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Key Messages | Steel Sector Overview
The global steel sector is responsible for approximately 10% of global CO2e emissions
- Global steel emissions have more than doubled since 2000 (from 1.2 gigatonnes in 2000 to 2.5 gigatonnes in 2021). However, emissions have started to decouple from production levels since 2016
- Without intervention, emissions are expected to continue growing due to rising demand from emerging economies. Reaching net zero by 2050 would require a 25% emission reduction by 2030
Steel is currently produced through three main production routes, all of which emit CO2:
- Blast furnace-basic oxygen furnace (BF-BOF): 72% of global steel production. It uses coke and limestone to produce pure iron from iron ore in a blast furnace, which is then turned into steel in an oxygen furnace
- Scrap electric arc furnace (scrap EAF): 21% of global steel production. Scrap metal is melted in an EAF using electrical energy
- Natural gas-based direct reduced iron-electric arc furnace (NG DRI-EAF): 7% of global steel production. Iron ore is turned into iron using natural gas, which is then melted in an EAF to produce steel
On average, BF-BOF is the cheapest production method ($390 per tonne vs. $415 for scrap EAF and $455 for NG DRI-EAF). However, regional variations in costs (such as for raw material and fuel) make all three methods competitive
- Downstream activities after crude steelmaking (e.g., refining, casting, rolling) represent less than 20% of the total steel production emissions
- Because steel is a 100% recyclable material, increased use of scrap metal can help decarbonize the steel sector
Credit: Mimi Khawsam-ang, Max de Boer, Grace Frascati, and Gernot Wagner (22 February 2024); share/adapt with attribution. Contact: [email protected]
![CBS Photo Image](/sites/default/files-efs/imce-uploads/CKI/CKI-Steel-Sector.jpg)
Steel sector scope 1 and 2 emissions are ~10% of global emissions
![CBS Photo Image](/sites/default/files-efs/imce-uploads/CKI/Steel-Sector-Scope_emissions.png)
Sources:
- Scope 1 emissions from Rhodium Group ClimateDeck (September 2023); Scope 2 iron and steel estimate from IEA (2023).
- Credit: Mimi Khawsam-ang, Max de Boer, Grace Frascati, and Gernot Wagner (22 February 2024); share/adapt with attribution. Contact: [email protected]
Global steel emissions have more than doubled since 2000, with emission growth decoupled from production growth after 2016
![CBS Photo Image](/sites/default/files-efs/imce-uploads/CKI/Global%20CO2%20Emissions%20Analysis.png)
Note: The majority of the world’s iron is used to make steel. Sources: Rhodium Group ClimateDeck (September 2023); World Steel Association; McKinsey, Decarbonization Challenge for Steel; IEA, CO2 Emissions in 2022, Reuters, China 2021 Crude Steel Output. Credit: Mimi Khawsam-ang, Max de Boer, Grace Frascati, and Gernot Wagner (22 February 2024); share/adapt with attribution. Contact: [email protected]
Observations
- In recent years, the steel industry has made efforts to reduce its carbon footprint with more energy-efficient processes and technologies
- Though not enough by itself, recycling rates have improved (sitting around 80%-90% globally)
- Better manufacturing yields have made supply chains more efficient
- Enhanced control processes and predictive maintenance strategies have led improvements in operational efficiency
- China, the largest steel producer in the world, saw a 3% decline in steel output in 2021 and a similar decline in the years since
1.) Blast furnace-basic oxygen furnace (BF-BOF), which alone produces ~80% of iron & steel CO2
2.) Scrap electric arc furnace (EAF), limited to recycled scrap
3.) Natural gas-based direct reduced iron-electric arc furnace (NG DRI-EAF) most expensive, least used
Steel-making Method:
Blast Furnace - Basic Oxygen Furnace
![CBS Photo Image](/sites/default/files-efs/imce-uploads/CKI/BF-BOF_1.png)
Sources: World Steel Association; IEEFA (2022); IEA, Iron and Steel Technology Roadmap (2020); Steel Technology, Basic Oxygen Furnace Steelmaking; Recycling Today, Growth of EAF Steelmaking; Wildsight, Do We Really Need Coal to Make Steel. Credit: Mimi Khawsam-ang, Max de Boer, Grace Frascati, and Gernot Wagner (22 February 2024); share/adapt with attribution. Contact: [email protected]
Observations
- BF-BOF: iron ore, coke, and limestone produce iron in a blast furnace, which is turned into steel in an oxygen furnace
Steel-making Method:
Scrap Electric Arc Furnace
![CBS Photo Image](/sites/default/files-efs/imce-uploads/CKI/Scrap-EAF_0.png)
Sources: World Steel Association; IEEFA (2022); IEA, Iron and Steel Technology Roadmap (2020); Steel Technology, Basic Oxygen Furnace Steelmaking; Recycling Today, Growth of EAF Steelmaking; Wildsight, Do We Really Need Coal to Make Steel. Credit: Mimi Khawsam-ang, Max de Boer, Grace Frascati, and Gernot Wagner (22 February 2024); share/adapt with attribution. Contact: [email protected]
Observations
- BF-BOF: iron ore, coke, and limestone produce iron in a blast furnace, which is turned into steel in an oxygen furnace
- Scrap EAF: scrap metal is melted in an electric arc furnace using electrical energy
Steel-making Method:
Natural Gas-Based Direct Reduced Iron - Electric Arc Furnace
![CBS Photo Image](/sites/default/files-efs/imce-uploads/CKI/Global%20Steel%20Production.png)
