Steel majors invest in green steel, but change might be driven by contenders

Steel majors invest in green steel, but change might be driven by contenders

This transformation of the steel industry is not simply a theoretical exercise and the largest steel makers in the world are now setting themselves on a pathway of reaching net zero emissions. According to Bloomberg New Energy Finance (BNEF), over 615 million tons of steel or 18% of global production is under a net zero target and most aim to be carbon neutral by 2050.

Company analyses by BNEF show consensus in the near term. Almost all steelmakers agree that the focus should be on increasing recycling rates and improving the energy efficiency of the conventional coal-based process while piloting deep decarbonisation technology like CCS and hydrogen.

There is less consensus looking further ahead, with long-term technology choices differing between companies. Diversified majors like Baowu (China) and ArcelorMittal (Luxembourg), the two largest steel companies in the world, are testing both the CCS and hydrogen routes.

ThyssenKrupp (Germany), Posco (South Korea) and TataSteel IJmuiden (the Netherlands) plan to fully convert their fleets to hydrogen-based production. They are developing new equipment to accommodate lower-grade iron ore in hydrogen-based steelmaking. SSAB (Sweden) is at the forefront of hydrogen-based steelmaking but plans to primarily rely on purer forms of iron such as recycled steel.

Nippon Steel and JFE (both from Japan) aim to reduce emissions by applying CCS to existing coal-based blast furnaces but have recently started to investigate hydrogen too. While US Steel is somewhat lagging behind its peers, it will likely roll out pilots for both CCS and hydrogen on the back of increased policy support in the US for both hydrogen and CCS.

But the real change might not come from the steel majors who have billions of dollars worth of coal-based steel assets on their balance sheets. On a positive note, that provides them the capital to develop CCS and hydrogen. On a more negative note, it could limit real change as current assets may become stranded once hydrogen technology takes over.

Disruptive change might be driven by Tesla-style new entrants. Vulcan Green Steel from Oman is a new company in the industry that is planning to build a hydrogen-based steel plant from scratch. Blastr is doing similar things in Norway and Finland. GravitHy in France focuses on the production of green iron. Van Merksteijn is planning to build a green steel facility to produce a specialised steel product (wire rod) at the Eemshaven in the Netherlands. The H2 Green Steel mill in northern Sweden is currently the most advanced green steel project in Europe.

Finally, Ukraine could be a country driving the change in the sector. As the ongoing war persists, the financial focus of politicians and financiers is on short-term funding issues. But slowly, they're beginning to look at long-term reconstruction efforts too. The World Bank estimates Ukraine's reconstruction will cost more than $400 billion. Ukraine is seeking up to $40 billion to fund the first part of a Green Marshall Plan to rebuild its economy. The main priority will be on the iron and steel industry, with a vision to build a green steel industry of 50 million tonnes.