Steelmakers Are Next in the Crosshairs as Climate Pressure Grows
Steelmakers Are Next in the Crosshairs as Climate Pressure Grows
(Bloomberg) -- Flames leap from cauldrons brimming with molten iron as they’re tipped into giant vats at one of Europe’s largest steel mills.
Heated to over 1,000 degrees Celsius (1,832 Fahrenheit) in furnaces fired by coal, the liquid metal sloshing at Thyssenkrupp AG’s facility in Duisburg, Germany, will eventually wind up in automobiles, wind turbines and everyday household items from washing machines to furniture.
It’s an industrial process that’s hardly changed since being patented by English inventor Henry Bessemer in 1856. But it’s also a dirty one – steel production accounts for about 7% to 9% of all man-made carbon emissions, according to the World Steel Association. After forcing changes at other resource giants, climate lobbyists and policymakers are zeroing in on steel, raising tough questions for an industry that’s already grappling with rising costs and faltering global growth.
To clean up, Thyssenkrupp and other European steelmakers are turning to hydrogen as a replacement for coal in their processes. The German industrial conglomerate said in April it wants to convert the entire Duisburg facility over time.
Yet there’s skepticism over whether the cash-strapped industry can afford such a fundamental change, which would require massive investment, a new stream of renewable energy and almost inevitably higher steel prices.
Thyssenkrupp received a state grant this year to start testing the use of hydrogen at one of the Duisburg blast furnaces. The process works by using hydrogen as a reducing agent, refining iron ore. To hit zero emissions, the mill could eventually be powered by hydrogen produced using renewable electricity.
The aim is to clean up the centuries-old process. In traditional blast furnaces, carbon in the form of coal or carbon monoxide is pumped in along with the ore, creating pure liquid iron. The carbon latches onto atoms of oxygen in ore and floats away as carbon dioxide, a greenhouse gas that contributes to global warming.
While furnaces produce an average of 1.8 tons of carbon dioxide for each ton of steel – the equivalent of driving a car from New York to Salt Lake City and back again – using hydrogen eliminates most of those emissions.
“This isn’t just clean steel that can be produced on a small scale in the laboratory,” said Arnd Koefler, chief technology officer at Thyssenkrupp Steel. “We’re talking about a million tons per month.”
Governments are forcing the steel industry to clamp down on pollution as part of a drive to make good on pledges under the 2015 Paris Agreement on climate change. While the challenge is a global one, the issue is most pressing in Europe where the regulatory standards are toughest.
Adding to the pressure is the Climate Action 100+, a group of 320 investors that manage more than $33 trillion in assets that’s demanding companies adhere to the Paris targets. The group has forced changes at oil major Royal Dutch Shell Plc and mining giant Glencore Plc and is now looking at steelmakers.
“Steel companies need to step up their game and commit to the innovation necessary to ensure they can deliver change across their businesses,” said Stephanie Maier, a steering committee chair at Climate Action 100+.
Steel producers have already made some progress in cutting carbon emissions by improving plant efficiency, but much of the low-hanging fruit has now been plucked. The slowdown in pollution cuts sits uncomfortably with European Union efforts to tighten emissions.
In Sweden, where steel production makes up about 10% of carbon emissions, a group including the utility Vattenfall AB, steelmaker SSAB AB and iron ore producer Luossavaara-Kiirunavaara AB is building a carbon-free steel plant that will start small scale production next year. Similar to Thyssenkrupp’s Duisburg plant, the Swedish plant would use hydrogen.
Production costs are expected to be about 20% to 30% higher than a similar plant using fossil fuels. However, the developers argue that the rising cost of emitting carbon dioxide – whether through the EU’s emissions trading system or future taxes – will ultimately make green steel economical by the 2030s.
“By then, industrial companies will have to pay most or all of the real costs of their greenhouse gas pollution, and renewable energy will be cheaper and far more abundant,” said SSAB CEO Martin Lindqvist.
For now, many producers may have more pressing worries to deal with. European steelmakers have been feeling the pinch across the continent as demand contracts, especially from the normally profit-driving auto sector, while low-cost imports into the region remain high.
The path to carbon-free steel may need to be paved by government assistance similar to that received by renewable energy, ArcelorMittal Chief Technology Officer David Clarke said in a London interview. The world’s biggest steelmaker has started a hydrogen project at its mill in Hamburg. It will initially produce 100,000 tons of steel a year as a technology demonstrator.
“If you want to make the cost of that hydrogen reasonable, you also need uber-cheap electricity,” he said. “The cost of making steel may almost double from what it is today.’
--With assistance from Jeremy Diamond.
To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net, Lynn ThomassonLiezel Hill
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