Green steel, and why it's not just a buzzword
If industry can find the means to decrease the emissions of CO2 associated with steel production, then the potential impact on global CO2 emissions is hugely significant. And, while replacing the fossil fuels currently used to achieve those temperatures is more easily said than done, innovative companies are already making significant progress.
Community Marketing Manager
During Axora’s recent “Turning green into gold: what ‘net zero’ means for mining” community event, panellist Joe Carr – Axora’s Innovation Director – surprised guest moderator Tim Harford with a reference to “green steel”.
Discussing steel production, Joe had asked rhetorically: “When we look at the carbon emissions of steel [production]… do you want to buy dirty steel or do you want to buy green steel?” An intrigued Tim Harford admitted that the term was new to him, instinctively observing that “I can imagine that the moment people start hearing about green steel, they'll be like, oh, I want me some green steel.”
I can imagine that the moment people start hearing about green steel, they'll be like, "oh, I want me some green steel."
So why is green steel – steel that is produced or recycled using non-fossil fuel sources – important?
According to Worldsteel, every metric tonne of steel produced in 2020 led to an average of 1.85 metric tonnes of CO2 released into the atmosphere. Much of these emissions are down to the burning of fossil fuels – oil, gas and largest, coal – to raise blast furnace temperatures to those required to trigger the reactions needed to release iron from iron ore. It’s why Axora’s Joe Carr referred to today’s steel as “dirty steel”.
The scale of emissions from “dirty steel” production is huge. In 2020, 1.86 billion metric tonnes of steel were produced, meaning total direct CO2 emissions came in at 2.6 billion metric tonnes. That’s somewhere between 7% and 9% of all global, human-caused CO2 emissions – just from steel production.
These 2.6 billion metric tonnes of CO2 emissions is also of concern to the major iron miners: while the ‘downstream’ emissions associated with steel-making are something over which they have no control, they remain linked to them.
Recycled steel already accounts for 26% of current global demand.
If industry can find the means to decrease the emissions of CO2 associated with steel production then, clearly, the potential impact on global CO2 emissions is hugely significant. And, while replacing the fossil fuels currently used to achieve those temperatures is more easily said than done, innovative companies are already making significant progress.
First, fully electric processes, using renewable energy sources, have already been developed, enabling steel to be recycled with few emissions (and steel may be endlessly recycled). Recycled steel already accounts for 26% of current global demand. It’s a great start, holding out the possibility of significantly reduced emissions.
However: forecasts suggest that half of future production of steel will still need to come from iron ore – with, ironically, much of the net new need coming from renewable technology and infrastructure rebuilding, as well as from the developing world. With annual demand only likely to increase, producers are also looking at new technologies for producing steel from iron ore using renewable energy sources, in order to make a more meaningful dent in overall emissions from the industry. For example:
In Sweden, SSAB, LKAB and Vattenfall – under the name HYBRIT – are working together to develop the first fossil-free steel. HYBRIT’s technology involves replacing the blast furnace process, which uses carbon and coking coal to remove the oxygen from iron ore, with a ‘direct reduction’ process. This process employs hydrogen produced from water using electricity from fossil-free energy sources, through which process water vapour, rather than carbon dioxide, is formed.
In Australia, Fortescue Metals Group has revealed ambitions to build Australia’s first green steel pilot plant. Fortescue is trialling two methods of scaling green steel, in one method replacing the coal in the furnace with green hydrogen and, in the other approach, eliminating the blast furnace altogether and instead “zapping” the ore with renewable electricity.
In the United States, Boston Metal plans, by 2025, to be producing commercial quantities of green steel using a technology known as Molten Oxide Electrolysis (MOE), which uses renewable electricity to turn iron ore into liquefied metal.
As well as initiatives on the supply side, there are also initiatives on the demand side. For example, SteelZero is a global initiative bringing together forward-looking organisations to speed up the transition to a net zero steel industry. Organisations that join SteelZero make a public commitment to procure, specify or stock 100% net zero steel by 2050. And it’s attracting important support: as recently as May 2022, Volvo became the first car maker to sign up to the SteelZero initiative, committing itself to stringent CO2-based steel sourcing requirements by 2030.
Pure hydrogen-based steel production is expected to be cash cost competitive between 2030 and 2040 in Europe.
A June 2020 McKinsey report noted that green hydrogen prices were forecast to halve by 2030, and included an interesting matrix showing – based on the cost of CO2 per tonne and the cost of H2 per tonne – the point at which H2 based production becomes more cost-effective than ‘conventional’ steel production.
The report suggested that “with expected carbon dioxide prices of around €55 per tonne and hydrogen prices of some €1,780 per tonne (implied electricity price at €0.027/per kilowatt-hour) in 2030, conventional steel production still retains a cash cost advantage” – but also that “this scenario changes as soon as hydrogen prices drop (driven by the cost of electricity) or carbon dioxide prices increase.” It concluded that pure hydrogen-based steel production is expected to be cash cost competitive between 2030 and 2040 in Europe.
It may be the case that it is on the demand side that the term “green steel” becomes most important. Why? Because the term “green” is one well-understood (and, increasingly, expected) by the wider world: the public and, of course, customers. Certainly in developed countries, significant proportions of the population already seem prepared to pay more for ‘green’ products that do less harm to the environment, as the popularity of hybrid/battery electric vehicles and ‘green’ domestic energy tariffs has already shown.
But will consumers need to pay more for green steel indefinitely, or will green steel become as cheap as ‘traditionally’ produced, dirty steel?
The example of conflict diamonds in the 1990s encapsulates one future for green steel, ending with consumers unwilling to purchase products made with steel without appropriate environmental credentials. In the case of conflict diamonds, the result was an eventual ban on “blood diamonds” and the emergence of the Kimberly process.
This consumer expectation was exactly the conclusion that Tim Harford immediately reached when he first learned of the term “green steel”.
But will consumers need to pay more for green steel indefinitely, or will green steel become as cheap as ‘traditionally’ produced, dirty steel? Well – particularly given recent geopolitical events that have sent the price of coal to record levels – it’s certainly possible that green steel could become competitive sooner than expected, benefitting all consumers. There are also several other factors in the system, including power supply and regulation.
But many green steel innovations are in their early stages, and it will be many years before blast furnaces are fully replaced by more sustainable processes.
Time will tell, but the journey is certainly under way.
Learn more, explore our insights and reports
Sustainability in mining: what does it actually mean?One of the most interesting discussions on sustainability in mining happened at our recent community event. Read more on what was, and perhaps more interestingly wasn’t said by our expert panellists here.
An interview with Verah Malele, Senior Mining Engineer, at ExxaroThe Exxaro-operated Grootegeluk open-cast mine in Limpopo, South Africa, feeds the important Matimba and Medupi power stations. Part of Verah Malele’s role is to make sure that supply to the power station meets demand and doesn’t suffer interruptions.
Unlock transformationWhat industry-specific challenges are you facing right now?
Talk to us so we can find proven solution to help you.