IFC Partners with Gunung Raja Paksi to Drive Decarbonization in Indonesia's Steel Industry with $60M Investment

The $60 million loan (in Indonesian rupiah equivalent) will help GRP boost its production of low-carbon steel through the expansion of Electric Arc Furnace (EAF) technology, which uses scrap metals to produce steel with significantly lower emissions compared to traditional methods.

The International Finance Corporation (IFC) has announced a loan to PT Gunung Raja Paksi Tbk (GRP), a leading steel producer in Indonesia, to support the decarbonization of the country's steel industry. The $60 million loan (in Indonesian rupiah equivalent) will help GRP boost its production of low-carbon steel through the expansion of Electric Arc Furnace (EAF) technology, which uses scrap metals to produce steel with significantly lower emissions compared to traditional methods.

This initiative is in line with Indonesia’s climate goals, helping to cut greenhouse gas (GHG) emissions in a sector that accounts for around 8% of global emissions. By adopting EAF technology, GRP aims to reduce emissions by more than half compared to the global steel production average. This will also contribute to the country’s growing steel demand while reducing reliance on high-carbon steel imports.

The steel industry is vital for infrastructure development and urbanization, but decarbonizing it is crucial given the global push for sustainability. With demand for steel expected to exceed two billion tons by 2040, especially in Asia, low-carbon solutions like those being implemented by GRP are critical.

Kimin Tanoto, Chairman of GRP's Executive Committee, emphasized the importance of decarbonizing the steel sector to sustain its contribution to global prosperity while transitioning towards greener production methods. GRP’s efforts include decommissioning its unused blast furnace, enhancing the energy efficiency of its EAF, and exploring new steel products compatible with EAF technology.

In addition to the financing, IFC has signed an advisory agreement with GRP to support its decarbonization strategy. This partnership also marks IFC’s first steel investment in Asia in over a decade, underscoring the significance of reducing emissions in Indonesia, which is a major steel producer in Southeast Asia.

This project supports Indonesia’s broader target of achieving net-zero emissions by 2060, while also positioning GRP as a leader in sustainable steel production in the region.