Steel is on its way to net zero

SEATTLE (Scrap Monster): The need to combat climate change on an international scale makes the decarbonization of the steel industry irreversible

The steel industry accounts for 7-9% of the world’s greenhouse gas emissions. Therefore, the process of gradual reduction of CO2 emissions from steelmaking has already been launched in most leading producing countries. The pace of progress varies, as it depends on a number of factors. So, what barriers do companies face and what incentives can accelerate the green transition?

Factor 1: Resources

Large coal reserves have made the BF-BOF route the dominant steelmaking method in China, India, Russia, Canada, Australia, Germany, the UK, Vietnam, South Africa, Indonesia, Ukraine, and other countries. Whereas the countries of the Gulf and North Africa, as well as Iran have huge reserves of natural gas. Therefore, all steelmaking here is based on the NG-DRI-EAF model (natural gas-based DRI production followed by steelmaking in electric arc furnaces).

There are exceptions to the rule. The US, the world’s third largest coal producer, produces most of its steel in electric arc furnaces (EAF). And vice versa. Despite having no coal mining capacity of its own, Brazil has built its steel industry predominantly on the BF-BOF route, using local charcoal.

Finally, there are countries with no metallurgical raw materials of their own. And they have made different choices in their time. Turkey relied on the construction of EAF plants, while Japan and South Korea relied on integrated mills.

Given that the BF-BOF steelmaking route emits an average of 2.2 to 2.4 tons of CO₂ per ton of steel, compared to just 0.4 to 0.7 tons for the EAF process, it’s clear which technology has the advantage in decarbonization. Steel products in the Gulf and North African countries, as well as Iran, are already virtually green.

Whereas the rest will have to invest heavily to achieve even that level. And the higher the share of BF-BOF mills in the national steel industry, the more investment is required. But where to invest?

Company strategies

Currently, 2 ways of decarbonization are known. The first one is replacement of BF-BOF capacities by NG-DRI-EAF, with further prospect of transformation into H2-DRI-EAF (DRI production using hydrogen with subsequent steelmaking in electric arc furnaces). This strategy has been chosen by:

* British Tata Steel UK and British Steel for the Port Talbot and Scunthorpe steelworks. The projects cost £1.25 billion and £2 billion;

* ArcelorMittal North America and Algoma Steel of Canada for the Dofasco and Algoma mills. The projects cost $1.8 billion and $880 million;

* British Liberty Steel for Australia’s Whyalla Works. The cost of the project is $485 mln;

There are fully completed cases as well.

• Ukrainian company Interpipe completed construction of an EAF plant with a capacity of 1.32 million tons in 2012, completely abandoning the previous open-hearth steelmaking process. The project cost $700 mln;
  Russia’s United Metallurgical Company plans to launch a new Ecolant EAF plant with an annual capacity of 1.8 mln tons of steel this year. The cost of the project is $1.79 bln.

The advantage of this way is that it is based on the best available technologies (BAT). This means that the results of their implementation and payback can be confidently predicted. Whereas the second currently known decarbonization route, the use of hydrogen in blast furnaces, is still at the stage of searching for optimal solutions.

* The US Cleveland-Cliffs in January 2024 at its Indiana Harbor mill completed trials of H2 injection into blast furnace No. 7, the largest in North America;

* India’s Tata Steel in April 2023 conducted a successful hydrogen injection trial in BF at its Jamshedpur mill;

* Turkey’s OYAK Mining & Metallurgy in 2024 completed a hydrogen injection trial in BF at its Erdemir mill;

* Japanese Hydrogen Steelmaking consortium of Nippon Steel, JFE Steel and Kobe Steel built small 2 pilot BFs at East Nippon Works in Kimitsu and JFE Steel in Chiba in 2023 for research on H2 utilization in blast furnace production;

The use of hydrogen in blast furnaces has limited potential to reduce CO2 emissions (up to 20%) and may not lead to low-carbon steel production, unlike electric arc furnaces and DRI produced using hydrogen.

According to Hideoki Suzuki, Nippon Steel’s Executive Director for Environment, the use of H2 in blast furnaces does not imply complete abandonment of coke. Therefore, the remaining volume of greenhouse emissions is planned to be neutralized using CCUS technology (capture, storage and use of CO2). Now it is far from industrial implementation.

