New announcements promised the use of ‘green’ steel technology
Recent announcements by global steel companies in India underscore how important the country’s steel technology path will be in achieving the global decarbonization of the steel sector.
POSCO plans $5 billion investment with Adani
ArcelorMittal Nippon Steel India (AM/NS) – a joint venture between two of the world’s largest steel producers, Europe’s ArcelorMittal and Japan’s Nippon Steel – has announcement a US$13 billion investment in a 24 million tonnes per annum (mtpa) steel plant in Odisha and an additional US$22 billion investment in Gujarat. Meanwhile, South Korean steel giant POSCO is Planning $5 billion investment with Indian conglomerate Adani to build an integrated steel plant in Gujarat.
The ads have, to varying degrees, promised the use of “green” steel technology without providing any details.
The world’s largest steel producer, China, may have already peaked, and therefore steel-related carbon emissions are likely to decline. While China produced 1 billion tons of crude steel in 2021, down 3% year on year, India, the world’s second largest steel producer, product 118.1 Mt of crude steel, an increase of 17.8% compared to 2020.
In 2020, 56% of India’s steel production was produced via electric furnaces of which less than half was attributed to electric arc furnaces and the rest was produced on induction furnaces. These furnaces are mainly fed with direct reduced cast iron (DRI). India has a high share of DRI based steel production using gasified thermal coal which produces more shows than DRI based on natural gas. The balance of 44% was produced by blast furnace, from coking coal. India’s growing demand for steel has led to significant investment in new blast furnace capacity in recent years.
India’s steel sector is energy intensive above the world average
Thus, the Indian iron and steel sector is the largest contributor to industrial energy demand, with a strong dependence on coal (85% of energy inputs). Currently, the steel industry accounts for nearly 23% of total energy inputs and 30% of industrial carbon dioxide (CO2) emissions in the industrial sector.
The main reasons for the higher energy intensity of the Indian steel sector compared to the world average are its high dependence on coal, the lower share of scrap recycling, a fragmented and underperforming casting sector and the number of old blast furnaces.
The International Energy Agency (IEA) in its Stated Policy Scenario (STEPS) predicted that Steel production in India will double by 2030 and quadruple by 2050. Coal demand is also expected to increase by 250%. Curb CO2 emissions and meeting a growing demand for steel seems to be a dilemma for political and industrial decision makers.
Tata Steel, JSW, Steel Authority of India, Jindal and AM/NS are among the biggest producers in India.
AM/NS’s new announcements represent a significant increase in its Indian steelmaking capacity and will supposedly use green steelmaking technology at the Odisha plant. The US$22 billion to be invested in Gujarat involves a series of projects including 10 gigawatts (GW) of solar and wind development for the decarbonization of steel production.
POSCO’s move will be its first new steel investment in India after four unsuccessful attempts over the past 17 years.
The lack of steel technology details in these announcements contrasts with those made in developed countries whenever companies want to highlight their transition to low carbon steel.
ArcelorMittal has announced the construction of a new DRI-EAF in its Spanish operation plant that could reduce carbon emissions by 50%. In another agreement with the government of CanadaArcelorMittal will install DRI-EAF technology to phase out the current blast furnace and reduce emissions by 60%.
India faces a major challenge in decarbonizing its coal-dependent steel industry
POSCO’s memorandum of understanding with Adani is part of his plan set up a “green†steel capacity outside of South Korea.
Invest in any new coal-based steel technology in the 2020s will lock in carbon emissions for decades. Steel production assets are durable and the average lifespan of a blast furnace can reach 50 years. Investing in blast furnace technology in the 2020s means new plants would be operating even after 2070, which is the announcement year for India to achieve net zero emissions.
India’s rapidly growing demand for steel indicates that it faces a major challenge in decarbonizing its coal-dependent steel industry. However, by using low-cost renewable electricity, India could have the opportunity to produce cost-competitive green hydrogen for use in the iron-making process.
DRI can be produced using zero-emission green hydrogen rather than gas or coal. The current drawback is its cost.
Mukesh Ambani’s Reliance Industries Ltd huge planned pivot towards new energy technologies has the potential to enable an era of cheap green hydrogen in India. Its planned US$75 billion investment in renewables and electrolyzers will help drive down the cost of green hydrogen – the company is targeting US$1/kg backed by 100 GW of renewable energy, both before the end of this decade.
Reliance’s green hydrogen ambition is now being followed by others
Reliance’s green hydrogen ambition is now being followed by others, including Adani.
The global steel industry is on the verge of switching from coal to hydrogen. With enough high-quality iron ore and low prices for hydrogen, India could play a pivotal role in the global decarbonization of steel given its large and growing economy.
We await details on the technology to be used by AM/NS and POSCO/Adani – global decarbonization of steel will be difficult if low carbon steel capacity is built in developed countries while the technology Most carbon-intensive older ones are built in developing countries where much of the growth in steel demand can be expected.
By Soroush Basirat and Simon Nicholas, Energy Analysts, IEEFA
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