Iron and Steel

More efforts needed
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In this report

The direct CO2 intensity of crude steel has been relatively constant (within a 20% range) during the past two decades, and in the last couple of years has returned to roughly the 2000-08 level. To align with the SDS, the CO2 intensity of crude steel needs to fall an average of 2.5% annually between 2018 and 2030. Achieving this reduction and maintaining it after 2030 will not be easy. Energy efficiency improvements spurred much of the reduction in recent years, returning CO2 intensity to previous levels, but opportunities for further efficiency improvements will likely soon be exhausted. Thus, innovation in the upcoming decade will be crucial to commercialise new low-emissions process routes, including those integrating CCUS and hydrogen, to realise the long-term transformational change required. Governments can help by providing RD&D funding, creating a market for near-zero-emissions steel production, adopting mandatory CO2 emissions reduction policies, expanding international co operation and developing supporting infrastructure.

Direct CO2 intensity in iron and steel, 2000-2018

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Tracking progress

While the energy intensity of steel has gradually fallen since 2009, expanding production from 2009 to 2014 raised total energy demand and CO2 emissions. After a small decline between 2014 and 2016, energy demand and CO2 emissions increased in 2017 and 2018, primarily as a result of higher steel production.

Substantial cuts in total energy demand and CO2 emissions will be needed by 2030 to get on track with the Sustainable Development Scenario (SDS).

Short-term CO2 emissions reductions could come largely from energy efficiency improvements and increased scrap collection to enable more scrap-based production.

Longer-term reductions would require the adoption of new direct reduced iron (DRI) and smelt reduction technologies that facilitate the integration of low-carbon electricity (directly or through electrolytic hydrogen) and CCUS, as well as material efficiency strategies to optimise steel use. The groundwork for commercialising these technologies needs to be laid in the next decade.

Demand for steel, which drives steel production, is a key determinant of energy demand and steel subsector CO2 emissions. Global crude steel production increased by 5% in 2018 to reach 1 817 Mt, following 6% growth in 2017. Initial estimates suggest 3% growth in 2019. This follows a period of relatively flat demand from 2013-2016.

As China accounts for nearly half of global steel production, its activities are a key driver of global trends. After stagnating in 2013‑16, production expanded 6‑8% annually in 2017-19. In recent years, China has made efforts to close excess steel production capacity, including illegal mills. This may partially explain the production increase registered in official statistics, as legal plants have taken up some of the production of closed, illegal ones.

Driven by population and GDP growth, global steel demand will likely continue to increase, especially because of economic expansion in India, the ASEAN countries and Africa, even as demand in China gradually declines.

Adopting material efficiency strategies to reduces losses and optimise steel use throughout the value chain can curb demand growth and thus help the subsector get on track with the SDS. Material efficiency strategies include increasing steel and product manufacturing yields, lightweighting vehicles, extending building lifetimes and directly reusing steel (without melting).

Global steel production, 2010-2019

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In 2018, the energy intensity of steel1 fell by 3.6%, compared with 1.3% average annual declines from 2010 to 2017. While these recent reductions are positive, they resulted primarily from energy efficiency improvements in conventional production processes, as well as a small increase in scrap-based production, rather than from a transformative change towards low-carbon steel production methods. The steel sector is still highly reliant on coal, which meets 75% of its energy demand.

The energy intensity of crude steel needs to decline by 1.2% annually during 2018‑30 to attain the SDS level. Energy efficiency is important for SDS alignment, but on its own cannot decarbonise the sector. Transformational change is required, and the groundwork for breakthrough technologies needs to be laid before 2030.

Energy demand and intensity in iron and steel, 2000-2018

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Scrap-based production (also referred to as secondary or recycled production) can be valuable in reducing energy demand and CO2 emissions, as it is considerably less energy-intensive than primary production from iron ore. Scrap is used as the main ferrous feed in electric arc furnaces (EAFs), as well as in induction furnaces to a lesser extent. Scrap-based production in EAFs and induction furnaces accounted for about 20% of production in 2018, a similar share as previous years.

