Key areas for steel decarbonization

More than half of the steel sector’s initiative announcements regarding low-carbon steelmaking relate to replacing the high-emitting blast furnace method of making iron. These often involve combining direct-reduced iron (DRI), electric arc furnace (EAF) and hydrogen technologies. Other initiatives mainly relate to scrap steel recycling.^[56] However, there is no single solution to steel decarbonization. Technologies such as heat recovery and biomass integration could offer a transitional pathway, until breakthrough technologies reach maturity – and low-carbon ambitions match investment. This Industry chapter presents an array of key technologies focused on the high-emitting stages within steelmaking (box 4.1).

Box 4.1 Steel sector emissions

The iron and steel industry is responsible for at least 7–9 percent of global greenhouse gas (GHG) emissions.^[57] GHG emissions occur at every stage of the steelmaking process, from the mining of iron ore to shaping the final product. While more efficient direct reduced iron (DRI) plants are growing in number, most emissions come from the blast-furnace preparation of iron for steel production (figure 4.3). Globally, the demand for steel is expected to have grown by more than a quarter by 2050, using 2019 as a baseline.^[58] Asia remains the largest steel-consuming region. But demand from Africa – the world’s fastest-growing region with a population projected to grow 220 percent by 2100 – is rising quickly (albeit from a relatively low level). It is projected that come 2050, 80 percent of buildings in Africa will have been constructed after 2015.^[59] At the same time, steel – a key component of wind turbines, e-vehicles and railways – continues to be essential for decarbonization itself.

Figure 4.3 Emissions from various stages within the steelmaking process

Source: ECN, 2015.

 
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Retrofitting or phasing out blast furnaces

Traditionally, pig iron (see box 4.2) is made in blast furnaces. This is the most carbon-intensive part of steelmaking (see box 4.1). Blast furnaces have been around for hundreds of years and the potential for further efficiency improvement is limited. Any low-carbon scenario that includes blast furnaces would probably need to rely on emerging technologies such as carbon capture and storage (CCS) to reach its climate goals.^[60]. However, CCS is not a mature technology – and time is short.

Around 71 percent of current global blast furnace capacity will come to the end of its operational life before 2030.^[61] Considering the 20-year lifespan of such facilities, the sector needs urgent investment into new solutions to avoid a decade-long lock-in to old technologies. Researchers have estimated that a decade of delay in replacing blast furnaces could consume 12 percent of the remaining carbon budget.^[62]

Researchers have estimated that a decade of delay in replacing blast furnaces could consume 12 percent of the remaining carbon budget

Today’s pace of blast furnace replacement is too slow to achieve the Paris Agreement’s 1.5-degree Celsius target.^[63] Blast furnace retrofitting is therefore an alternative measure. This involves measures such as lining blast furnaces, recovering gas for electricity generation and integrating biomass into blast furnace fuel in regions where there is a high sustainable biomass availability.^[64]

Box 4.2 Two steelmaking routes

Steel is an alloy of iron and carbon that is both stronger and more fracture-resistant than iron. It can be either recycled from scrap steel or produced through processing iron ore. Steel is produced via two main routes: the blast furnace-basic oxygen furnace (BF-BOF) route and electric arc furnace (EAF) route, with variations and combinations in between.

The key difference between the two routes is the raw materials consumed. For the BF-BOF route, these are predominantly iron ore, coal and recycled steel. The EAF route mainly uses recycled steel and electricity. Depending on plant configuration and recycled steel availability, other sources of metallic iron such as direct-reduced iron (DRI) or hot metal can also be directed to the EAF route. Iron manufactured in a blast furnace is typically known as “pig iron” or “hot metal” and produced and processed in a liquid state.

Melting scrap in an EAF generates significantly less GHG emissions than the integrated BF-BOF route. But limited scrap availability constrains use.

 
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Direct reduced iron (DRI) opens up for fuel switching

The biggest climate change mitigation potential to be found within the steel sector relates to fuel switching and electrification.^[65] Conventionally, coal in the form of coke is used as feedstock for iron production. Specifically, it helps separate oxygen from iron ore within the blast furnace. Carbon monoxide’s reaction with oxygen at high temperatures yields a purer iron material suitable for steelmaking. But this process also produces large amounts of CO₂.

