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Steel · Capital AllocationEAF-Scrap Versus BF-BOF: The Full Cost Comparison for India’s Next Wave of Steel Capacity — Capex, Opex, Carbon Cost, and CBAM Liability at Current Prices
India’s steel capacity must grow from 200 Mtpa today to 300 Mtpa by 2030. Every tonne of new capacity built between now and 2032 locks in a production route — and a carbon intensity — for 25 to 30 years. The choice between BF-BOF and EAF-scrap is therefore not an operational decision but a capital allocation decision with three-decade consequences. At current input prices — imported shredded scrap at approximately $340 to $380 per tonne CFR Nhava Sheva, coking coal at approximately $230 to $260 per tonne, and iron ore at approximately $100 to $120 per tonne — EAF and BF-BOF operating costs overlap in the Rs 36,000 to Rs 46,000 per tonne range. The capex picture is unambiguously in EAF’s favour: approximately Rs 3,500 to Rs 5,000 crore per Mtpa against Rs 8,400 to Rs 10,000 crore per Mtpa for a new integrated BF-BOF plant. On carbon cost, there is no overlap: BF-BOF at India’s sector average 2.36 tCO₂ per tonne of steel faces approximately Rs 5,000 per tonne in CBAM certificate costs for EU exports in 2026 using verified data, rising to over Rs 15,000 per tonne by 2034 as free allocation phases out; EAF-scrap at 0.3 tCO₂ per tonne faces effectively zero CBAM liability and earns CCTS CCC revenue. This article builds the comparison from current, primary-source verified numbers — and specifies at what scrap price the EAF operating cost advantage disappears.
EAF-scrap capex is approximately 40 to 55% of BF-BOF capex for equivalent liquid steel output. Tata Steel’s Ludhiana EAF (0.75 Mtpa, 100% scrap, commissioned March 2026) was built for Rs 3,200 crore — approximately Rs 4,267 crore per Mtpa equivalent. A new integrated greenfield BF-BOF plant costs approximately Rs 8,400 to Rs 10,000 crore per Mtpa, based on the IIT Bombay study’s $1,000 to $1,200 per tonne capex benchmark. EAF is also faster to commission — 18 to 30 months versus 48 to 72 months for a new integrated BF-BOF complex — meaning EAF captures demand and cash flow significantly earlier for the same investment commitment.
At current prices (Q4 2025 to Q1 2026), EAF and BF-BOF operating costs overlap. Imported shredded scrap at $340 to $380/t CFR translates to approximately Rs 34,000 to Rs 38,000/t of scrap, or approximately Rs 37,000 to Rs 43,000/t of liquid steel at a 1.10 scrap-to-steel yield ratio. Adding electricity (Rs 2,800 to Rs 3,600/t at grid tariffs, or Rs 1,750 to Rs 2,250/t with captive solar at Rs 5/kWh), electrodes (Rs 500 to Rs 800/t), and conversion costs (Rs 2,000 to Rs 3,000/t), total EAF opex is approximately Rs 43,000 to Rs 50,000/t with grid and Rs 39,000 to Rs 45,000/t with captive solar. BF-BOF opex — iron ore, coking coal, and conversion — lands at approximately Rs 34,000 to Rs 46,000/t depending on commodity price cycles. Scrap price relative to coking coal is the primary swing factor.
The carbon cost picture is one-sided. India’s BF-BOF sector average is 2.36 tCO₂/t steel. At EU ETS approximately €65/tCO₂ and the BF-BOF CBAM benchmark of approximately 1.543 tCO₂/t, an Indian BF-BOF exporter with verified actual data faces approximately €56 per tonne (Rs 5,040/t) in CBAM certificates for 2026 EU exports. By 2034 when free allocation reaches zero, this rises to approximately (2.36 − 1.543) × €100 = approximately €82/t (Rs 7,380/t). EAF-scrap at 0.3 tCO₂/t: the BF-BOF benchmark already exceeds EAF’s actual GEI, meaning CBAM certificate obligation for EAF steel is near zero. EAF also earns CCTS CCC revenue for outperforming its target intensity — at Rs 800/tCO₂e, a 1 Mtpa EAF plant at 0.3 tCO₂/t versus a target of approximately 2.0 tCO₂/t (illustrative) earns approximately 1.7 Mt CCCs = approximately Rs 136 crore per year.
The CBAM default value crisis applies equally to EAF and BF-BOF plants if they fail to provide verified emission data to EU importers. India’s CBAM default steel emission factor is 4.32 tCO₂/t (before 10% mark-up), which applies to all Indian steel regardless of production route. A Tata Steel Ludhiana EAF plant producing at 0.3 tCO₂/t that fails to supply verified data to its EU customer faces the 4.32 tCO₂/t default — the same penalty as the most polluting BF-BOF plant. EAF plants therefore have the same MRV urgency as BF-BOF plants for CBAM compliance, even though their actual carbon liability is near zero once verified data is established.
