldwide, but it is also one of the largest industrial contributors to GHG emissions, accounting for about 8% of global emissions. With global steel demand expected to exceed two billion tons by 2040, driven largely by Asia’s growth, innovative approaches like GRP’s low-carbon steel production are essential to reducing the sector’s carbon footprint.
In addition to the loan, IFC has signed an Advisory Engagement Letter with GRP to help the company develop and implement a comprehensive decarbonisation strategy. This includes exploring different financing options to decommission GRP’s newly built but never-operated blast furnace, improving the energy efficiency of its EAF technology, and assessing new downstream processes. IFC will also assist GRP in identifying market opportunities for high-value steel products compatible with low-emission EAF production.
Euan Marshall, IFC’s Country Manager for Indonesia and Timor-Leste said, “Our partnership with GRP is a significant step in our commitment to supporting industrial decarbonisation in Indonesia, and marks IFC’s first steel investment in Asia in over a decade. We are delighted to provide both investment and advisory assistance to support GRP in its journey to develop a commercially and environmentally sustainable business.”
Indonesia is one of the largest steel producers in Southeast Asia and the fifteenth largest producer globally.