Years after major global banks began restricting finance for thermal coal used in power generation, many continue to support metallurgical (met) coal, a key raw material in conventional steelmaking.
Banks often argue that, unlike coal-fired power generation, steel production has no commercially viable alternatives to met coal at scale. ANZ, for example, states that there are no readily available and commercially viable substitutes for met coal in large-scale steel production, and continues to support its met coal mining customers.
However, this position increasingly overlooks developments in steelmaking technology. Around 30% of global steel is already produced without relying on met coal, and that share is expected to grow as recycling, electric arc furnaces (EAFs), and direct reduced iron (DRI) technologies expand.
ANZ is not alone in maintaining this position. Macquarie Bank initially committed in 2021 to achieving zero on-balance-sheet lending to coal companies by the end of 2024, a target it subsequently met. However, in November 2021, it reversed course and resumed lending to met coal companies, citing a lack of viable alternatives.
NAB maintains that readily available substitutes for met coal in steelmaking remain limited, while Westpac describes support for met coal as vital to large-scale steel production. Both banks, however, have policies restricting finance for new met coal mines.
The policy gap extends beyond Australia. Several European banks that led the global shift away from thermal coal still lack specific restrictions on met coal financing.
Some major investors have also maintained or resumed exposure to met coal despite previously withdrawing from thermal coal investments on climate grounds. AustralianSuper, Australia’s largest superannuation fund, sold its holdings in Whitehaven Coal in 2020 when the company was involved in both thermal and metallurgical coal mining. Whitehaven subsequently expanded its met coal business through acquisitions in Queensland.
AustralianSuper later viewed the expansion, supported by demand from customers in markets such as India, as an opportunity to reinvest. It is now Whitehaven’s largest shareholder, holding a 13.7% stake.
Alternatives to Met Coal Are Expanding Worldwide
The transition away from conventional met coal-based steelmaking is already underway across several major economies.
In the United States, more than 70% of steel is produced using recycled scrap in electric arc furnaces. These operations can also be supplemented by direct reduced iron and pig iron, demonstrating how steel production can rely less on conventional coal-intensive processes.
The European Union is following a similar path, with approximately 45% of its steel already produced in EAFs. Several DRI plants are also under development, supporting a transition towards a steel industry built increasingly around scrap recycling and alternative ironmaking technologies.
Major Japanese steelmakers, including Nippon Steel and JFE Steel, have begun shifting towards greater use of EAFs as part of their efforts to reduce dependence on conventional met coal-based production.
South Korea has also announced plans to accelerate the decarbonisation of five major industrial sectors, including steel. Its strategy includes developing hydrogen-based steelmaking, with the ambition of becoming the first country to mass-produce steel using hydrogen instead of met coal.
The expansion of direct reduced iron production provides further evidence of this transition. Midrex, a leading supplier of DRI technology, has reported that global DRI capacity increased by 44% between 2020 and 2025, with further expansion expected.
Canada is also positioning itself to participate in the emerging clean iron industry. In August, the country announced support for CAD70 billion in clean energy investment and high-grade iron ore mining. Greater availability of suitable iron ore could help expand DRI production and support the development of lower-emissions ironmaking.
The shift is not confined to developed economies. China, the world’s largest steel producer, is using less met coal as domestic steel demand declines. Greater use of recycled scrap is expected to reduce coal requirements further, while the country’s adoption of DRI-based steelmaking is also progressing.
Together, these developments challenge the argument that met coal will remain indispensable to steel production over the long term.
India May Not Deliver the Growth Australian Met Coal Producers Expect
Australian met coal producers frequently point to India’s expanding steel industry as a major source of future demand. However, India’s changing import strategy presents challenges for Australian suppliers.
Concerned about relying too heavily on a single country for a critical industrial input, India has been diversifying its sources of met coal. According to S&P Global, Australia’s share of India’s met coal imports fell from approximately 80% in 2020 to 37% in the first half of 2026. Indian imports of Australian met coal also declined by 7.4% year on year during the same period.
This shift comes amid concerns about the long-term reliability and availability of Australian supply. The Australian government has repeatedly revised down its forecasts for met coal exports, while recent legal developments concerning mine approvals and carbon emissions have added further uncertainty to the industry’s outlook.
India’s diversification has coincided with the withdrawal of several major diversified mining companies from Australian met coal operations. Rather than developing substantial new capacity, some Australian coal producers used the strong cash flows generated by the surge in coal prices following Russia’s expanded invasion of Ukraine to acquire existing mines.
As a result, Australian met coal production has increasingly shifted into the hands of companies whose businesses are heavily concentrated in coal mining.
Diversified mining groups have moved in the opposite direction. South32 and Anglo American have exited Australian met coal mining, while Rio Tinto completed its withdrawal from coal in 2018.
BHP, by contrast, continues to support met coal as a long-term component of steel production. The company has argued that carbon capture and storage (CCS) could help reconcile continued met coal use with global decarbonisation goals, although the commercial viability and scalability of this approach remain significant questions.
BHP continues to pursue approvals to extend met coal operations in Queensland’s Bowen Basin. At the same time, the company has indicated that its Queensland met coal assets are struggling to compete for investment and have generated no returns for the business.
These developments raise questions about the long-term investment case for Australian met coal, particularly as steelmaking technologies evolve and major importers diversify their supply chains.
Banks Are Beginning to Tighten Met Coal Financing Policies
As alternative steelmaking technologies expand and the long-term outlook for met coal becomes less certain, the scope for banks to finance new projects may narrow.
Some financial institutions have already introduced restrictions that go beyond conventional thermal coal policies.
France’s Société Générale was an early adopter of met coal financing restrictions. Its policy excludes financing for met coal mining projects, including new mines and extensions to existing operations. The bank also restricts new banking relationships with companies that generate more than 50% of their revenue from met coal mining.
In 2026, the UK’s NatWest updated its policies to exclude project financing for new met coal mines. It also moved away from the position that met coal should be treated as essential to the future of steel production.
These policy changes reflect the broader transition underway in the steel industry. Recycling, EAFs, DRI, and hydrogen-based production are creating pathways to reduce dependence on conventional met coal-based steelmaking.
The long-term outlook for Australian met coal faces additional challenges from repeated downward revisions to export forecasts, India’s efforts to diversify its imports, and uncertainty over the competitiveness of existing mining operations.
For banks, these developments raise important questions about the long-term risks associated with financing new met coal projects. As steelmakers invest in alternative technologies and major importers reassess their supply chains, financial institutions may need to reconsider whether their lending policies adequately reflect the direction of the industry.
Met coal remains important to conventional steelmaking today, but its role is changing. As alternatives expand and commercial deployment progresses, the assumption that met coal will remain indispensable to the global steel industry is becoming increasingly difficult to sustain.
Bank financing policies will need to account for that transition, rather than treating the industry’s current dependence on met coal as a permanent condition.
