A necessary challenge: keys to transforming the steel industry

[Article originally published in Renewable Energy magazine] 

The steel industry is one of the most polluting processes in the industrial sector, due to the use of coal to produce steel. Globally, it is responsible for more than 7% of carbon emissions, producing around 2,000 million tons of this material each year. 

According to the International Energy Agency, between now and 2050 the demand for steel will increase by more than a third, mainly in developing countries, with its consequent impacts, so the need to achieve the transformation of this sector well before that date is evident.  

To achieve this, it will be essential to stop burning fossils and incorporate alternative energy vectors, such as green hydrogen, which serves as fuel and reducing agent in the processes to produce direct reduction iron. Also, the exclusive use of renewable sources to supply energy to electric arc furnaces should be encouraged. However, both options will involve a large-scale increase in renewable power, so it is essential to ensure that this is carried out in a planned manner and compatible with the protection of local communities, biodiversity and the territory. However, the transformation of the steel sector should not be focused exclusively in terms of “decarbonization”. The solution should not be based on replacing one source of energy with another, but rather should focus on solutions focused on reducing demand by improving the efficiency of materials and new circular business models, as well as increasing the percentage of steel recycling. 

In Spain, the steel sector also plays a particularly relevant role within the industrial sector, which is responsible for 22.5% of greenhouse gas emissions. Steel production is mostly based on the use of electric arc furnaces, with the exception of the Gijón steelworks, owned by ArcelorMittal, which uses coal and is one of the ten most polluting steelworks in Europe according to Eurostat data. 

Regardless of the approval, in December 2022, of the strategic project for economic recovery and transformation (Perte) of Industrial Decarbonization, which aims to launch the necessary investments for the decarbonization of the sector, there is still no route that includes short and medium-term objectives and measures that guarantee the transformation that is needed, since this cannot and should not depend solely on the existence of financial assistance.  

So much so that under the framework of this Perte, in April 2023, a subsidy of 450 million euros was granted to ArcelorMittal for its Gijón steel plant for the construction of a direct reduction plant powered by green hydrogen, which would allow replacing one of the two blast furnaces that burned coal. 

This investment is part of the company’s decarbonization plan, which also includes the launch of a hybrid electric arc furnace. However, it is still pending approval by the company, and it is not sufficiently clear whether it will finally be produced, despite the subsidy having been granted. 

The journey towards the comprehensive transformation of the Spanish steel industry is not an easy task and the sector is called to face important challenges. To achieve this, it is essential to have early and adequate planning with milestones for 2030 and 2040, objectives for reducing demand, improving energy efficiency and recycling, electrifying processes and the use of green hydrogen and renewable energies, as well as address the problem of high energy price volatility. It is on this planning and under strict conditions regarding its application, on which the public-private investment granted must be based.