Steel is everywhere in our lives and fundamental to a sustainable future.
Whether it is future energy and transport systems, protection from the impacts of natural disasters, climate-resilient infrastructure, construction and housing, low-carbon manufacturing and agriculture, steel is at the heart of delivering solutions.
Increasingly, circular economic approaches are prolonging steel’s useful life. The steel industry is an integral part of the circular economy – with our material ideally suited to be remanufactured, reused and ultimately recycled.
Transforming steel production
Iron is made by removing oxygen and other impurities from iron ore. When iron is combined with carbon, recycled steel and small amounts of other elements it becomes steel. Once made, it is a permanent resource; it is 100% and infinitely recyclable without any loss of properties.
Steelmaking is a truly global industry, and raw materials (such as iron ore and scrap) and steel products are traded globally to a large extent. Today, over 70% of global steel production takes place in Asia.
The production of steel remains a CO2 and energy-intensive activity. However, the steel industry is committed to continuing to reduce the footprint from its operations and the use of its products.
Our industry fully supports the aims of the Paris Agreement.
The Paris Agreement
The Paris Agreement was adopted in 2015. The agreement’s central aim is to limit global temperature rise to well below 2 degrees Celsius above pre-industrial levels and to pursue efforts to limit the temperature increase even further to 1.5 degrees Celsius.
The agreement aims to reach a balance between anthropogenic emissions and removals by sinks in the second half of the century.
There is no single solution to drastically reducing CO2 emissions from our industry, however, the main elements enabling industrial and societal transformation are:
While each of these components will play a strong role, our focus here is on the first element – mitigating our own emissions from the production of iron and steel.
Being responsible – Reducing our own impact
- In 2020, on average, every tonne of steel produced led to the emission of 1.851 tonnes of CO2 into the atmosphere. In 2020, 1,860 million tonnes (Mt) of steel were produced, and total direct emissions from our sector were of the order of 2.6 billion tonnes, representing between 7% and 9%. of global anthropogenic CO2 emissions.
- In 2020, the International Energy Agency (IEA) released a roadmap that explores potential technologies and strategies necessary for the iron and steel sector to pursue a pathway compatible with the IEA’s broader vision of a more sustainable energy sector.
The IEA Iron and Steel Technology Roadmap
In October 2020, the International Energy Agency (IEA) released its Iron and Steel Technology Roadmap. This document analyses the impacts and trade-offs of different technology choices and policy targets for the industry to be in line with the goals of the Paris Agreement.
Under the IEA’s Sustainable Development Scenario, total direct emissions from the iron and steel sector fall by more than 50% by 2050 relative to 2019. On the same pathway, the emissions intensity of crude steel production must fall by 58%.
The IEA states that steel is vital to modern economies and notes that sustaining the projected demand growth in steel while reducing emissions poses immense challenges. While efficiency improvements will help the industry, there is a need to develop further and deploy a broad portfolio of breakthrough technology options and enabling infrastructure to achieve long term, deep reduction in emissions.
Furthermore, the IEA notes the critical role governments must play in ensuring a sustainable transition of the sector, and concludes with a call to action for governments, the steel industry, the research and NGO communities and other stakeholders.
There are three components to reducing our impact: step up, maximising scrap use, and developing breakthrough technologies:
A portfolio of technology options
There is no single solution to low-carbon steelmaking, and a broad portfolio of technological options will be required to be deployed alone or in combination as local circumstances permit. Our industry is leading many research, development and deployment (RD&D) efforts globally to develop each of these options.
In any given location, the choice of which breakthrough solution to deploy will be determined by the availability of resources and local policy support.
- In areas rich in low-carbon energy, one might expect to see the deployment of water electrolysis and hydrogen reduction.
- In areas with access to CO2 storage, for example the UAE, the USA or the Netherlands, CCS or blue hydrogen reduction may emerge as the most appropriate choice.
- In areas offering potential access to biomass resources, such as Australia or Brazil, sustainable biomass and biochar may be used to substitute coal in existing steelmaking processes.
- Carbon capture and utilisation (CCU) can combine carbon-rich waste gases with renewable energy to create synthetic fuels and chemicals such as acetone and isopropanol that can be used as feedstock by the chemicals sector.
What is low-carbon steel?
worldsteel defines low-carbon steel as steel that is manufactured using technologies and practices that result in the emission of significantly lower CO2 emissions than conventional production.
The IEA roadmap projects that the broad deployment of breakthrough technology will accelerate between 2030 and 2050. However, we can expect to see first movers trial and implement first of a kind plants providing increased quantities of low-carbon steel to the market from the mid-2020s. Learnings from these innovations will support broader deployment across the wider industry by mid-century.
Each company’s choice of which breakthrough technology to invest in will to a large degree depend on the resources available and the policies in place. However, even if the conditions are good, it is clear that the production of low-carbon steel is going to be more expensive than steel production today.
The higher production cost will result from a combination of the following:
- increased operational expenses, due to, for example: use of more expensive low carbon resources such as green hydrogen or low-carbon electricity; CCS equipment requiring additional energy to operate and for CO2 storage
- increased capital expenses due to, for example: replacement of coal-based blast furnace units with hydrogen-based DRI units and basic oxygen furnaces with electric arc furnace units, the conversion of existing equipment to use hydrogen or other fuels; the retrofitting of CCS or CCUS infrastructure
- capital losses due to, for example: the potential early retirement or write-off of long-lived steelmaking assets
The IEA estimates the additional production cost to be between 10% and 50% compared to today, a cost increase significantly exceeding production margins. However, the steel industry will continue to reduce costs by improving its operational efficiency and deploying intelligent manufacturing technologies, partly offsetting the additional cost.
Since the transformation of the industry will be gradual, with some companies/countries/regions moving faster than others, steel produced using low-carbon technologies will be competing with conventionally produced steel (and other conventionally produced materials) in the same market for some time. This will create a first mover disadvantage and policy support will therefore be needed.
Partnerships between governments and the steel industry are fundamental to a sustainable future
The tools available to governments, the steel industry profile, and anticipated access to affordable and low-carbon technologies differ by region and by country. As with the Paris Agreement, we believe that individual countries are best placed to assess and implement policy and technical strategies to suit their particular circumstances.
Nevertheless, it is absolutely clear that governments, the steel industry and other stakeholders will all need to collaborate closely to overcome the technological and economic challenges and create the market conditions necessary for the steel industry to transition to low-carbon steelmaking effectively.
In practice this means that:
The steel industry will:
Mitigate our own emissions
- Accelerate efforts to improve energy and CO2 efficiency across the global industry and work with partners and neighbours to create synergies
- Develop a portfolio of breakthrough technologies through increased research and development
- Ensure that all scrap that is collected is recycled into new steel products by developing technologies that maximise the value of all collected scrap
Create partnerships to enable transformation
- Engage with governments to make clear what will be needed in terms of low-carbon resources and finance to deploy these breakthrough technologies at scale
- Continue to measure and report on our CO2 emissions
Governments need to put a supportive and enabling framework in place that:
- Does not pick winners and losers among possible technologies but recognises that a number of different technologies will be used
- Reduces the first mover disadvantage by increasing the demand for low-carbon materials and creating a market for low-carbon steel, keeping in mind that producing low-carbon steel will be up to 50% more costly than conventionally produced steel today. At the same time, ensuring that policies reward proactive efforts and do not create an economic disadvantage for companies who have already invested in efficient steelmaking
- Enables access to finance for the transition, through, for example, frameworks for sustainable finance.
- Ensures availability and affordability of low-carbon resources, including CCS infrastructure and hydrogen, in quantities necessary
- Takes a life cycle approach and supports the circular economy, including the collection and sorting of end-of-life scrap
- Takes an innovative approach to the regulation of low-carbon processes and products, such as the products from CCU processes
Stakeholders and users of steel also have a role to play and should:
- Demand low-carbon steel and understand that this will come at an additional cost
- Consider the entire life cycle and design steel containing products suitable for remanufacturing, reuse and recycling