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Construction, renewable energy buyers join steel producers to push zero carbon steel

Highlights

New SteelZero initiative targets net-zero steel by 2050

Hydrogen steelmaking 'tipping point' in 10-15 years

Carbon taxes, border adjustment to level playing field

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A global shift to net-zero carbon steel requires a 10-30 year phased approach that starts with driving demand through policy and aligning costs against traditionally produced steel, rather than expecting consumers to pay significantly more for green production, according to industry experts speaking Dec. 1.

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The officials spoke during a webinar hosted by international non-profit the Climate Group, which the same day announced a new global initiative – SteelZero –in partnership with ResponsibleSteel and supported by eight major steel-buying companies aimed at driving market demand for net-zero steel.

Currently, steelmaking is one of the biggest emitters of CO2 globally, with the $2 trillion sector's total greenhouse gas emissions accounting for 7%-9% of global direct emissions from the use of fossil fuels, according to Climate Group.

The steel consumers signing on to SteelZero have made a public commitment to transition to procuring, specifying or stocking 100% net-zero steel by 2050. The companies include: UK steel construction company BHC, UK constructional steelwork company Bourne Group, international property developer Grosvenor Britain & Ireland, multinational construction company Lendlease, global consultancy and construction firm Mace Group, renewable energy company Orsted and engineering services group WSP UK.

"Targeting net-zero steel from the demand-side of the supply chain makes this initiative the first of its kind, with the potential for it to have significant impact on investment, policy, manufacturing and production in the sector," Climate Group said in a news release announcing the initiative.

The webinar speakers – which included officials from ArcelorMittal, Orsted, Lendlease and environmental consultancy Environmental Resources Management – agreed the technology exists to produce decarbonized steel, and that demand is increasing, but said the movement needs support from regulatory policy and green financing.

Eur50 billion for a steelmaker to go green

Moderator Peggy Hollinger of the Financial Times asked about the estimated Eur50 billion cost for a steel company to "go entirely green," and whether society had to help pay.

Alan Knight, AM's head of corporate responsibility and sustainable development, conceded "those sorts of numbers we do recognize," and said green bonds and access to green financing were key.

He suggested that while producers transitioned, government policy needed to drive a higher price for blast-furnace produced carbon steel to narrow the cost differential and ensure demand.

Knight said producers and consumers together needed to go to policy makers and say: "'You are asking us to take on all of the risk; can you push the risk to those people who aren't making those investments. The more certain we are [of demand], the more we can borrow."

The process requires support from regulators, investment and sustainable finance, and "will take time; it won't take 10 years ... It will be a journey of 25-30 years," said Dirk Nuyens, ERM's senior partner and global account director, steel and mining.

The situation mirrors that of offshore wind energy in 2012, when it was "one of the most expensive energies available," said Jakob Askou Bøss, Orsted's senior vice president of corporate strategy and stakeholder relations. Now, "it's actually cheaper to buy renewable versus fossil fuel energy," he said. "There will be a time when carbon neutral steel will be cheaper."

He said the experience with wind energy was that getting there required "significant innovation, significant market demand, and a lot of policy."

Fifty percent of Orsted's procurement cost comes from steel, and the company has set a target to make its supply chain carbon free by 2040.

But he agreed with Lendlease's Cate Harris, group head of sustainability and the Lendlease Foundation, that steel consumers are not about "to pay 50% more tomorrow," since they face competition as well.

Reusing carbon currently cheaper than hydrogen

Knight said since scrap-based steel production cannot meet global demand, the traditional BOF production from iron had to be made green in one of two ways: by recycling and storing carbon or by using hydrogen.

"The routes that rely on circular carbon rather than hydrogen are coming in at lower cost," he said. So most steel companies are looking into hybrid solutions, blending "carbon capture, weaving in hydrogen as it becomes more affordable, and increasing recycling to reduce the footprint."

Knight said hydrogen cost should reach a tipping point in 10-15 years to enable its competitive use in steelmaking, at which point "demand should be there."

Hydrogen in 10 years should be more affordable, but it's also about "creating demand and promoting it," Nuyens said.

They agreed the transition was also linked to carbon taxation and border adjustment, which is expected to increase with time. Knight said Europe should put a tax on "carbon used in Europe, not just made in Europe, to level the playing field" with imports.

Nuyens said some Chinese producers were "preparing themselves a bit faster than some of the American and European ones," and that India was also moving rapidly.

Critically, they said the steel industry needs standards and specifications that go beyond just the carbon specification, and a way to prove those are being adopted, "to know what we mean by green steel," Knight said.

Nuyens said these are being adopted and validated by independent certified auditors – "a roll-out; it's happening as we speak."