Scrap is also used with ore-based inputs in blast furnace-basic oxygen furnace (BF-BOF) production, usually at a rate of 15‑20%, which improves the energy efficiency of this route. Furthermore, scrap is normally blended at a rate of about 10% with DRI production. Altogether, scrap inputs account for about 35% of total crude steel production.

Scrap-based production tends to cost less than primary production, so the key constraint is scrap availability. The global scrap collection rate is currently around 85%, with rates by end use varying from as low as 50% (for structural reinforcement steel) to as high as 97% (for industrial equipment).

To get on track with the SDS by 2030, the global market share of scrap-based EAFs and induction furnaces combined needs to reach over 28%, even as total steel production increases. Scrap inputs should account for over 40% of total crude steel production.

Achieving this rate of scrap-based production will be spurred by increasing scrap availability as steel produced during the past several decades reaches the end of its lifetime. However, better scrap collection, facilitated in part by improved sorting methods (particularly for end uses such as reinforced steel and packaging, which currently have the lowest collection rates) will be needed to ensure that all available scrap is used. Recycling measures will be especially important in emerging economies as greater amounts of steel-containing products begin to reach the end of their lifetimes.

Even at higher recycling rates, scrap availability will put an upper limit on the potential for recycled production. Decarbonising emissions from primary production therefore remains important in the SDS.

For example, emissions can be reduced in the short term by increasing gas-based DRI production, which is less emissions-intensive than coal-based BF-BOF production and currently accounts for about 5% of steel production. DRI also has the advantage of being easier to retrofit with CCUS or to transition to hydrogen inputs.

In the longer term (post-2030), shifting towards innovative primary production routes incorporating hydrogen or CCUS will be required to achieve greater emissions reductions.

Innovation will be critical to reduce primary steel production emissions. Several RD&D efforts are under way, including those working towards near-zero-emissions production such as:

  • The HYBRIT project in Sweden, which is developing hydrogen-based DRI production. In early 2020, the project announced it  was aiming to produce the first fossil-carbon-free steel for sale in 2026, a considerable advancement from the previous target of 2035 (Renewables Now, 2020). Additional time would likely be required after that for scaled-up production and then full commercialisation. A pilot plant is currently under construction, with start-up expected in summer 2020. As part of separate initiative, a pilot plant using hydrogen reduction is also being designed in Germany, to be built by 2030.
  • The HISarna project’s testing of an enhanced smelt-reduction technology that could be combined with CCS. A pilot plant in the Netherlands has produced 60 kt of iron, and plans are under way for a second large-scale pilot plant (0.5 Mt) in India, which could open in 2025‑30.
  • Japan’s COURSE 50 project to develop lower-emissions steel production, based on the blast furnace but with several emissions-reducing features to recover gases from the blast furnace to reduce fuel input needs, reform coke oven gas into hydrogen to be used as fuel, and integrate carbon capture. The first phase of testing in an experimental blast furnace was completed in 2017, and the programme is aiming for commercial-scale demonstration by 2030. Similar technology is being tested by the IGAR and 3D projects at an ArcelorMittal plant in France.
  • The Siderwin project, which is developing production via low-temperature electrolysis, known as electrowinning. An engineering-scale pilot is expected to be commissioned in 2020.
  • Boston Metal’s work on high-temperature electrolysis, with a prototype cell commissioned in 2014 and plans to test full-scale cells by 2024.

Continued efforts on these and other innovative projects will be integral to bring these technologies to full commercialisation in the coming decade. 

In the short to medium term (the next five to ten years), CO2 emissions reductions can be most easily achieved by promoting energy efficiency. Deployment of best available technologies should be pursued when economical, keeping in mind the longer-term need to transition to breakthrough near-zero-emissions technologies.

Considerable energy efficiency improvements can be achieved by improving operational efficiency and process yields, as advocated by the World Steel Association’s Step-Up Programme that encourages all steelmakers to improve their operations to the level of the current top 15% of performers. This can be reinforced by implementing energy management systems.

Secondary production should also be increased through more effective scrap collection and sorting.

