Decarbonising the steel and iron ore industry by 2050, in line with the Paris Climate Agreement, will require $1.4 trillion of investment and revolution across every stage of the value chain, Wood Mackenzie says.
This presents an urgent challenge and enormous opportunity, Kallanish reads in the consultancy’s research report.
The report points to the industrialised world’s reliance on steel, with 2.2 billion tonnes of production required to meet global steel demand by 2050 – a 15% increase from 2021.
From iron ore mining to steel manufacturing, the industry is highly carbon intensive. Iron and steel production emit a combined 3.4 billion t of carbon annually – equal to 7% of global emissions.
“Decarbonising the steel industry is a staggeringly big task. To meet Wood Mackenzie’s 1.5°C accelerated energy transition scenario by 2050, steel emissions must reduce by 90% from current levels. There is an urgent need to act now to decarbonise the iron and steel sectors. Business as usual is no longer sustainable,” says Malan Wu, research director at Wood Mackenzie and lead author of the report.
Wood Mackenzie’s shows $800-900 billion will be essential to abate carbon from existing steelmaking infrastructure, such as setting up new hydrogen-based direct reduced iron and electric arc furnace plants.
“Mining companies will need to play an active role in cutting their operational emissions as well as invest in new high-grade mines and green pellet capacities to feed green steel. In turn, this will require five times the current supply of high-grade pellet feed, an equivalent to 750 million tonnes, translating into an investment of $250-300 billion,” the consultancy says.
To achieve net zero by 2050, it says three-quarters of steel production will have to use low-carbon technologies, requiring the commercialisation and uptake of new technologies such as DRI and molten oxide electrolysis running on renewable energy.
Switching to clean energy will also require around 2,000 gigawatts of dedicated renewable generation capacity, equivalent to two-thirds of current global renewable generation capacity.
“A hydrogen ecosystem will also need to be developed for green steel, as decarbonisation will require around 50 million tonnes per annum of competitively priced green hydrogen, with commercial viability versus conventional steelmaking routes requiring green hydrogen supply at $2/kg,” Wu adds.
The report warns that these measures will still fall short of emissions targets, necessitating an incremental $200-250 billion investment in carbon offset measures, such as carbon capture, utilisation and storage (CCUS). The industry will need to capture and store 470 million tonnes of carbon to reach 2050 emission targets.
Green premiums are also inevitable, given new technologies and low carbon feedstocks are likely to inflate steel production costs by 15-20%. Steelmakers will pay approximately $100/tonne by 2050 to align themselves to a 1.5 °C goal by 2050, according to Wood Mackenzie estimates.
Siew Mung Tan Malaysia