A more low-carbon option is to produce iron through direct reduced iron (DRI) plants. Currently, most commercial DRI plants use natural gas instead of coal as the reducing agent for removing oxygen from iron ore. Because natural gas is still a fossil fuel, hydrogen – specifically green hydrogen – is being touted as a breakthrough alternative for direct reduction of iron ore. But the technology is not expected to achieve significant scale-up by the major steel-producing nations within the next decade (read more below).
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Electrification of steelmaking

An alternative ironmaking horizon technology is iron reduction through applying electricity (electrolysis) at a high or low temperature.^[66] This requires iron to be dissolved in a solvent.^[67] One benefit is that electrolysis technologies could be more modular, requiring smaller facilities and offering greater flexibility. To date, only a few hundred kilograms of steel has been produced in a laboratory or at small pilot scale using this technology.

Electrification of the steelmaking process through EAFs opens up a further route away from fossil fuels. Direct reduced iron and EAFs are considered a cornerstone of steel decarbonization. While their deployment varies greatly between countries, a combination of the two technologies currently accounts for 5 percent of global steel production – and is growing.^[68] This represents a significant emissions mitigation potential compared to the blast furnace and BF-BOF route.

Notably, an EAF’s mitigation potential depends on key factors such as a country’s energy mix and the percentage of scrap steel used as feedstock (box 4.3). For instance, the CO₂ intensity per tonne of steel produced by an EAF in India and China appears to be higher than for conventional steel production in Canada. Mainly, this is due to lower scrap recycling levels and higher fossil fuel rates within the grid.

Obviously, the choice of energy sources powering a country’s electric grid is not in the hands of steel producers. Some steel producers are therefore developing their own renewable energy or entering into power purchase agreements with low emission generators.

Box 4.3 Steel recycling

Scrap steel can be sourced from cars, bridges and buildings. Every tonne of scrap that goes into steel production avoids 1.5 tonnes of CO₂ emission and 1.4 tonnes of iron ore consumption.^[69] About one-third of steel production already uses scrap steel, and it is estimated that around 85 percent of steel is recycled. Expansion of scrap-based steel production and higher recycling rates depend in part on the availability of high-grade scrap, to which there is a limit. Measures such as improved separation of high-copper steel from other scrap streams can boost the availability of scrap corresponding to end-product requirements. In this regard, technologies such as laser-induced breakdown spectroscopy technologies to determine the content of alloys are under rapid development.^[70][71]

 
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Material efficiency for reduced steel demand

A crucial but sometimes overlooked steel decarbonization strategy is material efficiency, wherein fewer resources are used to achieve the same result. ^[72] The EAF does more than just enable steelmaking electrification. It can also handle higher amounts of scrap steel than a basic oxygen furnace (up to 97 percent) and is an efficient way of melting scrap. Traditional steelmaking recycles no more than 25 percent of scrap steel in the process before having to increase energy input. The remaining 75 percent or more is virgin material (see box 4.3). Measures to keep steel flows clean (especially from copper) and ensure high-quality secondary steel are key. But for the steel sector material sustainability means going beyond scrap recycling.

Using steel more efficiently, for example, by using less steel in construction, together with reusing and recycling, could cut steel demand by 20 percent by 2050 ^[73] – or even 40 percent according to the IPCC.^[74] Indeed, it is possible to cut steel use in buildings by almost a half while still meeting design specifications.^[75] However, the single largest contributor to material efficiency would be to extend the lifespan of buildings. Reinforcing concrete with engineering steel combined with stainless steel, for example, can eliminate repairs and replacements resulting from steel degradation within concrete.

Material substitution for existing steel products, or design and quality improvements to avoid material degradation, are other options for reducing steel sector emissions. High-strength steel has the potential to cut material use by 30 to 40 percent in a range of cases.^[76]
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Avoiding steel loss: smart manufacturing and short lead times

Avoiding material loss in the steelmaking process can further contribute to GHG emission reduction. Up to half of steel supplied to the automotive industry currently ends up as scrap at the fabrication or forming stages and does not make it through to the final product.^[77] Technologies that support material efficiency and circular material flows, such as near-net-shape casting (NNSC), 3D printing and powder metallurgy, could reduce waste by producing the desired shape with fewer processing stages. That said, they may only have a marginal positive impact. Avoiding material loss requires fundamental operational efficiency improvements and reduced lead times to better align the supply and demand sides of steel products.

At present, a network of steel stockholders separates steel producers from users. While standard-sized steel products suit producers and stockholders, these are not aligned to consumer need from a material use perspective. Enabling more end-use adapted steel production while maintaining short lead times could reduce material loss, owing to fewer steel products having to be cut to size at the user stage. Digital technologies that enable efficient supply chains could play an important role in this.

