Steeling Ourselves; Let’s Talk Decarbonizing Steel Production

Flat World Partners
5 min readJan 23, 2023

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Given the essential nature of steel in many legacy sectors like construction and manufacturing (but also for growing clean technologies, such as wind turbines and electric vehicles) decarbonizing the industry is crucial for achieving net-zero emissions. Steel faces significant challenges in finding scalable ways to reduce emissions during the production process and a general high cost of transitioning product facilities — making this a “hard-to-abate” sector of our economy, and a huge carbon challenge. Right now, the industry is a major contributor to global emissions, accounting for approximately 8% of CO2 emissions worldwide and according to the Paris Agreement, must cut emissions by a whopping 93% by 2050.

Many solutions to sustainable steel are emerging, but in each case, the solution itself is not the problem, rather the inputs or enabling environment for the technologies is proving to be challenging. In most cases, this is a challenge of electricity rather than steel itself. One of the most promising solutions is hydrogen-based steel production: hydrogen can be used as a reducing agent in the steelmaking process instead of coal, a method known as hydrogen-based direct reduction (HDRI). This not only eliminates carbon emissions but also allows for the use of lower-grade iron ores, which can greatly increase efficiency and lower costs. Furthermore, Hydrogen also solves the energy input problem. Steel requires such high temperatures for the production process that they relied upon burning fossil fuels. Now, research and development of hydrogen has showcased that it can be a bridge source of fuel. The key challenge for HDRI is the lack of infrastructure for hydrogen production and distribution overall. Thus, to fully realize the potential of this technology, governments and industry must invest in the necessary infrastructure and research and development.

Another technology that has gained attention is the process of using biomass as a reducing agent in a blast furnace which can significantly reduce carbon emissions and utilizes a renewable resource. However, the current biomass options are not yet sustainable at scale and further research is needed in developing sustainable options. The steel industry is also looking into Electric Arc Furnace (EAF) method as an alternative. EAF method uses scrap steel as its raw material, reducing the need for primary production, and can significantly reduce carbon emissions and save energy. Although EAF method is more environmentally friendly, it can only be applied to produce “special” steels, not the conventional steels that represent the vast majority of production.

The decarbonization of the steel industry presents a sizable challenge, but the future of steel looks to be greener than ever before — hydrogen, biomass, scrap inputs, and more are on the horizon. What is needed is a massive investment in research, development, infrastructure, and collaboration. We’re optimistic that a bit of industry iron willpower can get it done.

Derek Brooks, Head of Venture

Electra has scooped up $85 million backing from a raft of top investors including the Bill Gates-founded Breakthrough Energy Ventures, Amazon, and BHP Ventures, to support the firm’s plans to further develop and scale its zero-emissions steel production technology. Electra can electrochemically refine ore into pure iron at low temperatures of just 140 degrees Fahrenheit, before converting the iron into steel using existing infrastructure.

Steel, which can be re-used and re-formed forever, is a highly sustainable material. It is also the most recycled substance on the planet. As such, if the process could be cleaned up, the product itself is still a good one. Carbon capture, utilization, and storage (CCUS) is another solution that steel industry can adopt, whereby exhaust fumes from blast furnaces, even in their current form, can be captured and stored underground. This technology not only helps the steel industry reduce its emissions, but also enables these by-products to be used as a feedstock for other industries, such as the chemical or power sectors.

We love cooperation. The First Movers Coalition (FMC), an outcome of COP26 in 2021, is a global initiative leveraging the purchasing power of companies to decarbonize seven “hard-to-abate” industrial sectors. The Coalition, now consisting of 67 companies, have made $12 billion worth of purchasing commitments in steel, aluminum, shipping, trucking and aviation — essentially accepting and endorsing higher prices now in order to create the market, which will allow costs to subsequently fall at scale.

This newsletter is intended solely for informational purposes, and should not be construed as investment/trading advice and are not meant to be a solicitation or recommendation to buy, sell, or hold any securities mentioned. Any reproduction or distribution of this document, in whole or in part, or the disclosure of its contents, without the prior written consent of Flat World Partners is prohibited

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