· 8 min read
Modern life is surrounded by Iron and Steel. Buildings, skyscrapers, bridges, power transmission towers, aeroplanes, vehicles and ships all use significant amounts of iron and steel in their construction (see Figure 1). They are also an essential ingredient for energy transition. Renewable energy sources such as wind turbines are 71-79% steel, and solar panels, geothermal plants, and electric vehicles heavily depend on iron and steel products.
As steel is essential for modern economies, steel demand is expected to grow substantially in the coming years due to its direct relationship to population, GDP growth, and overall industrialisation. This newsletter explores several decarbonisation strategies, highlighting the urgent need for industry to address climate change while driving economic progress.
Figure 1: Global End-Use by Sector (in 2022)
Understanding the Iron and Steel-Making Process
Iron and steelmaking involves two main routes:
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BF-BOF route: In the Blast Furnace (BF), iron ore is reduced to molten iron using coke and limestone. The molten iron is then refined in the Basic Oxygen Furnace (BOF), where oxygen is blown in to remove impurities like carbon, creating steel. It is the most common primary production pathway, which accounts for ~70% of global steel production and around 90% of primary production relying on coal injection.
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DRI-EAF route: In the Direct Reduced Iron (DRI) process, iron ore is reduced using natural gas or coal without melting. This DRI is fed into an Electric Arc Furnace (EAF), where electric energy melts the iron and scrap to produce steel.
Energy and Emissions
Energy: The iron and steel industry accounted for 845 Mtoe of energy consumption globally in 2019, representing 20% of industrial energy use and 8% of total final energy use. Coal currently meets 75% of the sector's energy and feedstock demand, with electricity and natural gas accounting for the remaining energy demand.
Emissions: Globally, the sector accounted for 2.6 Gt of direct CO2 emissions and 1.1 Gt of indirect CO2 emissions associated with purchased energy in 2019. Of the steel sector’s direct CO2 emissions, ~0.3 Gt are process emissions from using lime fluxes and ferroalloy production.
The energy and emission intensities of the main production routes are stated in the figure below.
Figure 3: Production Emission and Energy Intensity in tCO2e/t and GJ/t, respectively (Source: IEA, 2020)
Global and Company Insights:
The iron and steel sector employs more than 6 million people directly and engages 40 million indirect jobs. It generated around USD 2.5 trillion in global revenue, 3% of GDP.
The table shows that China accounts for 53% of the world’s steel production, followed by India, Japan, the USA, and Russia. Globally, around 1.9 billion tonnes of steel is produced, out of which the top 10 companies account for just over a quarter of global output, with the top 25 and 50 accounting for 42% and 56%, respectively.
Figure 4: Top Steel Producers by company and country in 2019 (Source: IEA, 2020)
Blast and DRI furnaces last around 40 years, with costly refurbishments every 25 years. Global furnace age averages 13-14 years, with China leading at 12 years. Without additional investments in green technology or new infrastructure, the existing steel industry could still emit an estimated 65 gigatonnes (Gt) of CO2 by 2060.
Decarbonisation Measures
Like the wider energy system, the iron and steel sector must rely on more than one technology or mitigation lever to make progress on its climate goal. As per the IEA, hydrogen, CCUS, bioenergy, and electrification constitute avenues for achieving deep emission reduction in steelmaking. This section describes several technological practices and innovations for decarbonising the iron and steel sector.
Figure 5: Emissions reductions by mitigation measure (Source: IEA, 2022)
1. Decarbonising the Mining Operations
Several effective options, such as clean haul trucks, powertrain technologies, low-carbon energy, shovel operator efficiency improvements, and high-pressure grinding rolls technology for iron mining, can mitigate carbon emissions from the mining industry.
2. Fuel Switching
The iron and steel industry uses coal and natural gas as reducing agents. Thus, as reducing agents, substantial amounts of carbon from the raw materials can be mitigated using low-carbon hydrogen, solid recovered fuels, or bioenergy sources.
2.1. Solid Recovered Fuels (SRF): Using SRF reduces GHG emissions and landfill waste disposal, a major source of methane emissions. It contains high carbon and hydrogen content necessary for strengthening steel. The steel plants in Austria, Germany, and Japan have used SRF as a reducing agent.
2.2. Hydrogen: Hydrogen can be used as a reducing agent and has an excellent potential for emission reduction. Hydrogen-based DRI can reduce up to 91% of direct CO2 emissions relative to using natural gas. Many steel producers are developing this option.
Figure 6: Large-scale greenfield DRI projects and their reducing gas (Source: Steel Times International)
2.3. Bioenergy: Biomass injection into blast furnaces is commercially implemented in Brazil using upgraded biomass, such as charcoal. Additionally, bio-coal or torrefied waste wood are being tested as potential alternatives, with trials currently underway at ArcelorMittal's plant in Belgium. Scalability issues due to mechanical and supply constraints.
