US President Joe Biden’s administration has focused on green steel production after rejoining the Paris Agreement this year and setting an ambitious target of reducing global greenhouse gas (GHG) emissions to roughly half of their 2005 level by 2030.
Global steelmaking carbon dioxide (CO2) intensity – or the amount of carbon by weight emitted per unit of energy consumed – would need to decline by 90% compared with 2015’s carbon emissions level in order to meet the Paris Agreement’s CO2 reduction target, investment bank and financial services company Jefferies said in an industry note earlier in the year.
“Incremental improvements in carbon intensity will not be sufficient for the industry to reach these goals and, as such, several technical solutions are being examined by the steelmaking industry,” according to the Jefferies note.
Read our latest report: The true price of green steel, where we look closely at green steel production and the impact on supply chains and steelmaking production margins.
Therefore, policy changes – including support for implementation of carbon capture and sequestration technology - will be required to reduce the steel industry’s GHG emissions, Nucor executive vice president of business services and general counsel Gregory Murphy said at Fastmarkets’ 2021 Steel Success Strategies Industry Briefing on Tuesday June 22.
Carbon capture technology
Carbon capture technology can be deployed by integrated steel producers to reduce CO2 emissions. And use of that technology “is where the United States is at a huge advantage to some other blast furnace-producing countries, though it may not be any cheaper to do,” Fastmarkets analyst Alistair Ramsay said.
“To reduce their exposure to coke, steelmakers increase their scrap feed and increase their share of higher iron content iron ore, which needs less coke to remove the oxygen from the iron ore,” Ramsay explained.
“But this strategy causes volatility [because] when high-grade iron ore becomes too expensive, then it encourages more coke use to save money. That is, they blend more lower-value ores” to substitute for higher-grade product in steelmaking, Ramsay said. “We see this clearly in China, but [perhaps] it is apparent in less dynamic markets, too.”
Notably, think tank Global CCS Institute has estimated that the cost of one ton of steel could initially rise by as much as 29% if carbon capture and sequestration technology is used in the production process.
Still, Steel Dynamics Inc (SDI) president and chief executive officer Mark Millett, speaking during a keynote address at Steel Success Strategies, argued that consumers have to accept a green premium for the steel sector to achieve net-zero emissions targets.
And about 14% of global steel companies’ potential value is at risk if they are unable to decrease their environmental impact, making the shift to green production a clear priority, according to studies cited by the consulting firm McKinsey & Co in a note on June 3.
About 70% of US steel is already made via the “greener” method of electric-arc furnaces, and some of the remaining integrated mills - including US Steel and Canadian steelmaker Algoma - are striving to move away from old technologies.
Indeed, US steel mills are on pace to add more than 13.5 million tons of electric-arc furnace flat-rolled steelmaking capacity over the next few years, according to Fastmarkets’ research.
US steel production – which had fallen by 17.60% year on year in 2020 due to the impact of the Covid-19 pandemic, according to Nucor’s Murphy – has been recovering in 2021. Still, supply tightness, especially in the flat-rolled steel sector, has resulted in an extraordinary year for steel prices.