Are Steelmakers Closer to Fully Decarbonizing Steel Production?

Steel can very well be one of the most eco-friendly commodities, but its industry is also one of the most energy-intensive, representing more than 8% of global CO2 emissions. Since the ferrous metal is essential to the world’s turn towards sustainability, its decarbonization is critical.

So, are steelmakers anywhere near to speeding up this process?

The Urge Of A Transformation

According to SMS Group, in steel production, “the primary stage based on coke making and blast furnaces contributes to more than 80% of greenhouse gas emissions.”

The underlying advantage for steelmakers in improving the sustainability of their operations is breaking away from the increasingly tight regulations. As ESG increasingly becomes a factor in every investment and macro risk assessment, capitalizing on these metrics can yield steelmakers a competitive advantage.

According to Saurabh Bhatnagar, EY India National Mining & Metals Consulting Leader, “Over the past 50 years, advances in technology and a move from traditional blast furnaces (BFs) toward the electric arc furnace (EAF) have reduced energy use in steel production by 60%.”

Current Methods

At present, BF steel production is used by 75% of steelmakers, maintaining the original mix of iron ore, coal, and recycled steel. To create the steel, iron ore is reduced and then must be melted and molded according to specific needs.

Alternatively, EAF is the evolution in steel production, leading to the use of simpler processes such as the electric arc furnace route. It integrates the smelting of recycled steel and electricity, in addition to additives such as iron alloys to obtain the desired physical properties.

Like the blast furnace method, EAF steel production has the same stages and smelting can be complemented with injected oxygen, but, due to the limited availability of recycled material to carry out this process, this type of steel is produced in 25% in steel companies.

“The continued move to EAF will drive down emissions further, but creating a genuinely sustainable industry will require broader, bolder measures from all players across the steel value chain,” says Bob Stall, EY US Mining & Metals Leader.

Future Technologies

The use of new technologies is perhaps the most obvious way to decarbonize steel, but their integration remains a challenge for the industry.

Through carbon capture, companies can reutilize more than 90% of the exhaust gas from BFs for combustion, while also storing the remaining 10%. Although this technology is nothing new, it is still expensive and technically challenging.

Determining whether carbon capture is suitable may depend on overall operating costs, with technology costs still high at this stage of maturity.

On the other hand, the use of green hydrogen with direct reduced iron (DRI) and EAF, “is likely to be the cleanest alternative for steelmakers in the future, although it will be some time before hydrogen is economically feasible and scalable,” says Bhatnagar.

Last March, EIT Innoenergy revolutionized the European energy and industrial market by announcing a €2.5 billion investment in the H2 Green Steel initiative, which will establish the world’s first and largest large-scale green steel production project.

According to Jacob Ruiter, CEO of EIT Innoenergy Benelux, the H2 Green Steel initiative is coupled to a continuously decarbonizing electrical system and, by focusing first on energy- or CO2-intensive industries such as steel, cement, and fertilizers, it can have a major impact in a relatively short time.

Beyond Technology

For Bhatnagar, improving on ESG metrics will unlock benefits for steelmakers beyond compliance and stakeholder expectations.

“Companies with a better ESG performance can secure project financing at a lower cost, enhance resources management, reduce operational risk and increase resiliency against future changes.”

He also asserts that steelmakers should be ready to make a balanced trade-off between industry, end consumers, and the environment.

“Aligning stakeholders will be critical to quicken the pace of change needed and to enable the collaboration required to co-develop feasible solutions to complex challenges.”

About the Author:

Cristian Bustos is senior editor for ValueWalk.com. Previously, he was the news correspondent in Germany for Colombian radio broadcast Blu Radio, where he covered the 2017 German federal election and the 2017 G20 Hamburg summit. He was also public relations consultant to EY and HAYS, and has covered a wide range of topics including business, finance, and international relations, as well as verticals such as automotive, aerospace and renewable energy. Email him at cbustos@valuewalk.com.