It is all about the cost. Nippon Steel has managed to achieve a cost of carbon capture at $149/t CO2 and this is the best achievement so far. Obviously, this is too high a cost per 1 ton of finished steel. Plus dependence on technical solutions in related industries, primarily in terms of carbon transportation and storage. Therefore, it is very difficult to predict progress.

Under these conditions, many players do not have long-term decarbonization programs. Targets are limited to reducing CO2 emissions by 10-25% by 2030-2035 through BAT. Among them are all major Brazilian and Russian steel companies, Canadian Stelco, Japanese Kobe Steel, Australian Steel Products Ltd. (part of BlueScope Corporation), and others. Nevertheless, in accordance with national commitments, steelmakers in most countries must switch to carbon-neutral production by 2050. In China and Russia – by 2060, in India – by 2070.

Factor 2: The role of suppliers

ArcelorMittal North America in Canada and Liberty Steel Australia are also planning to build DRI plants with annual capacities of 2.5 million t and 1.8 million t as part of decarbonization. Having such a facility in the future will strengthen the market position of these companies.

But many will have to look for third-party suppliers. First of all, those who now use steel scrap to operate their EAFs. Its availability on the global market will decrease as more and more EAF facilities are built, including to replace existing BF-BOFs.

For instance, in China, no new BF-BOF projects have been approved by the authorities in 2024. According to the Centre forResearch on Energy and Clean Air, permits were issued only for the construction of EAF plants with a total capacity of 7.2 million tons per year.

According to forecasts by the consulting company Wood Mackenzie, the share of EAF in global steel production by 2050 will rise to 48% compared to 29.1% in 2024. According to various estimates, the operation of these facilities will require about 1 billion tons of scrap per year – while its procurement in 2024 amounted to 460.6 million tons.

Steelmakers cannot expect a twofold increase in scrap procurement. Moreover, more and more countries are resorting to protectionist measures with regard to steel scrap, regulating scrap export in one way or another. Or even banning it completely.

That’s why the importance of DRI, HBI, and CBI is growing – along with the role of countries that can supply these low-carbon iron ore materials to steelmakers lacking the conditions to produce them domestically.

First of all, the Gulf States, North Africa, as well as Iran, Australia, Brazil, Canada and Ukraine could become such suppliers. And they are very interested in such a scenario. Therefore, a number of new projects are being prepared for launch.

• In Mauritania, the state company SNIM together with the consortium CWP Global intends to build a DRI plant with an annual capacity of 2.5 million tons per year;
• Egypt plans to build a DRI plant with a capacity of 2.5 million tons at a cost of €1 billion with a subsequent increase to 4 million tons. The plant will operate in the economic zone of Suez;
• In Algeria, the local company Copresud together with the Italian consortium CEIP Scarl plan to build a DRI plant worth €1 billion;
• In Libya, the Turkish company Tosyali Holding together with the local state-owned company SULB intend to build a DRI plant with an annual capacity of 8.1 million tons. Also in Libya, state-owned LISCO will build a DRI plant with a capacity of 2 million tons;
• Brazil’s Vale will build a complex in Saudi Arabia to produce 12 million tons of CBI per year in the Ras-al-Khair industrial zone;
• Bahrain Steel plans to increase DRI output to 24 million tons by 2028, up from 12 million tons in 2019;
• Emirates Steel is to commission a new 2.5 million tons per year DRI plant from 2027.
• Green Steel of Western Australia is building a $1.74 billion DRI plant in Western Australia;

Production of green H2 is an extremely energy-intensive process. Moreover, it requires “green” electricity. It is obvious that not everyone has such potential for solar energy as the Gulf countries, North Africa, Australia, Iran and Brazil. Or hydropower like Canada.

Therefore, they are the ones that can become suppliers not only of green DRI/HBI/CBI, but also of green H2 for the steel industry in other countries. On this basis, the decarbonization strategy in China, Japan, South Korea, UK, EU states – envisages significant hydrogen imports by 2050.

It is expected that by then its price will have fallen to $1500/t . This should be a commercially acceptable offer. Currently, the cost of producing “green” H2 in different countries ranges from $5000/t to $12000/t. And the cost of transportation is about the same as the price of the product itself. This shows well how far hydrogen decarbonization is now from market realities.

Courtesy: www.seaisi.com