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Nov 22, 2021

Green Steel: Now is the time to take on the decarbonization challenge

The message is clear from those attending the Conference of the Parties 26 (COP 26 for short) meeting in Glasgow: to limit global warming we need to set more ambitious decarbonization targets.

Achieving the goals of the Paris Agreement adopted at COP 21 requires a complete transformation of the way society produces and consumes. According to the International Energy Agency (IEA), the iron and steel industry accounts for the largest share (over 25%) of the CO2 emissions from the global manufacturing sector and 7% of the emissions from the energy sector including process emissions. The global steel sector now has an unprecedented opportunity to contribute to achieving net zero and support the transition to clean energy. It is inevitable that governments will take steps that will reshape the industry to be more sustainable.

Steel is a vital material that is required to meet the social and economic needs of society. After a brief lull in 2020, the demand for steel has continued to rise, in part as a result of generous stimulus packages that have been offered to help mitigate the impact of the Covid pandemic on national economies. These packages have been largely directed towards infrastructure and electrification, areas which are by nature steel intensive. Steel is also an integral ingredient for the energy transition, with solar panels, wind turbines, dams, and electric vehicles all depending on it to varying degrees. Steel demand and consumption are both expected to rise by 1% a year between 2020 and 2025, and the IEA has forecast that by 2050 global steel demand is set to increase by at least a third. Satisfying this growing demand presents challenges for the sector as it seeks more sustainable methods of production in order to address the pressure it is under to decarbonize and remain cost competitive in light of current and potential future carbon pricing.

Steel production and consumption (Mt)
Figure 1. Steel production and consumption (Mt). Source: HSBC Securities (USA) Inc., Metals Quarterly Q4 2021 report.

How can the steel industry address the decarbonization challenge?

Recent developments in regulations, the commitment of some governments to reduce CO2 emissions, and investors’ behavior and demands for higher decarbonization targets have led many iron ore miners and steelmakers to set ambitious decarbonization goals for the coming years. In particular, mining companies are under pressure from investors to reduce a rise in Scope 3 emissions, and this is directing even more attention toward emission reductions in steelmaking.

Without these ambitious targets and increasingly strong regulatory pressures, COemissions from the steel industry are projected to continue rising. So what pathways are open to the industry to help it tackle the decarbonization challenge in the short to medium term? Some of the already developed/developing solutions are explained below:

Steel scrap

Steel production from scrap is much less energy intensive (up to eight times less) than production from iron ore, which is largely coal based. However, steel recycling rates are already quite high, around 80-90% globally, and the amount of scrap recycled is not currently covering the demand for raw materials, meaning scrap and recycling could not be a standalone solution to achieve decarbonization goals. ArcelorMittal indicated that the world needs 50 to 100 years of continuous steel production to build an adequate stockpile of scrap volumes.


The steel industry's decarbonization process will place a greater value on higher-quality iron ore products as they require less coal to produce, and this in turn will help to reduce emissions in the near term. If emissions from steelmaking continue to be restricted then a shift towards higher feed quality can be expected, for example through increased pellet use. Only a small proportion of the iron ore currently available is of the required grade for direct reduction and thus for the main steelmaking route which will replace the carbon-intensive blast furnace route.

According to Fastmarkets, only 37% of the seaborne iron ores are high grade, which is the grade required for example for production of direct reduction (DR) pellets. This shortage of high-grade ore is set to continue and will impact the availability and price of feed material for the DR/electric arc furnace (EAF) route

Figure 2. Global iron ore export breakdown by grade category. Source: Fastmarkets - Understanding the high-grade iron ore market report.
Figure 2. Global iron ore export breakdown by grade category. Source: Fastmarkets - Understanding the high-grade iron ore market report.

In addition, there is a global trend towards a shift in installed capacity – the share of EAF production is expected to grow from 28% in 2019 to 48% by 2040 (Metso Outotec Business Intelligence, investment bank research). To address these trends, the steel industry needs technology partners like Metso Outotec, who can offer both the straight grate and the grate kiln process for pelletizing and help customers to determine which process best matches their ore, fuel, and pellet requirements. Our iron ore pelletizing systems combine the best features of both technologies to provide the most modern plant and to produce high-quality pellets at the lowest cost.

Figure 3. Main steel production pathways and material flows in 2019. Source:International Energy Agency - Iron and Steel Technology Roadmap
Figure 3. Main steel production pathways and material flows in 2019. Source:International Energy Agency - Iron and Steel Technology Roadmap


Traditionally, direct reduced iron (DRI) is produced from the direct reduction of iron ore using natural gas, but emerging technologies are enabling the production of DRI using hydrogen as a reductant. Depending on the source of the hydrogen, this offers the potential for truly green carbon-free steel. Hydrogen-based DRI is, therefore, expected to be a major decarbonization enabler for steelmakers, particularly in Europe.

It is the opinion of Metso Outotec that hydrogen, a reductant we are using in our Circored-Smelting Furnace route could be a game changer for the industry. It emits about 50% less COthan the conventional blast furnace-oxygen converter route, assuming hydrogen generation by conventional steam reforming. If the hydrogen is generated by green energy and the electricity to power the EAF is generated from renewable sources, the CO2 emissions of this route could be decreased by up to 90%. Circored technology allows the direct use of iron ore fines without prior agglomeration such as pelletizing or sintering. Operation with hydrogen as the reductant allows the application of low reduction temperatures, minimizing sticking tendencies, and enables direct reduction with negligible CO2 emission values.

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