ArcelorMittal, Thyssenkrupp and more: the race to clean up the steel sector
The moves of the steel sector among the most polluting at an industrial level. The in-depth analysis of the Financial Times
Skyscrapers and bridges, cars and cruise ships, guns and washing machines. They all have one thing in common: steel.
As a key input to engineering and construction, it is the most widely used metal in the world and provides the foundation for modern industrial economics. Since the English inventor Henry Bessemer developed a method of mass-producing iron alloy in the 1850s, a sprawling industry has grown that now has a turnover of $ 2.5 billion and employs millions of people.
But just as the oil and coal sectors have faced severe pressure in recent years, the role of steel in the climate crisis is now under much closer scrutiny. From the American Rustbelt to the manufacturing heartland of China, the dominant way of smelting iron pumps huge amounts of carbon dioxide into the atmosphere, the main culprit in man-made global warming.
Outside of power generation, the steel sector is the largest industrial producer of gas. It accounts for 7-9 percent of all direct fossil fuel emissions, according to the World Steel Association, more than India's total.
As climate change rises on the global political agenda and many governments commit to ambitious environmental goals, a race against time is underway to develop low-carbon versions of this strong and versatile material, writes the FT.
“Steel is a very important material for modern society. It has long been produced from iron ore, using coal, ”says Martin Pei, technical director at SSAB, a Swedish company at the forefront of these efforts.
“If we really want to contribute to achieving the climate goals set in the Paris Agreement, then there is a fairly widespread consensus that it will not be enough to further improve the efficiency of the blast furnace. Revolutionary technologies are urgently needed ”.
After the mass spread of renewable energy over the past decade, as well as the recent commitments by many car manufacturers around the world to switch to electric motors, heavy industries such as steel, cement and petrochemicals that require extreme heat are one of the next frontiers in the decarbonisation of the economy.
To meet global climate and energy goals, the steel industry's emissions must decline by at least half by mid-century, according to the International Energy Agency, with dips to zero pursued thereafter.
Some of the world's largest steelmakers, including ArcelorMittal , Thyssenkrupp and the Chinese Baowu group, are in various stages of transforming laboratory concepts into an industrial reality. Some have even announced targets for so-called "net zero" emissions.
Faustine Delasalle, partner of Systemiq, a sustainability consulting and investment firm, says the level of technical development is encouraging. “We are not yet at the point of being ready for the market, but it is progressing relatively quickly and we can expect a first wave of near-zero production sites before 2030”.
The most ambitious plans include abandoning a principle of transformation of rock into metal discovered in the Iron Age, with "clean" hydrogen gas as a new alternative energy source.
However, converting a slow, monolithic industry that churns out 2 billion tons of product per year will be a huge task. Among the hurdles is the level of investment required, which could run into the hundreds of billions of dollars – not easy in a business plagued by chronic oversupply and volatile swings in profitability.
ArcelorMittal, Europe's largest steel producer, has estimated that decarbonising its plants on the continent, in line with the EU's goal of eliminating net greenhouse gas emissions by 2050, will cost between 15 and 40 billion. EUR.
“These technologies will increase the cost of our steel. It's not cheap, and our customers should be ready to pay, ”executive chairman Lakshmi Mittal says.
Decarbonisation goals
The reason why steel is so carbon-intensive comes from the main route of extracting iron from its ore. Towering blast furnaces heated to more than 1,000C are loaded with ore, lime and coke, a fuel derived from metallurgical coal that removes oxygen molecules from iron oxide. A by-product of this chemical reaction is CO2.
“A significant amount of energy is needed to heat the iron ore, to melt it and to actually separate the oxygen from the iron in the iron oxide molecule,” explains Ryan Smith, senior analyst at the CRU consulting firm.
“The lowest cost energy carrier is carbon based. This, combined with its high temperature properties, is what makes coke so important for iron and steel production and [it is] really hard to replace. "
While environmental policymakers dream of a “circular economy” in which resource extraction and waste are minimized, recycling alone cannot provide the answer for steel, which is already the most reused material on earth.
