Leading steelmakers overlook methane embedded in their coal supplies

Methane intensity varies across coal mines and can only be reduced at the mine itself. Blast furnace-based ironmaking relies heavily on coal, and therefore comes with high methane emissions.

Steel decarbonisation has received increasing attention, but most of the focus remains on the iron and steel production process. Emissions linked to earlier stages – such as fugitive methane emissions from coking coal extraction – are rarely mentioned. If not taken into account, they could hinder steelmakers decarbonisation efforts.

Scope 3 refers to all indirect greenhouse gas (GHG) emissions within a company’s value chain. The GHG protocol’s Corporate Value Chain (Scope 3) Standard defines 15 categories under Scope 3, covering both upstream and downstream activities that a company indirectly influences. 

Leading steel companies have gradually begun disclosing Scope 3 in their emissions reportings. However, inconsistencies in scope and methodology make compatible assessments difficult. Most steel companies have not yet set targets and roadmaps for reducing their value chain emissions.

For steel companies using blast furnaces, emissions from the extraction, processing and transport of coal can make up a significant share of their Scope 3 footprint. Specifically, methane emissions from metallurgical coal mining fall under steelmakers’ Scope 3 Category 1 (Purchased Goods and Services) emissions, but are currently rarely reported.

The steel industry plays a major role in the EU economy. With average annual production of 140 million tonnes (Mt) of crude steel, the sector is responsible for around 5% of the EU’s CO2 emissions. In 2023, the EU mined 12.5 Mt and imported 32 Mt of coking coal, mainly to supply the steel industry. 

Recognising the importance of the metal industry and its climate impact, the European Commission introduced the European Steel and Metals Action Plan in March 2025, as part of the broader Clean Industrial Deal. The policy aims to phase in greener production routes and wind down the 51 blast furnaces which currently support 55% of the region’s steel production.

Yet, this transition is not guaranteed. As of 2025, around half of the blast furnaces are expected to run beyond 2035, or have no announced retirement date. 

While Europe has taken strong climate action, the methane embedded in the metallurgical coal supply chains of its largest steelmakers shows an area of oversight.

ArcelorMittal owns the largest share of the EU’s blast furnace capacity

ArcelorMittal, the largest steelmaker in the EU, owns over 30% of the blast furnace fleet by capacity within the region. In 2024, its blast furnace-based steelmaking produced 25.7 Mt of crude steel in Europe, accounting for 44% of the company’s total output.

For its global operations, ArcelorMittal annually consumes around 28 Mt of coking coal and PCI, but does not disclose the associated methane footprint. Ember estimates that if the company included coal mine methane emissions, ArcelorMittal Europe’s Scope 3 emissions would increase by 50%, based on its 2024 emissions reporting.

Australian coal feeds ArcelorMittal’s plants in the EU

The seaborne trade data shows ArcelorMittal imported 1.2 Mt of metallurgical coal and high calorific value thermal coal from Australia to supply its plants in Ghent (Belgium), Dunkerque and Fos-sur-Mer (France) in 2024. Considering ArceloreMittal’s share of steel production in the EU, Ember estimates that this accounted for around 9% of the company’s total coal imported to the EU.

The remaining ~91% of ArcelorMittal’s Europe coal imports are not publicly disclosed, nor can they be fully traced through existing customs or shipping records. This lack of transparency severely limits the ability to assess the full scope of methane imported by ArcelorMittal to the EU via Australian coal.

For mines identified, Ember estimates that methane from this coal could add 3.9 kilotonnes (kt) of emissions to ArcelorMittal Europe’s value chain footprint. That equals 111.15 kt CO2e, or 320 kt CO2e when applying GWP20, equivalent to the annual climate impact of 108,000 cars. 

Additionally, trade data identified that the company sourced coal from some of Australia’s gassiest mines like Carborough Downs and Moranbah North for its operations in Brazil. 

Coal mine methane should be reflected across all operations

Over the past year, ArcelorMittal has cancelled green hydrogen-based projects in Germany and France. The company has also been investing over €270 million to modernize blast furnace production lines at its French plants. Additionally, the Polish government is considering providing public support – potentially around €230 million – to the company, for modernizing one of the blast furnaces in Dąbrowa Górnicza.

Such decisions suggest that the company may continue to rely on coking coal in upcoming years in its operations within the EU. If so, it should reassess its climate impact by clearly reflecting coal mine methane in Scope 3 reporting.

More importantly, the Scope 3 accounting should apply across all ArcelorMittal’s global operations. Consistent disclosure helps create a level playing field in the steel industry and prevent carbon leakage.

Decarbonisation accountability should also extend to joint ventures like AM/NS India

ArcelorMittal also has a 60/40 joint venture with Nippon Steel, called AM/NS India. AM/NS India plans to bring two new blast furnaces online in 2026, which would almost double the capacity to 15 Mt. In the longer term, it has also signalled an ambition to reach 40 Mt of annual production capacity. ArcelorMittal, Nippon Steel and their financiers and investors should ensure the joint venture is delivering adequate decarbonisation efforts, and disclose its Scope 3 emissions accordingly.

Despite the declining trend, Japan remains the world’s third largest crude steel producing country, with an output of 84 Mt in 2024. The steel sector is responsible for around 10% of the country’s total GHG emissions. 

Currently, Japan has around 80.6 Mt of blast furnace capacity. Nippon Steel owns around 54%, followed by JFE Steel with 36% and Kobe Steel with around 10%.

