📋 Tender Overview
In an effort to drive decarbonization of the steel industry in Indonesia, IFC today announced funding to PT Gunung Raja Paksi Tbk (GRP), one of Indonesia’s largest steel producers. The funds will be used to increase low-carbon steel production, reduce greenhouse gas (GHG) emissions, and support Indonesia’s climate goals.
IFC, a member of the World Bank Group and the largest global development institution focused on the private sector in emerging markets, is providing a loan equivalent to US$60 million to GRP. The funds will be used by the company to increase its capacity to produce low-carbon steel sheets using Electric Arc Furnace (EAF) technology . This technology allows GRP to recycle various types of scrap metal to produce high-quality steel with significantly lower emissions, reducing emissions by more than half the global average for steel production. The collaboration is also expected to help Indonesia meet growing demand for steel and reduce its dependence on high-emission steel imports.
Steel is a building material that plays a vital role in global infrastructure development and urbanization. However, the sector also accounts for around eight percent of global greenhouse gas emissions. With global steel demand expected to exceed two billion tonnes by 2040, driven largely by growth in Asia, there is an urgent need to develop innovative approaches that can reduce the sector’s carbon footprint .
“By working with IFC, GRP will continue to set new standards in the decarbonization of steel production in Asia,” said Kimin Tanoto, Chairman of the GRP Executive Committee . “This investment, the first of its kind in a generation, underscores GRP’s role as one of Asia’s pioneering low-carbon steel plant operators. The steel industry is critical to Asia’s and the world’s prosperity, but the science is clear that we must urgently transition to decarbonization to sustain and grow sustainable prosperity for future generations. If steel companies are not ready to make the green transition, their assets risk becoming stranded. Sustainability is and will be GRP’s guiding principle going forward.”
In addition to this loan, IFC has also signed an Advisory Engagement Letter with GRP to help develop and implement a decarbonization strategy and support GRP’s efforts to reduce greenhouse gas emissions in line with international standards. This support includes exploring financing options to support GRP’s decision to decommission its newly built but never-operated Blast Furnace , as well as improving the energy efficiency of EAF technology and assessing new downstream process options and technologies. As part of this collaboration, IFC will also help GRP identify new market opportunities and explore high-value steel products that are compliant with EAF production requirements, strengthening GRP’s position as a leader in the country’s decarbonization efforts. This will also support Indonesia in achieving its target of Net Carbon Emissions by 2060.
"The partnership with GRP is an important step in our commitment to support the decarbonization of the steel industry in Indonesia, and marks IFC's first steel investment in Asia in over a decade," said Euan Marshall, IFC Country Manager for Indonesia and Timor-Leste . "We are pleased to provide investment and advisory support to help GRP develop a business that is both commercially and environmentally sustainable."
Indonesia is one of the largest steel producers in Southeast Asia and ranks fifteenth in the world. In 2021, Indonesia also imported around 6.6 million tonnes of steel, most of which was produced using Blast Furnace which produces high carbon emissions. Annual steel production in Indonesia is expected to increase from 16 million tonnes in 2023 to 33-35 million tonnes in 2030, driven by increasing demand from the infrastructure, housing and automotive sectors. Therefore, efforts to decarbonize this sector are crucial to achieving a low-carbon future.