Electric arc furnaces that melt scrap, rather than convert raw materials, are smaller, more flexible and emit a fraction of the CO2 of blast furnaces. Today they account for just under 30% of global steel production. But scrap supplies are limited, and arc furnaces cannot always produce the quality required for certain applications, such as automotive.
As a result, experts say there will always be a need for "virgin" steel, only through a less polluting method. Recent geopolitical events have given a new impetus to this research.
Along with joining the Paris climate agreement, which is committed to limiting global temperature rise to well below 2C, US President Joe Biden has proposed creating a climate research agency with goals that they include "the decarbonisation of the industrial heat needed to produce steel, cement and chemicals".
Another major mission statement came last year, when China unveiled a target to achieve "carbon neutrality" by 2060. This will require major upgrades at its steel mills, which are responsible for around a third of the industrial emissions of the country. As the source of half of the world's steel, the Asian superpower exerts a fundamental influence on the dynamics of the global market.
"China now generates about 2 tons of CO2 for every ton of steel it produces, while in Europe usually only one ton is generated," said Michele Della Vigna, investment analyst at Goldman Sachs. "In the long run, it becomes important for China to demonstrate that its exports are no more carbon intensive than goods produced in other countries."
For now, the most advanced initiatives to decarbonise steel production are in the EU – a reflection of its stricter environmental regulations. A flagship policy allows companies to buy and sell certificates to cover their carbon pollution. Under this emissions trading scheme, the price of one tonne of CO2 has increased eightfold since 2016 to nearly € 40.
With other countries already managing or planning to launch their own carbon markets, there are warnings that shareholder money could be at risk due to the failure of steelmakers to act on their emissions.
"You can't have steel moving forward at its current pace and then hope to hit net zero," says Carole Ferguson, head of investor research at CDP, a non-profit climate assessment group. “I think it's not happening fast enough, frankly. You really need to start investing now to be able to change ”.
Yet as fossil fuel companies have begun to come under shareholder pressure, there is less of a clear understanding among investors about the problems and possible solutions for heavy manufacturing industries, says Wolfgang Kuhn, director of financial sector strategies. to ShareAction, an NGO that promotes responsible investments.
“Oil and coal, we know they have to disappear. Even combustion vehicles must disappear, ”he says. “With steel it's more complicated”.
Reduction of hydrogen
A hundred miles south of the Arctic Circle, an experiment is underway that aims to overturn centuries of established metallurgy by harnessing the most abundant element in the universe.
At a pilot plant in Lulea, northern Sweden, SSAB will soon begin trials using hydrogen gas to reduce iron ore. He says this will result in virtually no CO2 emissions, with water vapor being the only by-product.
If tried industrially, this would be nothing short of revolutionary. However, the project centers rely on the re-use of an existing system called direct reduced iron, which accounts for a small percentage of steel production worldwide.
DRI ovens are normally injected with natural gas. Instead, SSAB will use clean hydrogen gas, produced in a plant called an electrolyser powered by Sweden's plentiful renewable electricity. The output will be a solid intermediate, called spongy iron, which goes into an electric arc furnace, where it is mixed with scrap and refined into steel.
Working alongside an electric company and an iron ore miner, SSAB is competing with rivals such as Austria's Voestalpine and ArcelorMittal, who are developing similar projects.
“From the laboratory, we know that in principle H2 is able, under the right conditions, to reduce iron ore to metallic iron. But so far no one has ever done it on an industrial scale, ”says Lutz Bandusch, a senior executive at ArcelorMittal, which already operates the only DRI-EAF plant in Europe.
Another possible role of hydrogen is the replacement of coal in blast furnaces. But it is not yet the complete solution for the production of clean steel. For starters, H2-centered DRI may depend on higher quality minerals, according to some analysts. Then there is the question of availability.
"Increase the production capacity of electrolysers and make the overall cost of H2 from electricity more affordable – this will be extremely important for the steel industry to decide to convert from the blast furnace process on a large scale," says Martin Pei. by SSAB.
The Swedish group, which is seeking to eliminate fossil fuels from every step of the steelmaking process, has estimated that metal from its hydrogen-based path will initially be at least 20 to 30 percent more expensive.
