Steel industry needs $278 billion to decarbonise: BloombergNEF

Steelmaking could happen with almost no carbon emissions through $278 billion of extra investment by 2050, with hydrogen and recycling to play a key role, says a BloombergNEF (BNEF) report.

By 2050, green hydrogen could be the cheapest production method for steel and capture 31% of the market. Another 45% could come from recycled material, and the rest from a combination of older, coal-fired plants fitted with carbon capture systems and electric processes to convert iron ore into iron and steel, says the research firm.

Today, around 70% of steel is made in coal-fired blast furnaces, with 25% produced from scrap in electric furnaces, and 5% made in direct reduced iron plants, the majority of which are fired by natural gas. In the hydrogen-DRI-EAF scenario, blast furnace production would fall to 18% of capacity, Kallanish notes.

“The steel industry cannot afford to wait for the 2040s to start its transition,” says BNEF head of sustainable materials Julia Attwood. “The next ten years could see a massive expansion of steel capacity to meet demand in growing economies, such as India. Today’s new plants are tomorrow’s retrofits. Commissioning natural gas-fired plants could set producers up to have some of the lowest-cost capacity by retrofitting them to burn hydrogen in the 2030s and 2040s. But continuing to build new coal-fired plants will leave producers with only bad options toward a net-zero future by 2050.”

To achieve the transformation, the steel industry must boost the amount of steel that is recycled, particularly in China; procure clean energy; and design all new capacity to be hydrogen or carbon capture-ready. It must also begin blending hydrogen in existing coal- and gas-based plants to lower the cost of green hydrogen, and retrofit or close any remaining coal-fired capacity by 2050, BNEF observes.

Producing hydrogen-DRI-EAF ‘green’ steel will require massive amounts of clean energy, and a shift to higher grades of iron ore. “This could change where most steel is made, or shake up the mining industry,” BNEF comments. Russia and Brazil both have access to high-quality iron ore reserves and to abundant clean power. Moreover, Brazil is expected to have one of the lowest costs for hydrogen production by 2030. Australia will however have to invest in equipment to upgrade its iron ore quality to avoid losing its number one place in the supply chain.

“Most of the costs to make green steel come from operations, rather than capital costs. Reducing the cost of green hydrogen is thus critical, and BNEF estimates that these should fall more than 80% by 2050 to under $1/kg in most parts of the world,” the firm concludes.

Adam Smith Germany