The Rise of Green Steel: Pivotal Step for the Steel Industry

The Steel Industry, one of the most carbon-intensive industrial sectors is under tremendous pressure from its investors, government, public, and other key stakeholders to reduce its carbon emissions. The sector accounts for nearly 7-8% of the global greenhouse gas (GHG) emissions and nearly a quarter of total industrial carbon dioxide (CO2) emissions. Traditional steelmaking is heavily reliant on fossil fuels, thereby emitting enormous amounts of carbon dioxide emissions per ton of crude steel produced. This has spurred the development of “Green Steel”, considered a beacon of hope to drastically reduce the industry’s carbon footprint.

Current production landscape:

In 2023, global crude steel production touched a whopping 1.891 billion tons, with China leading the race with nearly 54% of the total production, followed by India, Japan, and the United States at 7.4%, 4.6%, and 4.3% respectively. Currently, the Blast Furnace – Basic Oxygen Furnace (BF-BOF) route dominates steel production, accounting for roughly 70% of the global output. This traditional method uses fossil fuels like Coal and natural gas in the blast furnace to create molten iron, thereby making this process energy-intensive and carbon-intensive. Around 2.3tCO2 is emitted per ton of crude steel produced through this process. Alternatively, the Electric Arc Furnace (EAF) route is gaining traction, currently holding around 28% of the total market share. EAFs primarily rely on scarp steel for steel production, making them a more sustainable option. Compared to the BF-BOF method, emission from EAF steel production is nearly one-fourth, accounting for 0.6tCO2 per ton of crude steel produced.

As the regulations for carbon emissions tighten, EAF has become an attractive option for the major players in the industry. However, there are a few limitations to completely shifting to EAF. Going ahead, scrap steel might not be enough to meet the entire global demand for steel. For some high-grade steel applications, EAF steel might not always meet the quality standards achievable with virgin steel from BFs. Green steel research focuses on improving EAF technology to overcome these limitations. In essence, EAFs are a major green steel technology, but green steel encompasses a broader set of practices to minimize the environmental impact of the entire steel production cycle.

The Rise of Green Steel:

Production of Green steel revolves around two key principles – eliminating fossil fuels and use of renewable energy sources. Leading methods of production of green steel include –

1. Hydrogen Reduction (H-DR) – This technique replaces coal/ natural gas with hydrogen as the agent for reduction. The process involves heating iron ore, and combining it with hydrogen to extract oxygen and produce pig iron. The crucial aspect is the use of "hydrogen" generated through electrolysis using renewable energy sources like solar or wind power. This eliminates carbon dioxide (CO2) emissions during production. H-DR technology has the potential to reduce CO2 emissions by up to 95% compared to blast furnaces. Companies like Hybrit, a collaboration between SSAB, LKAB, and Swedish Power are leading the way in adopting this approach in Europe. Their pilot initiative in Luleå, Sweden aims to achieve the world’s first fossil-free steel production by 2026.
   

2. Electric Arc Furnaces (EAFs) powered by Renewables - EAFs rely on electricity often derived from fossil fuels. Green steel manufacturing involves operating EAFs on renewable energy sources. While this method doesn't completely eliminate emissions associated with steel production (such as those from raw material extraction), it does significantly reduce the carbon footprint compared to blast furnaces. EAFs with renewables has an average carbon footprint of 0.2-0.3 tCO2/t crude steel produced. ArcelorMittal, a global steel company is making investments in EAFs powered by renewables. They have unveiled plans to construct an EAF facility in Ghent, Belgium that will be powered entirely by renewables-generated electricity.
   

3. Direct Current (DC) Electric Arc Furnaces - DC Electric Arc Furnaces, known as DC furnaces, represent a progression in EAF technology by enhancing efficiency and reducing emissions. By harnessing direct current, these furnaces achieve stable and efficient melting processes thereby decreasing energy consumption and emissions even further.
   

Challenges and Opportunities that lies ahead:

Although green steel plays an important role in decarbonizing the steel industry, various challenges need to be addressed for the successful adoption of this low-carbon steel –

1. Cost of Production – Currently, the production of green steel is more expensive than traditional steel production. While few cost drivers like Labour, Iron ore prices, and capital remain the same, electricity prices and the cost of hydrogen play a major role in adding additional costs, thereby making per unit cost of green steel 40-50% higher than traditional steel.  
   

2. Technology Maturity – Although EAFs using renewables and H-DR are promising, these technologies are at a very nascent stage and thereby require a significant number of investments for research and development to make them more energy-efficient and low-cost. Economies of scale achieved through larger-scale implementation can also bring down costs. New methods like molten oxide electrolysis (MOE) show promise for further reducing emissions and production costs
   

3. Policy and Infrastructure Support: Government incentives like subsidies and tax breaks can encourage steel producers to adopt greener methods. Additionally, investments in renewable energy infrastructure are crucial to provide a reliable and affordable source of clean electricity for EAFs. For instance, in a major move, the EU approved €3 billion ($3.2 billion) in subsidies for two green steel projects in France and Germany – through these initial phases will use natural gas instead of clean hydrogen.

Despite the challenges, there are numerous pathways to a greener future for steel. As technology like H-DR and EAFs matures, production scales up, and economies of scale kick in, the cost of green steel is expected to decrease significantly. The Boston Consulting Group (BCG) suggests that the demand for green steel is expected to rise to 35 million tons, holding a 10% share of the global steel market by 2030.  Additionally, carbon pricing mechanisms like the EU's CBAM can disincentivize traditional methods and push producers to cleaner technologies. Furthermore, research and development efforts by steel companies, research institutions, and governments, like those facilitated by the Steel Zero initiative with its global multi-stakeholder approach, are crucial for refining existing methods and exploring entirely new ones. Finally, the growing consumer and investor demand for sustainable products, evident in H2 Green Steel pre-selling 1.5 million tonnes before even building their plant, creates a powerful market incentive for the steel industry to transition towards greener production methods. These combined forces can propel green steel from a premium option to a mainstream and cost-competitive solution for a sustainable future.

In conclusion, green steel is not just a technological innovation but a paradigm shift. It represents a commitment to building a future where industry and sustainability coexist. Overcoming the challenges and capitalizing on the opportunities will pave the way for a future where the built environment is no longer synonymous with environmental degradation.