“We believe that H2 is the most likely solution for achieving zero emissions. The key issue is cost, ”says Della Vigna of Goldman Sachs, who believes it will become economically viable at a carbon price of about $ 220 per ton.
However, for a massive shift to clean hydrogen, there should be a massive expansion of renewable energy infrastructure. Germany, for example, would require additional renewable energy equal to about 20% of its current electricity consumption to convert its steel sector to green hydrogen-based DRI, according to the International Renewable Energy Agency. This shows that the steel industry has limited room for change.
If total CO2 elimination lies at one end of the spectrum, other initiatives aim to prevent gas leakage or to envisage intermediate solutions that could reduce emissions over time.
At its Ghent plant in Belgium, ArcelorMittal is building a plant that will transform toxic waste wood into “bio-carbon” with a lower CO2 footprint to replace part of the normal variety in blast furnaces.
At the same site, ArcelorMittal is spending € 165 million on equipment to capture exhaust gases. The microbes will then convert them into ethanol, which can be recycled into carbon-containing chemicals, such as plastics or fuels.
However, environmentalists who criticize so-called carbon capture, use and storage systems argue that they are expensive, largely unproven to scale, and distract from the root cause of emissions.
Kingsmill Bond, an energy strategist at Carbon Tracker, a think-tank, believes the CCUS has a role to play in heavy industry. “But that's the bottom 10 percent. . . It will be necessary, but it will be the last piece, not the first ”.
As the industry heavyweights struggle with what has become an almost existential dilemma, the challenge is to attract new entrants hoping to shake up an industry where disruption is rare.
US start-up Boston Metals, born from the Massachusetts Institute of Technology and backed by Bill Gates, says it has devised a technology to produce brand new carbon-free steel using electricity.
In a method not unlike aluminum production, the current passes through a cell. This consists of a steel shell with 2-meter edges, which inside contains what the company calls a "soup of molten oxides" including iron ore.
Away from the 35-meter high blast furnaces that can be seen in large steel mills, the idea is that Boston Metal will supply small modular units to manufacturing sites that can be scaled in line with demand. CEO Tadeu Carneiro describes it as "the reverse of a battery".
"We inject electricity," he says. "The cell will spit out a very pure iron, where you can add the other elements to get the high quality steel."
The nine-year-old firm recently received investments from mining companies BHP Group and Vale, bringing its total funding to more than $ 100 million, and is aiming for large-scale commercialization by 2025.
"If we have the cost of electricity at the same level that aluminum producers have today, that is, from 15 to 35 dollars per megawatt-hour, we will be competitive without a carbon tax," says Carneiro. "This will really change the world."
If green steel is truly to have an impact in the fight against climate change, the industry cannot treat it as a niche and quality product. In a commodity business where cost is king, taxpayer support will likely be needed during the transition as traditional companies work to make new manufacturing processes more efficient and competitive.
"The European government has allowed taxation so that it can support the growth of renewable energy," says Mittal.
"We are saying that likewise there should be some kind of mechanism or policy framework [and] support for the steel industry in order to invest in project development into fully fledged commercial projects."
Another important consideration for politicians is trade, as steel is one of the most traded commodities internationally, with frequent allegations of dumping at low prices.
In addition to financing sustainable projects as part of its "European Green Deal", Brussels is now working out plans for a "carbon margin adjustment mechanism" that would impose a CO2 tax on certain goods entering the bloc. The idea is to prevent low-cost foreign products with a large environmental impact from undermining domestic companies that invest in expensive green technologies.
However, while this sets an implicit price for carbon in international markets, some are wondering if the numbers are there to encourage widespread adoption of clean technologies.
“From a cost and economic perspective, we still don't see the right conditions to facilitate wholesale change across the industry,” says CRU's Smith.
But Doug Parr, chief scientist at Greenpeace UK, sees a reason for the optimism: “The momentum appears to be greater than in the cement or chemicals industry. It could be a test case of how an industry goes on ”.
Article taken from the foreign press review of Eprcomunicazione
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/energia/arcelormittal-thyssenkrupp-e-non-solo-la-corsa-per-ripulire-il-settore-dellacciaio/ on Sat, 20 Feb 2021 14:47:44 +0000.