Policy, finances seen hampering South African steel decarbonisation

South Africa’s steel industry is taking “bold and determined steps” to fast-track decarbonisation, but financial and policy challenges are hampering progress, says the South African Iron and Steel Institute (SAISI). The EU’s implementation of the Carbon Border Adjustment Mechanism (CBAM) is meanwhile expected to have a significant impact on South African steel exports.

Around 60% of the country’s steel is produced through the blast furnace-basic oxygen route, whilst the remaining 40% is electric arc furnace-based, relying mainly on scrap as an input.

South Africa’s decarbonisation process involves hydrogen-based reduction processes, increased use of renewable energy, a shift towards EAFs, and exploration of carbon capture and storage (CCS) technologies.

“Reducing the industry’s carbon footprint will require a shift away from coal towards alternative, low-carbon energy sources such as hydrogen or renewable energy,” SAISI says in a note seen by Kallanish. “Carbon capture and storage (CCS) technology are alternative ways of decarbonising the steel sector. All this will require significant capital investment in infrastructure and technology development, challenging steel producers, especially smaller or mid-sized companies, who are already facing financial pressure due to demand constraints.”

“While several details still need to be finalised, the imposition of the CBAM [in the EU] could have significant implications for some African countries, most notably South Africa that on average, exports $1.4 billion a year of products from sectors covered by the EU’s offset mechanism, including the iron and steel sector,” SAISI adds.

The UK, another important export market, is following the EU lead. It is also considering imposing mandatory product standards (MPS). The MPS would apply to both domestically produced and imported products and would set an upper limit on the embodied emissions for individual products placed on the UK market, or produced in the UK.

“In addition, steel producers in South Africa face competition since the country’s carbon tax is currently levied only on South African producers and not on imported products. This creates an uneven playing field for South African steelmakers trying to transition to low-carbon steel production while remaining competitive in a global marketplace,” SAISI observes.

“Addressing these challenges will require a comprehensive and coordinated approach that involves government policies, industry investments, and collaboration across the supply chain to move towards a low-carbon economy effectively and efficiently,” it concludes.

Burak Odabasi Turkey