Steel is the world’s most important industrial material, with over 1.5 billion tonnes produced annually including from oil tankers to thumbtacks, from trucks to tin cans, from transmission towers to toasters.
Steel accounts for 50 percent of world demand in construction for its versatility, durability, and affordability. Perhaps more importantly, steel is 100 percent recyclable which makes it an eco-friendly product.
It is a well-known fact that demand for steel is dictated by the increase in the number of people in a population or dispersed group. Actual global human population growth amounts to around 83 million annually, or 1.1 percent year. The global population has grown from 1 billion in 1800 to 8.1 billion in 2024. The probable dynamic growth in global population will continue to have a direct execrating bearing on the housing (Buildings) and infrastructures around the world. Consequently, the demand for steel will continue to propagate substantially.
Here’s a quick synopsis of steel:
Advantages and Disadvantages of the Current Steel Production
| Pros of Steel Making Process | Cons of Steel Making Process |
| Efficient production at large scale | High initial capital investment |
| Produces strong and durable material | Energy-intensive process |
| High degree of automation possible | Generates significant carbon dioxide CO2 emissions |
| Recycling of steel is possible | Potential for environmental pollution |
| Wide range of steel grades and properties can be achieved | Requires experienced workforce to ensure quality |
The good news is that steel is a critical part of global economic growth as it plays an important role for the following five sectors:
- The building and infrastructure sector: It is the largest consumer, accounting for approximately 50 percent of total world steel consumption;
- The transport sector: It ranks second in the world for steel consumption and use. Steel is a key material in the automotive industry. Over 50 percent of the composition of vehicles is made of steel;
- Energy: Steel has many inherent qualities that make it an environmentally friendly packaging material. It has almost zero transmittance for gas, water, and sunlight, thus providing maximum protection to the goods;
- Machinery: Most of the heaving metal machinery used in building and infrastructure projects is made of steel, more specifically stainless steel; and
- Packaging: It has almost zero transmittance for gas, water, and sunlight, thus providing maximum protection to the goods.
The bad news is that the process of steel manufacturing produces more carbon dioxide (CO2) than any other heavy industry mainly because the majority of steel production is based on coal-fired furnaces.
Governments and industry have increased focus on decarbonizing hard-to-abate sectors, including steel making, which contributes roughly 6 percent of global CO2 emission and 8 percent of energy related emission (including power consumption emission).
Just to typify the magnitude of CO2, 1.85 tons of CO2 was emitted every ton of steel produced in 2018 on average which is equating to about 8 percent of global CO2 emissions. Consequently, steel players across the globe, and especially in Europe, are increasingly facing a decarbonization challenge. This challenge is driven by three key developments that go beyond the Paris Agreement:
- Changing customer and growing demand for carbon-friendly steel products: A trend that has already been observed in various industries, including the auto industry where manufacturers such as Volkswagen or Toyota have the ambitious aim of eliminating carbon emissions completely from their entire value chains (including their suppliers) and taking on a full life cycle perspective;
- Further tightening of carbon emission regulations: This is manifested in CO2 reduction targets, as well as rising CO2 emission prices as outlined in the European Green Deal; and
- Growing investor and public interest in sustainability: For example, the Institutional Investors Group on climate change, a global network with 250-plus investors and over USD 30 trillion in assets under management, has raised expectations for the steel industry to safeguard its future in the face of climate change. At the same time, global investment firm BlackRock has confirmed its commitment to environmentally responsible business development and sustainable investing.
The processes of manufacturing of steel and associated production are defined below:
- Blast Furnace – Basic Oxygen Furnace (BF-BOF) dominates production of 71 percent steel and is particularly stubborn to any decarbonization technology;
- Direct Reduced Iron to Electric Arc Furnace (DRI-EAF) production is 5 percent and growing, it appears to have better decarbonization potential to move towards net-zero; and
- Secondary steel production using mainly steel scrap in Electric Arc Furnace (EAF-scrap) is 24 percent of global production and has both the lowest energy consumption and is technically simplest to decarbonize through electrification, but is limited in market share to recycled steel capacity.
Of the options assessed, blue hydrogen, carbon neutral biomass, and Carbon Capture and Storage (CCS) appear to have the lowest cost and highest technical maturity. However, no single approach today can deliver deep decarbonization to the iron and steel industry and all approaches lead to substantial production cost increase. No uniform ideal solution exists and different geographies, infrastructure, and economies will determine the local optimum solution with viability and cost. Policy measures will be required to provide financial incentives for decarbonization and to avoid unwelcome outcomes such as emissions leakage or job loss.
