Quick Look at Steel and Why It Matters

Steel is everywhere—think cars, appliances, ships, bridges, and skyscrapers. It’s the go-to material for construction and engineering projects. Made mostly of iron and carbon, with a mix of other metals like manganese and silicon, steel is super strong but has a downside: it's a major source of carbon emissions. Each year, about 2 billion tons of steel are produced, and this process releases over 4 billion tons of CO₂ into the atmosphere, making up around 8% of global greenhouse gas emissions.

Why does Steel Production Generate So Much Carbon?

Steel production starts with mining iron ore, the most mined mineral in the world, with a staggering 2.6 billion tons extracted every year.

There are two main ways to make steel: recycling old steel or creating new steel from iron ore. While about a third of steel comes from recycling, which is much cleaner, the other two-thirds are made from scratch using iron ore. This process is incredibly energy-intensive and relies heavily on burning coal in blast furnaces.

Source: The National Iron & Steel Heritage Museum

To put it simply, a blast furnace is a massive machine where a mix of coke (which is processed coal), iron ore, and limestone are added from the top. Inside, some of the coke burns to produce the heat needed for a chemical reaction. This reaction removes oxygen from the iron ore, turning it into liquid iron, which then flows out of the bottom and is ready to be used to make steel.

Unfortunately, this method is a big polluter—every ton of steel produced this way releases over 2 tons of CO₂. Since steel is critical for building infrastructure, especially in rapidly developing countries, finding ways to reduce its carbon footprint is key to fighting climate change.

Pathways to Decarbonize Steel Production

There are several approaches being developed to Sure thing! To split content into columns, you can use CSS properties like "column-count" or "flexbox" in your code. This will help create a visually appealing layout for your content, making it easier to read and navigate. Just remember to adjust the column width and spacing to suit your design preferences!decarbonize steelmaking, each with its own benefits and challenges:

Hydrogen-based Direct Reduced Iron (DRI)

One of the most promising technologies for decarbonizing steel is Hydrogen DRI. In this process, hydrogen replaces carbon as the reducing agent to extract iron from iron ore, with water being the only byproduct instead of CO₂.

Hydrogen can be sourced in three ways:

  • Green hydrogen, produced through electrolysis (decomposing water into hydrogen and oxygen) using renewable energy.

  • Blue hydrogen, produced from fossil fuels but with carbon capture and storage (CCS) applied.

  • Grey hydrogen, produced from unabated fossil fuels.

Pros of Hydrogen DRI

  • When green hydrogen is used, it can almost eliminate CO₂ emissions from the reduction process.

  • It is considered one of the most advanced pathways for achieving near-zero GHG emissions in steelmaking.

Cons of Hydrogen DRI

  • Green hydrogen is expensive and scarce, which could hinder the widespread adoption of this technology.

  • Large-scale hydrogen infrastructure, including pipelines and storage, needs significant development.

  • The current hydrogen-based DRI process requires higher-quality iron ore than traditional blast furnaces, necessitating additional processing and costs.

Direct Electrification

Electrification of the steelmaking process involves using electricity instead of fossil fuels to heat and reduce iron ore. While electrification is already widely used in aluminum production, scaling it up for steel production presents several challenges. To power a single integrated steel mill, roughly 4 gigawatts of continuous electricity is needed, which is equivalent to the output of four nuclear power plants.

Pros of Electrification

  • Can directly eliminate CO₂ emissions if powered by renewable electricity.

  • Reduces reliance on hydrogen, avoiding the inefficiencies in energy conversion.

Cons of Electrification

  • Requires massive amounts of electricity, making it expensive and difficult to scale.

  • The technology is still in the early stages and not yet commercially available.

Carbon Capture and Storage (CCS)

Another pathway for decarbonizing steel production is CCS, which captures CO₂ emissions from blast furnaces before they enter the atmosphere. While this technology can reduce emissions significantly, it does not eliminate them completely.

Pros of CCS

  • Can be applied to existing blast furnace infrastructure, making it a feasible near-term solution.

  • Helps reduce emissions without requiring a complete overhaul of current steelmaking technologies.

Cons of CCS

  • CCS is expensive and technically challenging to implement at scale.

  • It does not fully eliminate emissions, only reducing them by a significant margin.

Increased Steel Recycling

Steel is already the most recycled material globally, with 85% of end-of-life steel being collected and reused. Recycling steel in electric arc furnaces (EAFs) is far less carbon-intensive than producing new steel from iron ore, making it a key component of decarbonization strategies.

The National Iron & Steel Heritage MuseumSource: The National Iron & Steel Heritage Museum

Pros of Recycling

  • Recycling steel produces far fewer emissions than producing new steel.

  • The process is energy efficient and already well-established.

Cons of Recycling

  • Recycled steel can only meet part of global demand, especially in developing economies where new steel is still needed.

  • Some steel cannot be recovered due to contamination or being embedded in long-lasting structures.

Green Finance: Bridging the Gap

Switching to green steel technology and boosting energy efficiency takes a lot of funding—but the good news is, there are plenty of financing options out there. The best choice depends on whether a company prefers debt or equity.

Take the Hydrogen Green Steel project in Sweden, for example. It’s landed major financial support to build the Boden hydrogen smelting steel plant, including €3.3 billion in senior debt from banks like AB Svensk Exportkredit and BNP Paribas, €750 million in senior debt from the European Investment Bank, and €500 million in subordinated debt. The goal? To produce 5 million tonnes of green steel by 2030, slashing CO₂ emissions by 95% compared to traditional methods. Backed by a mix of equity, debt financing, and strong demand from industries like automotive and construction, this project is set to lead the way in scaling green steel production.

Wrapping Up

Decarbonizing steel is a huge piece of the puzzle in meeting global climate goals. While new technologies like hydrogen DRI, electrification, and CCS are promising, they come with their own economic and technical challenges. We’ll need a mix of strategies to create a low-carbon steel industry. It’s going to take big investments, infrastructure, and global teamwork, but it’s crucial for building a sustainable future.

References

Catalyst with Shayle Kann - Podcast: https://open.spotify.com/episode/0P2Q0pXd2qH0n1w76N6GIR?si=4eecf7d12df74b6c&nd=1&dlsi=68c24a321f624439

Steel making: https://steelmuseum.org/steelmaking_exhibit_2016/blast_furnace.cfm

Hydrogen (H2)-based ironmaking: https://worldsteel.org/wp-content/uploads/Fact-sheet-Hydrogen-H2-based-ironmaking.pdf

Financing guidance for low-carbon transition of China’s steel companies: https://transitionasia.org/financing-guidance-for-low-carbon-transition-of-chinas-steel-companies/