Nippon Steel is the world’s fourth largest steelmaker. Overseas assets account for 28% of its total capacity, but over 95% of its domestic production still relies on blast furnaces. 

Annually, the company consumes around 25 Mt of coking coal for its domestic operations, equivalent to 35-40% of all coking coal imported by the Japanese steel sector. Based on its 2023 emissions reporting, Ember estimates that unreported coal mine methane would contribute to 165.9 kt of methane emissions, and increase Nippon Steel’s reported Scope 3 emissions by 23%.

Australian coal is an emissions hotspot in Nippon Steel’s value chain

Seaborne trade data suggests that in 2024, Nippon Steel imported around 11.3 Mt of metallurgical coal and high calorific value thermal coal from Australia. This amounts to roughly 45% of its total consumption and contributes to 43 kt of methane emissions, equivalent to 1.3 MtCO2e to Nippon Steel’s value chain. Applying GWP20 raises this to 3.6 MtCO2e.

This also means methane emissions from Australian coal used by Nippon Steel alone could add 20% to Japan’s energy-related methane emissions (215 kt) estimated by the IEA.

Notably, coking coal from Hail Creek and Moranbah North accounts for around 4% of Nippon Steel’s total metallurgical coal supply. These mines have higher methane intensity, significantly affecting Nippon Steel’s short-term climate impact. 

The company should also be aware of coal coming from suppliers who continue to rely on methane emissions estimation methods, which may lead to underreporting and increased regulatory risk.

Unabated coal is an unresolved supply chain risk

Most of Nippon Steel’s decarbonisation progress so far has resulted from lower production. But to ultimately address local emissions in Japan in a more sustained way, the company is developing hydrogen injection technology to reduce carbon emissions from its blast furnaces. However, it should be noted that fugitive methane emissions from upstream coal extraction will not be affected by this technology. 

In response to the climate-related shareholder proposals in 2024, the company is considering disclosing primary data for major emission sources in its value chain and reviewing potential CO2 reduction targets. However, whether and how coal mine methane is addressed remains unclear.

Moranbah North Coal Mine

Moranbah North is an underground hard coking coal mine located in the Bowen Basin. Since 2008, methane captured from the mine has been used for electricity generation at the Moranbah North Power Station.

Despite the abatement effort, a methane incident in March 2025 led to a temporary suspension of production. With a potential acquisition deal currently under negotiation, the continuation and advancement of methane capture and abatement projects will ultimately depend on the mine’s future owner. Coal from Moranbah North increases steel’s climate impact by 33%.

Nippon Steel has stated that coking coal remains essential in carbon-neutral steelmaking, and continues to invest in coal mining in Australia and Canada to secure supply. As part of this strategy, Nippon Steel must ensure that coal mine methane emissions in its supply chain are properly accounted for.

South Korea is the sixth largest steel-producing economy. Currently, it has around 51.4 Mt of blast furnace capacity, with over 75% operated by POSCO.

POSCO ranked as the world’s eighth largest crude steelmaker in 2024, with large-scale integrated worksites at Gwangyang and Pohang. While overseas assets account for roughly 10% of POSCO’s total production capacity, 97% of its domestic output relies on blast furnace technology. 

Annually, POSCO consumes around 22.5 Mt of metallurgical coal for its domestic worksites. Ember estimates that this contributed to 160.9 kt of methane emissions, and added 49% to the company’s reported Scope 3 emissions in 2024.

Australia’s coal adds 37.5 kt methane to POSCO’s value chain

Seaborne trade data shows that in 2024, POSCO imported 9 Mt of metallurgical coal from Australia, making up 39% of its total consumption.

This contributed 37.5 kt of methane emissions, equivalent to 1.1 MtCO2e, to POSCO’s supply chain emissions. Using GWP20, this figure rises to 3.1 MtCO2e. 

This also means that methane emissions from the Australian metallurgical coal imported by POSCO alone, could add 26% to South Korea’s energy-related methane emissions (146 kt) estimated by the IEA

Notably, POSCO sourced coal from some of Australia’s gassiest mines, such as Hail Creek and Moranbah North, which would significantly increase the company’s supply chain emissions if methane emissions were properly accounted for.

The company should also be aware of the risks of coal suppliers relying on emissions factors and unverified emissions estimates. 

Identified emissions hotspots unlock POSCO’s Scope 3 reduction opportunities

POSCO’s short term decarbonisation strategy is focused on improving blast furnace efficiency and applying CCUS technology. No confirmed plans have been announced for conversion or retirement of its blast furnaces, suggesting the company will likely continue to rely heavily on coal until 2035. 

POSCO’s delay in shifting away from coal-based production has already seen the company added to investor exclusion lists with strict climate requirements in recent years. 

To reduce associated short-term climate risks and demonstrate its commitment towards carbon neutrality, POSCO should set ambitious Scope 3 reduction targets looking at 2030. Specifically, fugitive methane emissions from upstream coal extraction and the measure to address them should be properly reflected in the company’s transition plan.

Carbon Capture, Utilisation and Storage (CCUS)

Carbon capture, utilisation and storage (CCUS) refers to technologies that capture CO2 from industrial sources and either use it for various purposes or store it underground. Many steelmakers have included CCUS in their transition plans. However, blast furnace steel plants may require multiple points of carbon capture. Fugitive methane from coal mining is largely not affected by CCUS technologies at steel plants, which are designed to capture CO2 emissions.