OPIS

Dr James Stevenson is an Vice President and Research Lead, Coal, Metals & Mining at OPIS, A Dow Jones Company. His expertise includes supply, demand, and price dynamics of global coal, iron ore, steel, and ferrous scrap. Before his current role, he worked as a coal analyser at Mercuria Energy Trading and Louis Dreyfus Highbridge Energy (now Castleton Commodities) as a coal strategist. He has also worked as a risk analyst at Eraring Energy (now part of Origin Energy) in the Australian utility industry. 

Through this article, Dr James shares his insights on the current trend of transition to green steel and the challenges involved in the transition.

How has the global shift away from coal investments impacted the steel production industry?

Over three-quarters of the world’s steel production is derived from iron ore and metallurgical coal. Although the global supply of iron ore is expected to remain ample, ensuring the continued production of steel to meet worldwide demands, the past decade has witnessed a pronounced shift away from investments in coal.

Notably, leading coal producers like Rio Tinto have exited coal production entirely. This trend extends beyond producers to include banks withdrawing funding for coal mining, insurance companies refusing coverage and major development banks ceasing their financial support. All of these trends are driven by environmental, social and governance (ESG) considerations due to coal’s substantial carbon emissions.

This evolving landscape presents considerable challenges for the supply of metallurgical coal, essential for steelmaking via the traditional blast furnace method. Upcoming closures of significant mines in Australia by 2028 and 2029, along with a notable mine in the U.S. in the early 2030s, indicate a diminishing availability of metallurgical coal. At the same time, there is a global shift toward electric arc furnace steelmaking, which relies on recycling steel scrap from sources like decommissioned vehicles and ships. This method is gaining prominence and is projected to expand significantly. However, the availability of steel scrap is insufficient to meet the anticipated demand, highlighting a critical gap in the transition to ‘green steel.’

What are the emerging trends and technologies in the steel-making industry, particularly regarding the shift toward more sustainable production methods?

The steel-making industry is witnessing significant advancements with the adoption of electric arc furnaces (EAFs) and the exploration of hydrogen as a green alternative in the production process.

Electric arc furnaces represent a pivotal shift towards recycling, enabling the industry to recycle steel from sources such as decommissioned vehicles and ships. Unlike traditional blast furnaces, which can incorporate a maximum of 30% scrap steel, EAFs can utilize up to 100 percent scrap steel as their feedstock. This capability not only enhances recycling efforts but substantially reduces carbon emissions. EAFs emit only about half a ton of carbon per ton of steel produced, which is 5 to 6 times less than the 2.5 to 3 tons of carbon emitted by blast furnaces. Additionally, EAFs do not require large quantities of fuel to achieve high purity levels and can reach higher temperatures more quickly, speeding up production.

Further innovation is seen in the use of hydrogen in both the blast furnace production process and the direct reduction iron (DRI) process. The DRI process, in particular, stands out for its potential in green steel manufacturing. It uses hydrogen to convert iron ore into metallic iron at temperatures below iron’s melting point (800–1,200°C), creating water vapor instead of carbon dioxide as a byproduct. This marks a significant departure from traditional methods that rely on natural gas, which carries the risk of greenhouse gas emissions. The green steel method employs hydrogen to reduce iron pellets into sponge iron at high temperatures yet below the melting point of iron, offering a promising route to reduce energy costs and mitigate environmental impacts.

What challenges does the steel-making industry face with the introduction of new technologies, particularly hydrogen-based direct reduction iron (H2-DRI) processes?

The inaugural H2-DRI facility, slated to commence operations in 2027, highlights the pioneering efforts in this area. However, several hurdles need to be addressed to ensure the success and scalability of such technologies.

"HYBRIT technology is set to transform the traditional steelmaking process by replacing the blast furnace method, which relies on carbon and coke for oxygen removal from iron ore, with a direct reduction process utilizing fossilfree hydrogen derived from water."

A critical challenge is the current limitation in hydrogen transportation, given that there is only one vessel globally designed for hydrogen trade. This situation is the nascent stage of the hydrogen economy’s infrastructure. On top of that, the H2-DRI process necessitates high-grade iron ore due to its limited capability to remove impurities from steel. While alternative methods exist to circumvent this issue, they invariably increase production costs, potentially affecting the competitiveness of H2-DRI steel.

Another fundamental concern, however, revolves around the supply of hydrogen. Despite numerous plans to leverage hydrogen and ammonia for various applications, including as feedstocks in steelmaking and other industries, a foreseeable shortage in hydrogen supply looms. This shortage threatens to impede not only the adoption of new steel technologies but the continued reliance on existing methods.

By 2030, the steel market is expected to face constraints due to the dwindling availability of metallurgical coal, essential for traditional primary route steel production. The scarcity of both coking coal and steel scrap could further strain the industry, impacting economic growth. Coal’s role in steelmaking, as part of the chemical process that converts iron oxide into iron, explains the industry’s dependency on this resource. Consequently, the future of steelmaking hinges on effectively overcoming these challenges, including securing a reliable hydrogen supply and addressing the limitations associated with raw material quality and infrastructure.

What are some of the future developments anticipated to address the sustainability and decarbonization challenges?

A notable development in this arena is the Hydrogen Breakthrough Ironmaking Technology (HYBRIT) initiative, a collaborative effort by SSAB, LKAB, and Vattenfall. This project aims to inaugurate its pilot plant by 2027, with the goal of producing green steel.

HYBRIT technology is set to transform the traditional steelmaking process by replacing the blast furnace method, which relies on carbon and coke for oxygen removal from iron ore, with a direct reduction process utilizing fossil-free hydrogen derived from water. It seeks to eradicate carbon emissions across the entire steel production value chain, from the mining stage to the final steel product.

The steel industry is also investing in carbon capture and storage (CCS) technologies to reduce carbon footprints in existing steel manufacturing facilities. CCS technology involves capturing CO2 emissions from the flue gases of coke ovens, blast furnaces and basic oxygen furnaces. These gases are then processed in a co-generation plant, enabling the simultaneous production of heat and electricity. This method not only aids in decarbonizing the steel production process, but it also contributes to energy efficiency.

Together, these advancements herald a promising future for the steel industry, aiming to mitigate environmental impacts while maintaining production efficiency and economic growth.