3. Process Interventions
Many solutions, such as energy efficiency, adopting renewable sources or fuel switching, waste-heat recovery technologies, process integration and optimisation, and CCUS, are available to decarbonise iron and steelmaking.
3.1. Energy Efficiency: Energy costs account for 20-40% of steel manufacturing costs. Hence, there is a strong incentive to save energy in the process. One study suggests that the energy utilisation efficiency of the whole iron and steel-making process was ~48%, meaning the remaining energy purchased was lost. Various options to recover the waste heat are available.
a. Coke Oven Gas, including tar, has very high energy content and could meet ~4.1% of the global demand for power generation.
b. Molten slag, exhausted at around 1450–1550°C, is a promising source for waste heat recovery, but traditional water quenching is inefficient due to high water consumption. In 2012, a Korean steel company, POSCO, developed an energy-efficient technology that achieved a 50% recovery rate at 460°C in a prototype field test.
c. Process optimisation and integration, including predictive process control and monitoring, can reduce energy demand in steel plants. Adjusting inputs and enhanced digitalisation of process controls, including integrating AI to increase predictive power, reduces thermal energy and losses.
3.2. CCUS: It is the most important family of technologies for mitigating carbon emissions. Because of its versatility, CCS can be applied in most processes, such as sintering, pelletising, coking, iron and steel making. Here are some of the Carbon Capture Technologies list published by the Global CCS Institute. The captured CO2 from these processes can be utilised for ‘Converting off-gases to fuels/chemicals’. CO2 can be stored in underground depleted wells (via EOR, ECBMR), saline aquifers, or porous basalt rocks. Here is the list of CO2 storage facilities worldwide.
4. Material Efficiency
Material efficiency is one good option to mitigate CO2 emissions. Material efficiency measures such as vehicle lightweight (with high-strength steel products), improved design and construction of buildings (innovative modular design), improved semi-manufacturing yield, reduced use of vehicles, and extending the life of buildings via refurbishments can reduce global steel demand by 1/5th in 2050 in the IEA SDS scenario.
5. Recycling and Resource Efficiency
Recycling steel can lower the emission intensity of steel by 62-90%. The reduction in emissions is based on the country's electricity grid mix. Since the 1900s, 22 billion tons of steel have been recycled, reducing the consumption of iron ore (28 billion tons) and coal (14 billion tons) globally.
Global secondary steel using steel scrap may expand to ~40 % (from the current 33%) of the total steel production by 2050. In 2019, ~865 MT of scrap was available – 20% home scrap, 30% prompt scrap, and 50% end-of-life scrap.
Click here for the interactive IEA Clean Energy Technology Guide to achieve net-zero emissions.
Investments required
Around USD 3 trillion must be invested in low-carbon power, green hydrogen, and CCUS infrastructure over the next 30 years. To direct the capital towards transforming the industry, policy interventions will be needed to improve returns. Large institutional investors and multilateral banks such as the World Bank and ADB can play a crucial role by providing access to low-cost capital linked to stringent emission reduction targets.
Green premium
Green steel production, which involves using technologies like hydrogen-based direct reduction, is expected to see premiums between 150-300 $/ton over conventional steel (differential of green steel and CFR steel prices) in the near term. As hydrogen-based steel becomes more prevalent, some projections estimate that premiums could stabilize as demand grows.
Even with a $200 per ton cost increase due to the adoption of green hydrogen DRI technology over conventional BF-BOF steelmaking, the impact on final products like cars, buildings, ships, and machinery remains minimal. For example, considering that a typical passenger car in the U.S. contains around 900 kg of steel, a $200 per ton increase in steel costs would raise the car’s price by only about $180.
Read my full article on ‘The Green Premium Explained’ here. To level the playing field for low-emission producers, an equivalent carbon price of $180-360/tCO2e must be added to high-emission products.
Figure 7: B2B and B2C green premium in the Iron and Steel Industry
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References
Transport & Environment (2022). Cleaning up steel in cars: why and how. Available at: https://www.transportenvironment.org/articles/cleaning-up-steel-in-cars-why-and-how
International Energy Agency (IEA) (2020). Iron and Steel Technology Roadmap. Available at: https://iea.blob.core.windows.net/assets/eb0c8ec1-3665-4959-97d0-187ceca189a8/Iron_and_Steel_Technology_Roadmap.pdf
International Energy Agency (IEA) (2022). Steel and Aluminium Report. Available at: https://www.iea.org/reports/steel-and-aluminium#dashboard
Kim, J., Sovacool, B.K., Bazilian, M., Griffiths, S., Lee, J., & Yang, M. (2022). Decarbonizing the iron and steel industry: A systematic review of sociotechnical systems, technological innovations, and policy options. Available at: https://doi.org/10.1016/j.erss.2022.102565
World Steel Association, Overview of the steelmaking process. World Steel Assoc, Available at: https://worldsteel.org/publications/bookshop/overview-of-the-steelmaking-process/