The scrap supply constraint is real but manageable on a 5 to 10 year horizon. India consumed approximately 35 Mt of ferrous scrap in 2024, with approximately 7 to 9 Mt imported. The scrap supply is projected at 65 to 70 Mt by 2030 as vehicles and structures from the 1990s and 2000s enter the scrap stream. The Vehicle Scrappage Policy (2021) is expected to unlock 5 to 8 Mt of high-quality auto scrap by 2030. DRI (sponge iron) at approximately Rs 24,000 to Rs 29,000/t is a direct substitute in EAF charge mixes when scrap prices rise, capping the effective scrap price ceiling that EAF mills face. India produces approximately 55 Mt of DRI per year (2025), the world’s largest production base — this is a structural hedge against scrap price spikes.
Capex comparison — the case before a single tonne of steel is made
The capex differential between EAF and BF-BOF is the first and most decisive advantage of the scrap route. An integrated greenfield BF-BOF complex includes coke ovens, a sinter plant, a blast furnace, and a basic oxygen furnace — each a major capital item. The IIT Bombay analysis of India’s steel sector competitiveness confirms a BF-BOF capex range of approximately $1,000 to $1,200 per tonne of annual liquid steel capacity (approximately Rs 8,400 to Rs 10,080 crore per Mtpa at Rs 84/$). A greenfield EAF-scrap plant, by contrast, requires only the electric arc furnace, ladle metallurgy furnace, and continuous casting equipment — eliminating the entire ironmaking capital chain. Tata Steel’s Ludhiana EAF — 0.75 Mtpa, commissioned March 2026, 100% scrap-based, producing at under 0.3 tCO₂/t — cost Rs 3,200 crore, equivalent to approximately Rs 4,267 crore per Mtpa. JSW Steel’s greenfield Kadapa EAF (Phase 1 target January 2029) has not disclosed final capex but industry estimates are consistent with Rs 3,500 to Rs 5,000 crore per Mtpa for Indian EAF of this type.
The capex differential alone is decisive for any steel company evaluating capacity expansion on a risk-adjusted basis. A BF-BOF integrated plant requires approximately Rs 9,400 to Rs 13,000 crore per Mtpa — a commitment that locks capital for 5 to 6 years before a single tonne is sold and for 25 to 30 years before the plant can be replaced. An EAF plant at Rs 3,500 to Rs 5,200 crore per Mtpa is commissioned in 18 to 30 months and can begin generating cash flow against the investment within two years of the go-ahead decision. The risk-adjusted capex advantage of EAF is therefore even larger than the absolute number suggests: for the same strategic capacity objective, EAF delivers a shorter payback period and allows the company to respond faster to demand signals.
Operating cost comparison — where scrap price is the swing factor
Operating cost is where the BF-BOF and EAF routes are most directly competitive, and where the comparison is most sensitive to commodity price movements. The two key inputs — coking coal for BF-BOF and scrap for EAF — are both globally traded commodities that can move significantly within a single year. The table below builds the comparison at three scrap price scenarios, using current (Q4 2025 to Q1 2026) input price levels for all other variables.
