The original antagonists from the first game return as defiant separatists in Steel Battalion: Line of Contact. After two years of interim administration by the occupying Pacific Rim Forces provisional goverment, the inhabitants of Hai Shi Dao have launched a successful counterattack, driving their oppressors off the island nation. Hai Shi Dao patriots fight for freedom and independence from the Pacific Rim Forces governing council.

Hai Shi Dao VTs are generally geared towards long distance engagements and mountainous terrain. Hai Shi Dao fields the more support role VTs than all other factions combined, making them the faction of choice for complex strategy minded pilots. This faction also has access to the greatest number of third generation VTs, but two of the three are very deficient in performance, even when compared to some second generation tanks.

Pacific Rim Forces were the protagonists of the original Steel Battalion game. They return in Line of Contact as invading oppressors wishing to reinstate their governmental control on the breakaway nation of Hai Shi Dao. Unlike the previous conflict in which PRF was the rightful crusader, the current scenario portrays the faction in a ruthless light, with total domination and iron-fisted rule being the order of the day.

Pacific Rim Forces field a number of VTs which are designed to be multi-role combat platforms, as well as several specialised fast-attack models. The direct combat mindset is further enforced by the melee weapon options that nearly half of their models possess. Most of their VTs are designed for close combat engagements and do not handle well on adverse terrain but cannot be matched in open field combat. PRF has access to the greatest number of Rail Gun capable VTs, in the form of the Prominence M2 and Prominence M3.

The Right Brothers are a splinter faction from the Hai Shi Dao which appear in the Third Turn of each Round. Located in the Northern Central highlands of the Hai Shi Dao island, the Right Brothers faction specialises in guerrilla warfare tactics and resistance strategies to keep their ancestral homeland free from outsiders.

Right Brothers self-produced VTs are slightly less combat capable than the mass production models of the Hai Shi Dao or Pacific Rim Forces. The Right Brothers have limited production capabilities in their separatist state and rely on outside VT suppliers to augment their combat forces. Excepting externally sourced VTs, every Right Brothers VT is capable of mounting a Marker Launcher which is an invaluable reconnaisance tool.

Pilots for the Right Brothers are seen as devout individualists who fight for freedom and the right to live out from under external rule.

The Jaralaccs Mercenary Forces where only encountered a few times in the original Steel Battalion game, always in the service of the Hai Shi Dao. They return in Line of Contact as assassins for hire who may fight for the highest bidder of their services. Jaralaccs Mercenaries show no loyalty to any one faction and may even switch sides from one battle to the next. This faction is available to transfer to after Turn Five in a Round.

Jaralaccs Mercenaries almost exclusively field heavy class combat VTs, all of which are devastating lethal in their designated combat role. Jaralaccs are the only faction which have general access to heavy class VTs, but they are also the most expensive general release VTs, requiring a pilot to perform very well or face the possibility of running out of funding. Three of the four models available to Jaralaccs pilots are capable of mounting highly destructive melee weaponry, as well as Anti-VT mines, making them fearsome close range opponents.