Stakeholders should work to increase scrap collection and recovery by improving recycling channels and sorting methods, and by better connecting participants along supply chains. Focusing on end uses that currently have low collection rates (e.g. reinforcement steel and packaging) will be important. The steel industry, steel product manufacturers and waste collectors could work together to ensure that manufacturing and end-of-life scrap is channelled back to steel producers. Engineers should consider reusability and recyclability in product and building design, and governments can assist by setting requirements and co‑ordinating channels for end-of-life material reuse and recycling.

Participants all along the value chain (steel producers, engineers, construction companies and product manufacturers) can also adopt material efficiency strategies that reduce overall steel demand. 

The steel industry can also take advantage of opportunities for industrial symbiosis – including using the waste or by-products from one process to produce another product of value – to help close the material loop, reduce energy use and reduce emissions in the case of carbon capture and utilisation. Examples include using steel blast-furnace slag in cement production and carbon from steel waste gases to produce chemicals and fuels.

In the longer term, deep emissions reductions will require the adoption of new process routes for primary steel production as well as other innovative technologies, including new smelting, direct reduction and CCUS technologies.

Accelerating innovation over the next decade will be critical to enable technology deployment post-2030. Increased support for RD&D is needed from governments and financial investors, particularly to advance the large-scale demonstration and deployment of technologies that have already shown promise.

Public-private partnerships can help, as can green public procurement and contracts for difference that generate early demand and can enable producers to gain experience and bring down costs. Government co‑ordination of stakeholder efforts can also direct focus to priority areas and avoid overlap.

It will also be important to begin planning and developing infrastructure for the eventual deployment of innovative processes, such as CCUS pipeline networks to transport CO2 for use or storage, and electricity transmission grids and near-zero-emissions electricity generation to enable low-carbon hydrogen production. Gaining social acceptance for building this infrastructure, particularly COtransport and storage facilities, and ensuring affordable access to infrastructure and energy inputs will also be necessary.

Policy makers can promote CO2 emissions reduction efforts by adopting mandatory reduction policies, such as a gradually increasing carbon price or tradeable industry performance standards that require average CO2 intensity for production of each key material to decline across the economy and permit regulated entities to trade compliance credits.

Adopting these policies at lower stringencies in the short term (i.e. within the next three to five years) will provide an early market signal, enabling industries to prepare and adapt as stringency increases over time. It can also help reduce the costs of low-carbon production methods, softening the impact on steel prices in the long term. Complementary measures may be useful in the short to medium term, such as differentiated market requirements (i.e. a government-mandated minimum proportion of low-emission steel in targeted products).

Ideally, mandatory policies should be applied globally at similar levels of ambition. Since steel is highly traded, measures will be needed to help ensure a level global playing field if the strength of policy efforts differs from one region to another. Possibilities include adopting border carbon adjustments or the free allocation of allowances for emissions below a targeted benchmark in an emissions trading system.

Governments can extend the reach of their efforts by participating in multilateral forums to facilitate low-carbon technology transfer and to encourage other countries to also adopt mandatory CO2 emissions policies. 

Improving the collection, transparency and accessibility of energy performance and CO2 emissions statistics on the iron and steel subsector would facilitate research, regulatory and monitoring efforts (including, for example, multi-country performance benchmarking assessments).

Data on energy intensity for each separate steel production route is especially needed, to account for variability among routes and enable better performance assessments and comparisons. Increased industry participation and government co‑ordination are both integral to improve data collection and reporting.

Resources
Acknowledgements

External reviewers: Andrew Purvis (World Steel Association), Asa Ekdahl (World Steel Association), Henk Reimink (World Steel Association), Markus Steinhäusler (voestalpine).

References
  1. Energy demand for steel includes blast furnace and coke oven energy consumption within the energy own use and transformation section of the IEA energy balance.

  2. World Steel Association (2020), Global crude steel output increases by 3.4% in 2019, https://www.worldsteel.org/media-centre/press-releases/2020/Global-crude-steel-output-increases-by-3.4--in-2019.html.

  3. World Steel Association (2019), Steel Statistical Yearbook 2019 (concise version), https://www.worldsteel.org/en/dam/jcr:7aa2a95d-448d-4c56-b62b-b2457f067cd9/SSY19%2520concise%2520version.pdf.