The steel industry is responsible for approximately 8 per cent of the world’s emissions, meaning the sector has a big opportunity to play a major role in reducing carbon emissions and achieving the net zero goal.
Steel is one of the most used materials in the world, with more than two million tonnes manufactured every year, and demand projected to escalate further in coming years.
Steel manufacturing requires high temperatures and uses coal, oil and natural gas to achieve this – an energy-hungry process.
One solution to reduce steel’s environmental impact is through recycling, as the material can be recycled infinitely without losing its properties. Recycling already accounts for 26 per cent of global demand and governments and industry are working to increase that ratio.
Australia ranks high in the world when it comes to its steel recycling ratio, with 97 per cent of end-of-life structural steel and 83 per cent of the nation’s scrap steel being recycled.
However, while steel recycling goes a long way in reducing emissions in the industry, it is not a total solution.
The steel industry’s extensive use of metallurgical coal to produce iron, the primary component of steel, is the primary driver (90 per cent) of fossil fuel emissions from steelmaking.
Since at least 30 per cent of the demand for steel still comes from virgin material, it is essential new manufacturing technologies are developed.
Currently, green hydrogen-based processes, supported by renewable energy, have the biggest decarbonisation potential and are the most promising for emissions reductions.
These processes can convert iron ore into direct reduced iron (DRI) or hot briquetted iron (HBI) during the iron production stage.
During the steel-making phase however, using electric arc furnaces (EAF) that run on 100 per cent renewable energy show great potential.
In Europe, there are already several projects that aim to replace fossil fuels with green hydrogen, while the United States is developing direct electrolysis from iron ore, a process similar to that currently used for aluminium.
The first commercial plants are expected to be in operation from 2030, at which date a large part of the European blast furnaces need to be refurbished.
Other steel decarbonisation methods involve gas- based direct reduced iron and other lower-emission technologies which offer some emissions reductions in the near term, and carbon capture utilisation and storage or offsets, but the former still relies on fossil fuels while the latter comes with significant uncertainty around viability and effectiveness.
Earlier this year, the Australian federal government allocated $200m to help ensure a continued supply of locally produced steel, with some of the funding helping to also decarbonise the industry. Of the funding, $63.2 million will support the purchase and installation of an electric arc furnace at Whyalla Steelworks, enabling green steel production in South Australia.
In contrast, $136.8 million will fund the relining and upgrade of a coal-based blast furnace at the Port Kembla Steelworks in New South Wales, which will maintain the status quo.
Between now and 2030, the Australasian Centre for Corporate Responsibility has estimated that 71 per cent of the world’s steelmaking assets will reach the end of their operating lives, necessitating significant investment in the relining of coal-dependent blast furnaces.
“Investors and companies need to reallocate capital towards genuine green steel processes in the next six years to prevent the lock-in of carbon-intensive steelmaking methods,” ACCR says.
This sentiment was echoed in a new report by WWF-Australia which noted that while methods for producing green iron and steel continue to improve, investment and policy support are required to encourage the use of these and put the industry on track to reach net-zero emissions before 2050.
The report proposes that Australia needs to act fast to boost its green iron production, as international trading partners are looking to decarbonise their steel supply chains.
Global market responses, such as the European Union’s carbon border adjustment mechanism (CBAM) which entered into force late last year, are forcing steel makers to reduce emissions.
CBAM mandates that EU importers of steel report on the volume as well as the greenhouse gas (GHG) emissions embedded during their production. From 2026 onwards, a levy – linked to the EU’s carbon market price (approximately €70/tonne at the start of August) – will also be payable.
Nicole Wyche, WWF-Australia’s Industry Decarbonisation Manager (Steel) said the industry supply chain is starting to shift, and Australia needs to act quickly or lose out to faster movers.
“With fast and deliberate action, Australia could be perfectly positioned to be the green iron key unlocking greener steel manufacturing with our major trading partners in Asia,” she said.
The report recommends the establishment of a $10 billion domestic support package to decarbonise the existing iron ore and steel industry and prioritise the development of export-focused green iron projects.
“Iron ore is crucial to Australia’s economy, and it’s in our mutual economic interests to work together to build out a green iron corridor from Australia to our major trading partners.”
One year ago, the WA government released a report to highlight the potential for the state to join the green steelmaking value chain, estimating that just one small scale green iron plant could contribute $31.7 billion to the economy. However, no real action has been taken by the government following the report’s release.
Instead, Rio Tinto, BHP and BlueScope Steel have announced they will investigate the development of the country’s first ironmaking electric smelting furnace pilot plant. If approved, the pilot facility could be commissioned as early as 2027.
In June, Rio Tinto also announced it will invest in a research facility in WA to convert Pilbara iron ore to metallic iron using raw biomass and microwave energy instead of coal, reducing the process’ carbon emissions by up to 95 per cent.