Green steel is defined as the manufacturing of steel without the use of fossil fuels. Of course, fossil fuels are made from decomposing plants and animals. These fuels are found in Earth’s crust and contain carbon and hydrogen, which can be burned for energy. Coal, oil, and natural gas are examples of fossil fuels. Here are some key methods being explored and implemented when it comes to manufacturing green steel:
- Hydrogen-Based Steel Production: This method replaces coal with hydrogen as the reducing agent. When hydrogen is used, the only by-product is water, significantly reducing CO₂ emissions. This is often referred to as “hydrogen direct reduction;”
- Electric arc furnaces (EAF): EAFs use electricity to melt scrap steel or direct reduced iron (DRI). If the electricity is sourced from renewable energy, the steel production process can be nearly carbon-neutral;
- Carbon Capture and Storage (CCS): CCS technologies capture CO₂ emissions from steel plants and store them underground or use them in other industrial processes, thereby reducing the carbon footprint of steel production;
- Recycling: Increasing the recycling rate of steel reduces the need for new steel production and hence lowers the overall emissions. Steel is highly recyclable, and using recycled steel in EAFs can be an effective way to produce green steel; and
- Innovative Materials and Processes: Research is ongoing into alternative materials and processes that could further reduce the carbon footprint of steel production.
According to Mitsubishi Heavy Industries Group, hydrogen can also be low carbon if produced using fossil fuels and Carbon Capture, Utilization and Storage (CCUS) technologies. This is known as “Blue Hydrogen”.
Some of the world’s biggest manufacturers are planning to reduce their carbon footprint by increasing the use of electric furnaces. But a report by the NGO Global Energy Monitor, says the shift from traditional blast furnaces to Electric Arc Furnaces is “Stagnant” and significantly behind decarbonization targets.
It says 31 percent of current steelmaking capacity uses electric furnaces, but only 28 percent of capacity under construction will use the technology:
- “We need to stop investing in coal-based blast furnace equipment and speed up the shift towards electric arc furnace steelmaking,”, said the report’s author, Caitlin Swalec.
Here’s a reality – Switching from coal-fired furnaces to either furnaces fired by electricity or hydrogen will require billions of dollars in investment.
According to World Economic Forum, the finance community is ready to support the transition of the steel industry. The investment needs are substantial. Transitioning the first plants to green steel in the 2020s, totalling 170 Mt of production capacity, will require $100 billion in investment. Leading lenders to the steel industry — ING, Société Générale, Citi, Goldman Sachs, Standard Chartered and UniCredit — are already working together to support steel sector decarbonisation.
The NZSI Steel Finance Working Group will forge methodologies to set global best practices for financial institutions to align their portfolios with climate targets in the steel sector and facilitate investment in green steelmaking.
According to the World Economic Forum’s First Movers Coalition at the Forum’s Annual Meeting in Davos this year, the Coalition announced it had expanded, with 55 companies and nine countries now committed to purchasing a proportion of the industrial materials and transport they need from suppliers using near-zero or zero-carbon solutions.
Recent studies estimate that the global steel industry may find approximately 14 percent of steel companies’ potential value is at risk if they are unable to decrease their environmental impact. Consequently, decarbonization should be a top priority for remaining economically competitive and retaining the industry’s license to operate.
Moreover, long investment cycles of 10 to 15 years, multibillion financing needs, and limited supplier capacities make this issue even more relevant and lock in significant lead times for addressing the decarbonization challenge.
Nevertheless, here’s an example of how a steel company in Canada is managing the transition from coal-fired furnaces to electric furnaces.
Algoma Steel smokestacks have been a fixture on the bank of the St. Mary’s River at the eastern end of Lake Superior for more than a century. Their green gamble worked out to prepare them for its next 122 years as the Sault Ste. Marie (City in Ontario, Canada) steelmaker is going electric. This is based on the article which was published in the Globe and Mail on Saturday, August 31, 2024 by Jeffery Jones.
It’s indeed a success story. Algoma Steel provided the region with employment and economic base. But with that has come uncertainty during a number of flirtations with bankruptcy as steel markets gyrated. The use of coal in its blast furnaces triggered climate-warning emissions along with health concerns among nearby residents.
Now Algoma Steel is in the process of a major shift. Its installing manufacturing technology that the company says will not only slash greenhouse gas (GHG) emissions, but also guard its financial future.
The new equipment eschews coking coal and blast furnaces in favour of scrap metal that, with a massive charge of electricity, will produce what’s known in the industry as green steel.
The modernization is aimed at turning the region’s largest employer into an operation that emits far less carbon and other pollutants, while making it less susceptible to swings in prices for raw material which is now expected to cost between $825 million and $875 million.
The Canadian federal government is kicking in $420 million of public money as part of its strategy for meeting intentional climate targets; Algoma is one of two publicly supported moves by steel producers to Electric Arc Furnace (EAF) production.
ArcelorMittal Dofasco in Hamilton has embarked on a $1.8 billion project, which includes $400 million contributed by the Canadian federal government and up to $500 million from Ontario provincial government.
With an EAF, scrap metal, and if required, pig iron, are fed into the furnace, and purity of the finished product is adjusted by the quality of the feedstock. Algoma’s production capacity will increase to 3.7 million tonnes per year from the current 2.8 million, with switchover taking place in phases. It’s a big economic benefit.
When fully operational, Algoma’s projection is to reduce CO2 emissions by three million tonnes annually, or 70 percent. That equates to more than a tenth of Canada’s 2030 goal under the Paris Agreement.
However, one of the tough aspects of the change-over for the community is the plant will require fewer workers, because of the efficiency of the technology. It currently employs about 3,000 people, and once it makes the transition, that number will fall to 1,600 to 1,700.
Here’s a video for 1.37 minutes for your browse which summarize the steel manufacturing process:
