Mild steel is primarily produced by melting scrap in electric arc furnaces, which reduces emissions by two-thirds compared to virgin steel.
The world produces more than 1.8 billion metric tons of steel annually. Demand is expected to grow rapidly in developing countries, but in Europe and North America, where infrastructure is already well-established, demand growth is relatively small. As steel is the world's most emission-intensive industry, accounting for approximately 7% of greenhouse gas emissions, it is crucial to ensure that this growth comes from a zero-emission process.
Companies need to triple their efforts to reduce emissions intensity and invest in less mature technologies over the next five years to achieve net zero emissions by 2050 as planned, according to the latest World Benchmarking Alliance (WBA) research on the steel, cement and aluminium industries.
Steelmaking is traditionally done in two steps – first, iron ore is reduced to iron using metallurgical coal, which acts as a heat source to drive the reaction and also extracts oxygen from the ore. The iron is then converted into steel in a second furnace. This method emits an average of 2.3 tonnes of CO2 per tonne of steel produced.
Around 30% of global steel production has lower carbon emissions. This steel is produced by melting scrap in electric arc furnaces (so-called secondary steelmaking). This method can reduce emissions by two-thirds, but much of it uses electricity from fossil fuel grids. Huge financial support is needed to prepare the industry for a net-zero future. This cannot just be done by companies themselves. But if a company has a clear vision of its strategy for 2050, they will know what they need to invest in now.
However, only five steel companies have currently set or committed to a near-term (2030) science-based target initiative; and only three have committed to setting a net zero emissions target.
Using green hydrogen (made from renewable energy) instead of coal to reduce iron ore production could make primary steel production virtually emission-free. The resulting direct reduced iron (DRI) is then fed into electric arc furnaces to produce steel. Europe is leading the way; Swedish steelmaker SSAB, iron ore producer LKAB, and energy company Vattenfall have pioneered this path with their Hybrit technology and are producing batches of fossil-free steel for testing by customers willing to pay a premium for clean steel.
Steelmakers in the Middle East have already started using natural gas rather than coal to reduce iron ore, and some European manufacturers are also considering this direction as they wait for green hydrogen to become available and affordable, however, there are major concerns about the potential for this to lock in the gas.
ArcelorMittal, which has received more than 1.5 billion euros in grants from several European governments, said green hydrogen must cost $1 to $1.50 per kilogram (compared with the current cost of $6) to be competitive with natural gas, and it is not confident that hydrogen will be available in Europe at the required price by 2030.
A huge obstacle to green hydrogen is the vast energy requirements of this fossil-free pathway. One estimate suggests that producing enough hydrogen to completely decarbonize the steel industry would require 20% more electricity than the world currently produces from all energy sources combined. LKAB estimates that by 2050, when it has fully transitioned its operations, it will need 70 terawatt hours (TWh) of clean energy per year.
Nucor, the largest U.S. steel producer, is partnering with Microsoft and Google to pool their needs for technologies such as long-duration storage of green hydrogen, which will help balance the electric grid and fill gaps when solar and wind power is unavailable.
In March, the US government announced a $1 billion investment in hydrogen steelmaking, with SSAB's US division among the beneficiaries. Hydrogen production also received generous subsidies under the inflation reduction bill. Separately, the US Department of Energy's Advanced Research Projects Agency-Energy (ARPA-E) will provide $28 million in funding to support the development of new technologies that could potentially enable zero-emission steel production at the same cost as today's blast furnaces.
One of the beneficiaries of ARPA-E is Electra, a green iron ore startup based in Boulder, Colorado. The company's low-temperature electrochemical process can utilize low-grade iron ore that is currently considered waste by the mining industry. In addition to reducing energy requirements, Electra says its system can be started and stopped to utilize intermittent renewable energy. According to ARPA-E, if the project is successful, the iron produced will be used for green steel, which will reduce greenhouse gas emissions by 80% and cost half of existing fossil fuel-based processes.
Steel is the easiest material to recycle and reuse, and as countries decarbonize, demand for scrap steel will increase. 70% of steel production in the United States is already done through this secondary route, and switching to renewable energy as an energy source will further reduce emissions. Many countries in Asia have already restricted the export of scrap steel, and new European legislation will restrict exports from 2027.
British industry fears EU legislation will increase demand for its steel scrap at a time when British steelmakers choose to close blast furnaces, as this scrap will increasingly need to be used domestically.
Another barrier to increased recycling is that secondary steel accumulates impurities, such as copper and other alloys added to meet the needs of different industries. Energy and climate policy analyst Chris Bataille suggests that the demand for primary steel could be reduced by improving scrap sorting and developing closed-loop systems.
German automaker Volkswagen, for example, is expected to be the first customer for its neighbor Salzgitter AG’s planned low-carbon steel, with both companies aiming to develop closed-loop recycling of steel between their two plants.
Tightening restrictions under the EU ETS will increase pressure on steelmakers to embrace cleaner production methods, with licensing rights set to disappear entirely when the EU Carbon Border Adjustment Mechanism (CBAM) comes into effect from 2026.
The CBAM is designed to prevent production and emissions from shifting to countries with less stringent climate policies, and Heaton said it was prompting overseas industries to think about how to compete in the EU market.
Heaton added that because adding scrap steel lowers emissions, “if companies only required volumetric emissions in their products, there would be a lot of greenwashing.” Therefore, ResponsibleSteel’s standards allow every steel mill to be compared on an equal basis to drive progress across the industry and achieve global emissions reductions.
Sources:
Reuters（2024.6.3）Steel companies ‘yet to prove their mettle’ in race for net zero