A limiting of steel demand and supply may raise concerns regarding a just transition, as the industry currently employs over six million people worldwide.^[78] On the other hand, without targeted measures to reduce steel demand, CO₂ emissions are projected to continue rising.^[79]
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Access to raw materials a barrier

Material efficiency also means making the best use of available raw materials. One challenge with direct reduced iron (DRI) is that it makes iron ore impurities more difficult to remove. This is mainly due to the iron ore remaining solid throughout the production process. DRI requires iron ore with a higher iron content, of which there is an insufficient supply globally.

The shortage of high-quality iron ore represents a significant bottleneck in steelmakers’ efforts to reduce emissions. Therefore, expanding DRI use is dependent on upgrading lower-quality iron ore

The shortage of high-quality iron ore represents a significant bottleneck in steelmakers’ efforts to reduce emissions.^[80] Therefore, expanding DRI use is dependent on upgrading lower-quality iron ore. This happens through a process known as beneficiation. Concentrated innovation efforts are focusing on improving beneficiation technologies through electrochemical processes.
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Hydrogen innovation progressing slowly

Hydrogen is receiving much attention as an alternative fuel in ironmaking. When reducing iron ore using hydrogen instead of carbon, oxygen atoms no longer react with carbon atoms to produce CO₂. Instead, they react with hydrogen atoms, leaving water as a by-product. However, there is an important distinction between the ways in which hydrogen is produced, and in what type of furnace it can be used.

Today, almost all hydrogen is derived from natural gas in a process involving steam with high-energy requirements (also called gray hydrogen).^[81] When gray hydrogen is used as a supplementary fuel in conventional blast furnaces, emission reduction is only around 2 percent. However, hydrogen can also be produced through the electrolysis of water. Hydrogen is considered green when the electrolysis is powered by renewable energy. If green hydrogen is used for direct reduction of iron (DRI), in the best-case scenario the CO₂ emitted is only 2.8 percent of what is emitted by a conventional blast furnace.^[82]

Green hydrogen production is advancing – but only slowly. Today, primary steel production with electrolysis-derived hydrogen has the same CO₂ footprint as the most energy-efficient conventional blast furnace. This is because most current grid electricity is not green, but instead a mix of fossil fuel and renewable energy sources.^[83] But with growing access to affordable renewable energy, green hydrogen could become a game-changer for lower-carbon steelmaking, both as a reducing agent and for powering steel electrification.

Sweden has already demonstrated green hydrogen-based DRI through its HYBRIT project (see Innovation Examples). And recent innovation may allow seawater to be used instead of freshwater for hydrogen electrolysis, thus saving another increasingly critical resource – freshwater.^[84]
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End-of-pipe carbon capture

Technological innovation is offering several breakthrough technologies. In reality, the transition toward steel sector decarbonization is slow paced. History has shown the industry to traditionally opt for gradual improvements over large-scale plant substitutions.^[85] Exceptions include technology improvements such as continuous casting, or EAF penetration in certain regions with high scrap availability.

In place of phasing out carbon-intensive blast furnaces, the industry often emphasizes the potential of CCS technologies. Such technologies could reduce CO2 emissions by up to 65 percent for a conventional steelmaking process, with captured CO2 turned into useful products such as ethanol and methanol.^[86]

However, the technological maturity of CCS is not advanced. Currently, only one of the 26 commercial CCS facilities in operation globally has been developed at an iron and steel plant.^[87] Moreover, only a few major investments into CCS technologies appear to be planned.^[88] On the other hand, the International Energy Agency envisages 15 percent of steel production processes to have been equipped with technologies that capture and store (or utilize) carbon by 2050 to meet Paris Agreement goals.^[89]
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Energy efficiency at its limit

Steel sector energy efficiency measures seem to have reached their limit in terms of emissions reduction. The best available technologies in this area are unable to provide more than around a 10 to 15 percent emission reduction – far below global targets.^[90] A majority of steel producers already employ some form of energy management system to track and optimize energy usage.^[91] However, another study suggests that, in the short term, retrofitting existing systems with the best efficiency technologies available today could have the greatest abatement potential.^[92] Companies often invest in increasing the efficiency of auxiliary systems such as compressors and motors.^[93]

Continuing the transition toward making proven technologies such as electric furnaces, preheaters and precalciners the industry norm is crucial. However, several other technologies – ranging from proven to horizon – deserve further research, investment and scaling in order to meet the steel sector’s net-zero requirements.
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