| Cost component | BF-BOF (Rs/t liquid steel) | EAF-Scrap — Low scrap ($290/t domestic HMS) | EAF-Scrap — Mid scrap ($360/t import shredded) | EAF-Scrap — High scrap ($430/t) |
|---|---|---|---|---|
| Primary raw material | Iron ore ~1.6t × Rs 8,400/t (₹100/DMTU × 62 Fe × 1.6t) = ~Rs 13,440/t | Domestic HMS 1.10t × Rs 27,500/t = ~Rs 30,250/t | Imported shredded 1.10t × Rs 34,000/t (~$360 × 84 INR) = ~Rs 37,400/t | Premium import 1.10t × Rs 40,700/t ($430 × 84 INR) = ~Rs 44,770/t |
| Reductant / Energy feedstock | Coking coal ~0.78t × Rs 20,500/t (~$245/t) = ~Rs 15,990/t + coke making costs Rs 2,000/t | Not applicable — replaced by electricity | ||
| Electricity | ~600 kWh/t (auxiliary) × Rs 7/kWh = ~Rs 4,200/t | 400 kWh/t × Rs 5/kWh (captive solar) = ~Rs 2,000/t | 400 kWh/t × Rs 7/kWh (grid) = ~Rs 2,800/t | 400 kWh/t × Rs 7/kWh (grid) = ~Rs 2,800/t |
| Electrodes, oxygen, alloys | Oxygen Rs 500/t; fluxes Rs 400/t = ~Rs 900/t | Electrodes Rs 700/t; oxygen Rs 500/t; alloys Rs 500/t = ~Rs 1,700/t | ~Rs 1,700/t | ~Rs 1,700/t |
| Conversion and overheads | Labour, maintenance, admin = ~Rs 3,000/t | ~Rs 2,000/t (fewer process steps) | ~Rs 2,000/t | ~Rs 2,000/t |
| Total operating cost | Rs 39,530/t at mid-cycle commodities | Rs 35,950/t EAF wins by Rs 3,580/t | Rs 43,900/t BF-BOF wins by Rs 4,370/t | Rs 51,270/t BF-BOF wins by Rs 11,740/t |
| CCTS net (CCC revenue at Rs 800/tCO₂) | Deficit if above target; cost or penalty | +Rs 1,360/t CCC revenue (1.7 tCO₂ surplus × Rs 800) | +Rs 1,360/t | +Rs 1,360/t |
| CBAM cost (EU export, 2026 verified data) | ~Rs 5,040/t (0.856 tCO₂ × €65 × Rs 90) | ~Rs 0–200/t (EAF GEI below BF-BOF benchmark) | ~Rs 0–200/t | ~Rs 0–200/t |
| Total cost including carbon (EU-exporting) | Rs 44,570/t (opex + CBAM 2026) | Rs 34,590/t (opex + CBAM − CCTS CCC) | Rs 42,540/t (still competitive with BF-BOF incl. carbon) | Rs 49,910/t (BF-BOF wins on total cost even incl. carbon) |
The table reveals the central operating logic: at scrap prices around $290 to $320 per tonne (domestic HMS, achievable in India’s currently weak scrap market), EAF wins decisively on total cost even before carbon. At $340 to $380 per tonne (current import prices), the operating costs are broadly comparable, and the carbon cost advantage of EAF is the decisive differentiator for any plant with EU export exposure. Above $430 per tonne, BF-BOF wins on total operating cost even after carbon — but such scrap prices have historically triggered a shift toward DRI as an EAF feedstock substitute, which caps the effective ceiling for EAF mills. The break-even scrap price above which BF-BOF becomes cheaper on a total cost basis (including 2026 CBAM) is approximately $400 to $420 per tonne — a level that Indian import markets have reached but not sustained.
India is the world’s largest producer of Direct Reduced Iron (sponge iron), with approximately 55 Mt of annual DRI output in FY2025 and projections of approximately 65 Mt by 2030. DRI costs approximately Rs 24,000 to Rs 29,000 per tonne ex-works (Fastmarkets, June 2025: DRI domestic India at Rs 24,650/t). At a DRI-to-steel yield ratio of approximately 1.05 to 1.10, DRI-based EAF steel costs approximately Rs 25,000 to Rs 32,000/t in feedstock alone — significantly below imported scrap at Rs 37,000–43,000/t. Indian EAF and induction furnace operators routinely substitute between scrap and DRI depending on relative pricing, with charge mixes ranging from 30% to 80% DRI depending on availability and price. This flexibility means India’s EAF sector has an effective scrap price ceiling of approximately $350 to $380/t beyond which DRI substitution becomes the rational choice. For any BF-BOF analysis that assumes high scrap prices destroy EAF economics, the DRI substitute must be factored in — and at DRI prices of Rs 24,000–29,000/t, EAF economics remain viable even when imported scrap exceeds $400/t.
The carbon cost differential — where EAF wins unconditionally
The scrap supply question — and why it is not a barrier to the decision today
The most common objection to EAF-first capacity planning in India is scrap availability. The concern is well-founded in historical data: India’s domestic scrap collection is approximately 27 to 32 Mt per year from a highly fragmented, largely informal network (less than 10% processed through formal shredders), and imports add approximately 7 to 9 Mt per year. Against a planned EAF capacity addition of 60 to 80 Mt over the next decade, the arithmetic looks challenging at first glance.
Three factors restructure this concern on a 5 to 10 year planning horizon. First, India’s steel production from the 1990s and early 2000s — when output was growing rapidly from 20 to 60 Mt per year — is now reaching end-of-life in construction, vehicles, and industrial equipment. The steel-in-use stock that becomes scrap approximately 20 to 40 years after production means India’s domestic scrap availability will rise structurally through the 2030s regardless of policy intervention. Second, the Vehicle Scrappage Policy (2021), which mandates scrapping of vehicles over 15 years for government fleets and provides incentives for private vehicles, is expected to unlock 5 to 8 Mt of high-quality, low-contamination auto scrap by 2028 to 2030 — the preferred feedstock for high-grade EAF steel. Third, DRI availability at Rs 24,000 to Rs 29,000 per tonne provides a functional cost ceiling on imported scrap because any Indian EAF mill can substitute DRI into the charge mix when scrap economics deteriorate. The BigMint data confirms that mid-2025 saw DRI substitution intensify when imported shredded exceeded $380/t.
