Authors and contributors
Araceli Fernandez Pales
Pharoah Le Feuvre
IEA (2019), "Tracking Industry", IEA, Paris https://www.iea.org/reports/tracking-industry-2019
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 increased in 2017, 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, which would enable more scrap-based electric arc furnace production.
Longer-term reductions would require the adoption of new direct reduced iron 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 the use of steel.
In 2017, the energy intensity of crude steel fell by 2.2%, compared with an average 0.7% annual decline from 2010 to 2016.
While the 2017 improvement is positive, it resulted from increased scrap-based production and energy efficiency improvements, rather than from a transformative change towards low-carbon steel production methods.
The steel sector is currently highly reliant on coal, which supplies 75% of energy demand.
The energy intensity of crude steel needs to decline by 1% annually during 2017‑30 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.
Scrap-based production (also referred to as secondary or recycled production) is particularly critical to reduce energy demand and CO2 emissions, as it is considerably less energy-intensive than primary production.
Scrap is used primarily in electric arc furnaces (EAFs), which were employed for 28% of total crude steel production in 2017, an increase from the relatively constant 25-26% during 2013‑16.
Scrap can also be used with ore-based inputs in blast furnace-basic oxygen furnace (BF-BOF) production, which improves the energy efficiency of that route.
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) (ArcelorMittal, n.d.).
To get on track with the SDS by 2030, the global market share of EAFs needs to reach over 40%, including fully scrap-based and direct reduced iron-based EAFs.
Achieving this rate of EAF production will require increases in scrap collection and improved sorting methods, particularly for reinforced steel and packaging, which currently have the lowest collection rates. Recycling measures will be particularly important in emerging economies as greater amounts of steel-containing products begin to reach the end of their lifetimes.
Even with higher recycling rates, scrap availability will put an upper limit on the potential for recycled production. Decarbonising primary production therefore remains important in the SDS.
Demand for steel, which drives steel production, is a key determinant of energy demand and CO2 emissions of the steel subsector.
Global crude steel production increased by an exceptional 4% to 1 690 Mt in 2017, and initial estimates suggest that it rose strongly in 2018 as well.
China accounts for nearly half of global steel production. After decelerating in 2014 and falling in 2015, production expanded by a strong 3% in 2017.
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 from closed, illegal ones (McKinsey, 2018).
Driven by population and GDP growth, global demand for steel may 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 use across value chains can curb growth and thus help in getting 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).
In the next five to ten years, CO2 emissions reductions can most easily be achieved by accelerating deployment of energy efficiency measures and best available technologies. This includes increasing secondary production by improving 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 designs, 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.
Furthermore, ensuring efficient equipment operation and maintenance will help guarantee optimal energy performance. This can be reinforced by implementing energy management systems.
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 likely require the adoption of new process routes for primary steel production as well as other innovative technologies, including new smelting, direct reduction, CCUS and production with electrolytic hydrogen.
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 investors, particularly to advance the large-scale demonstration and deployment of technologies that have already shown promise.
Private-public partnerships can help, as can green public procurement, which generates 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.
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 industry 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, that is, a government-mandated minimum proportion of low-carbon steel in targeted products.
Ideally, mandatory policies would be applied globally at similar strengths. Since steel is extensively traded internationally, measures may be needed to help ensure the competitiveness of domestic industries and prevent carbon leakage if the strength of policy efforts differs from one region to another.
Examples include time-limited measures to ease transition, such as declining free allocation of permits, or novel measures to apply emissions regulations on the lifecycle emissions of end-products rather than directly on materials production. The latter could potentially be used to apply border carbon adjustments, provided that they are implemented in line with international trade rules.
Governments can extend the reach of their efforts by partaking in multilateral forums to facilitate low-carbon technology transfer and to encourage other countries to also adopt mandatory CO2 emissions policies.
Improving 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.
Industry participation and government co‑ordination are both integral to improve data collection and reporting.
Although considerable CO2 emissions reductions can be realised through greater energy efficiency and increased scrap-based production, innovation will be important to reduce emissions even further, particularly in primary production.
An array of technologies is under development. New smelt reduction technologies based on coal or hydrogen plasma can cut emissions from coke production. Direct reduction technologies based on natural gas, hydrogen or electricity could reduce emissions considerably compared with the conventional blast furnace-coke oven (BF‑CO) route.
Additionally, adopting CCUS could achieve near-zero steel production emissions – and using the captured CO2 to produce chemicals and fuels would also offer new economic opportunities. Top-gas recovery systems in blast furnaces are also being developed to reduce energy and carbon inputs for conventional BF‑CO steel production.
Integrating CCS into existing iron and steel technologies could considerably reduce the carbon footprint of steelmaking. Achievable emissions avoidance depends on the iron and steel processes used, the capture technology and the amount of CO2 captured.
The use of hydrogen from renewable electricity in this process technology would enable a 98% reduction in CO2 emissions compared with the reference BF‑CO method.
Technology principles: An alternative to BF‑CO steel production, the DRI route reduces solid iron ore using carbon monoxide and hydrogen.
The new smelting reduction process would circumvent the need for iron ore agglomeration and coking, avoiding 20% of the CO2 emissions of the standard BF‑CO route.
The use of pure oxygen (oxy-fuel combustion) makes the new smelting reduction process well suited to CCUS because it generates a high concentration of CO2 off-gas and emissions are delivered in a single stack, as opposed to the multiple emission points of a standard steel mill. Equipping this process with carbon capture would result in 80% less CO2 emissions than standard BF‑CO production.
Part of the coal could eventually be replaced by natural gas and/or biomass, which would further reduce the CO2 footprint of the new smelting reduction process.
Technology principles: Iron smelting normally occurs in a blast furnace with coke used as a feedstock and fuel; the coke is produced from metallurgical coal in a coke oven. The blast furnace also requires the conversion of iron ore fines or lump ore into agglomerates, such as pellets and sinter. Using metallurgical coal and iron ore directly in a smelter can avoid the coke production and iron ore agglomeration steps.
Using CO2 from steel works arising gases (WAGs) can reduce the lifecycle emissions of fuel and chemical production, since it makes use of CO2 that would otherwise be emitted to the atmosphere. The net impact depends on what the WAGs are currently used for (e.g. flaring vs power generation), compared with their use as alternative feedstock for ethanol production.
For fuel production, this process would improve the resource efficiency of steelworks through one or more of the following: full process integration of by-products from ethanol plants into steel plants; increased use of low-temperature heat in steel plants for ethanol distillation; and replacement of pulverised coal injection with biomass in the blast furnace, reducing the direct CO2 footprint of steelmaking. Using WAGs could also reduce the lifecycle-assessed CO2 footprints of fuels by using ethanol produced through this method as a blending component.
For chemical production, this technology could facilitate wider penetration of variable renewable power generation by providing demand-load flexibility to the system, and could also reduce the life-cycle assessed CO2 footprint of chemicals produced through this method. However, the net impact would depend on what the WAGs are currently used for (e.g. flaring vs power generation), compared with their use as alternative feedstocks for chemical production.
Technology principles: WAGs are the gases released during steelmaking. They are carbon-rich, so provide a relatively concentrated source of CO2 for carbon capture and use.
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Asa Ekdahl (World Steel Association), Christopher Beauman (European Bank for Reconstruction and Development), Clare Broadbent (World Steel Association), Hugo Salamanca (IEA), Joe Ritchie (IEA), Masanobu Nakamizu (Japanese Iron and Steel Federation)