The scrap supply question is therefore not “can EAF scale in India” — it can, and the mathematics of India’s steel-in-use stock guarantee it will. The real question is the pace of formalisation of the domestic recycling network and the policy support for quality scrap collection infrastructure. The Rs 5,000 crore National Mission for Sustainable Steel — which allocates up to 80% of funds to secondary steel mills — addresses exactly this infrastructure gap.
India’s ferrous scrap imports face a specific emerging risk: the EU’s revised Waste Shipments Regulation (WSR), which tightened rules on exporting waste-classified scrap to non-OECD countries. India is among 24 nations that have applied for exemptions to continue receiving EU scrap classified as waste, with a decision expected in November 2026 from the European Commission. If India does not receive the exemption, EU-origin HMS scrap — a significant source of India’s imported feedstock — could face restrictions. Fastmarkets and BigMint both flag this as a risk for Indian EAF capacity planning. The practical mitigation is threefold: accelerating domestic scrap formalisation; building out DRI as a feedstock alternative; and diversifying import sources to US, South Africa, UAE, Singapore, and Australia, which are not covered by the EU regulation. This is a real but manageable risk, not a structural barrier to EAF expansion in India.
Frequently Asked Questions
What is the capex difference between a new EAF-scrap plant and a new integrated BF-BOF plant in India?
A greenfield integrated BF-BOF plant in India costs approximately Rs 8,400 to Rs 13,000 crore per million tonne per year of liquid steel capacity (based on $1,000 to $1,200 per tonne capex per IIT Bombay analysis, and field data from recent Indian project announcements). A greenfield EAF-scrap plant costs approximately Rs 3,500 to Rs 5,200 crore per Mtpa — Tata Steel’s Ludhiana EAF (0.75 Mtpa, commissioned March 2026) was built for Rs 3,200 crore, equivalent to approximately Rs 4,267 crore per Mtpa. EAF capex is approximately 40 to 55% of BF-BOF capex for equivalent liquid steel capacity, and EAF commissions in 18 to 30 months against 48 to 72 months for a new integrated BF-BOF complex. The capital efficiency and time-to-market advantage of EAF is decisive for any company evaluating India’s 300 Mtpa 2030 capacity target.
At what scrap price does EAF become more expensive than BF-BOF on operating cost?
Using current input prices — coking coal at approximately $230 to $260 per tonne, iron ore at approximately $100 to $120 per tonne, electricity at Rs 5 to Rs 7 per kWh — BF-BOF operating cost is approximately Rs 39,000 to Rs 42,000 per tonne of liquid steel at mid-cycle commodity prices. EAF with imported shredded scrap becomes more expensive than BF-BOF on pure operating cost at scrap prices above approximately $400 to $420 per tonne CFR Nhava Sheva. However, this break-even shifts materially when: (a) DRI at Rs 24,000 to Rs 29,000 per tonne is substituted into the EAF charge — reducing effective scrap demand; (b) captive solar electricity reduces EAF electricity cost to Rs 1,750 to Rs 2,250 per tonne; and (c) the CCTS CCC revenue of approximately Rs 136 crore per year per Mtpa and near-zero CBAM liability are added for EU-exporting EAF plants. On total cost including carbon, EAF wins at scrap prices up to approximately $420 to $430 per tonne.
Why does CBAM apply to EAF steel plants at the Indian default value even if their actual emissions are near zero?
India’s CBAM default steel emission factor is 4.32 tCO₂ per tonne (set in IR 2025/2621, published December 31, 2025), based on India’s weighted average steel sector emission intensity. This default applies to any Indian steel shipment for which the EU importer cannot produce verified actual emission data from the exporting installation. A Tata Steel Ludhiana EAF plant producing at under 0.3 tCO₂/t that fails to supply CBAM-compliant verified emission data to its EU customer gets taxed at 4.32 tCO₂/t — the same rate as the most carbon-intensive BF-BOF plant in India. The resulting CBAM certificate cost at 4.32 × 1.10 mark-up = 4.752 tCO₂/t, less the BF-BOF benchmark deduction of 1.504 tCO₂/t, is approximately (4.752 − 1.504) × €65 × Rs 90 = approximately Rs 19,000 per tonne — commercially prohibitive. EAF plants have identical MRV urgency as BF-BOF plants for CBAM compliance, even though their actual liability at verified actual data is near zero.