Sources: World Steel Association; IEEFA (2022); IEA, Iron and Steel Technology Roadmap (2020); Steel Technology, Basic Oxygen Furnace Steelmaking; Recycling Today, Growth of EAF Steelmaking; Wildsight, Do We Really Need Coal to Make Steel. Credit: Mimi Khawsam-ang, Max de Boer, Grace Frascati, and Gernot Wagner (22 February 2024); share/adapt with attribution. Contact: [email protected]
Observations
- BF-BOF: iron ore, coke, and limestone produce iron in a blast furnace, which is turned into steel in an oxygen furnace
- Scrap EAF: scrap metal is melted in an electric arc furnace using electrical energy
- NG DRI-EAF: iron ore turns into iron using natural gas, which is then melted in an electric arc furnace to produce steel
At present, crude steel is produced through three main methods that all emit CO2: BF-BOF, scrap EAF, and NG DRI-EAF
![CBS Photo Image](/sites/default/files-efs/imce-uploads/CKI/Steelmaking-Methods-Emissions-Scale.png)
Sources:
World Steel Association; IEEFA (2022); IEA, Iron and Steel Technology Roadmap (2020); Steel Technology, Basic Oxygen Furnace Steelmaking; Recycling Today, Growth of EAF Steelmaking; Wildsight, Do We Really Need Coal to Make Steel. Credit: Mimi Khawsam-ang, Max de Boer, Grace Frascati, and Gernot Wagner (22 February 2024); share/adapt with attribution. Contact: [email protected]
BF-BOF is the cheapest, most popular, and most polluting process which relies heavily on coal
Blast Furnace-Basic Oxygen Furnace (BF-BOF)
![CBS Photo Image](/sites/default/files-efs/imce-uploads/CKI/Blast%20Furnace-Basic%20Oxygen%20Furnace%20Chart%20Analysis.png)
Source: MIDREX (2021), ArcelorMittal (2021), World Steel Association (2021), IEEFA (2022), IEA Iron and Steel Technology Roadmap (2020).
Credit: Mimi Khawsam-ang, Max de Boer, Grace Frascati & Gernot Wagner (22 February 2024); share/adapt with attribution. Contact: [email protected]
Process description
- In the first step, coking coal and limestone is mixed with iron ore in a Blast Furnace (BF) to perform iron reduction and obtain molten crude iron
- Crude iron is sent to Basic Oxygen Furnace (BOF) to be converted into cast iron
- At this stage, up to 30% scrap steel can be added
Observations
- BF-BOF accounts for 72% of global steel production
- China, the world’s #1 steel producer, accounts for >50% world output and uses BF-BOF for 90% of steel production
- Both steps in the BF-BOF process produce CO2 as a byproduct. On average, BF-BOF emits 2.3 tonnes of CO2 per ton of crude steel – the highest amount of the three conventional steel routes
- BF-BOF remains cheapest means of steelmaking, with average production cost of $390/tonne
Scrap EAF is a cleaner steel making method that uses an Electric Arc Furnace to recycle scrap steel
Blast Furnace-Basic Oxygen Furnace (BF-BOF)
![CBS Photo Image](/sites/default/files-efs/imce-uploads/CKI/Scrap-EAF.png)
Source: MIDREX (2021), ArcelorMittal (2021), World Steel Association (2021), IEEFA (2022), IEA Iron and Steel Technology Roadmap (2020), Columbia Center on Global Energy Policy (2021).
Credit: Mimi Khawsam-ang, Max de Boer, Grace Frascati & Gernot Wagner (22 February 2024); share/adapt with attribution. Contact: [email protected]
Process description
- Scrap EAF takes collected scrap steel as input
- An Electric Arc Furnace (EAF) converts electricity into heat which is used to melt scrap steel into crude steel
Observations
- Scrap EAF accounts for 21% of global steel production, but use of technology is limited by the scarcity of scrap material
- Cleanest conventional route, emitting 0.7 tonnes of CO2 per ton of steel (72% less than BF-BOF)
- EU and US lead in scrap EAF production, accounting for ~40% of their steel production
- Scrap EAF average cost of production of $415/ton – but cost fluctuates based on scrap and electricity prices
DRI-EAF is less common and uses natural gas to reduce iron ore to pure iron, which then enters into an EAF to make crude steel
Natural Gas-Based Direct Reduced Iron – Electric Arc Furnace (NG DRI-EAF)
![CBS Photo Image](/sites/default/files-efs/imce-uploads/CKI/NG-DRI-EAF.png)
Source: MIDREX (2021), ArcelorMittal (2021), World Steel Association (2021), IEEFA (2022), IEA Iron and Steel Technology Roadmap (2020).
Credit: Mimi Khawsam-ang, Max de Boer, Grace Frascati & Gernot Wagner (22 February 2024); share/adapt with attribution. Contact: [email protected]
Process description
- Iron ore is mixed with natural gas in a Direct Reduced Iron (DRI) shaft to perform iron reduction and obtain pure iron
- The iron is then fed into an Electric Arc Furnace (EAF) where it is converted into crude steel
Observations
- DRI-EAF accounts for remaining 7% of global steel production and is most dominant in the Middle East and Africa, where gas is cheap and abundant
- Natural gas is a cleaner reduction agent than coal. DRI-EAF on average emits 1.4 tons of CO2 per tonne of crude steel, 40% less than BF-BOF
- DRI-EAF is the most expensive conventional production route at $455/ton
BAU | Business as usual | H2O | Water |
BF-BOF | Blast Furnace-Basic Oxygen Furnace | IEA | International Energy Agency |
CAPEX | Capital expenditure(s) | HRC | Hot Rolled Coil (type of finished steel product) |
CCUS | Carbon capture, utilization & storage | MPP | Mission Possible Partnership – industry decarbonization coalition |
CO | Carbon monoxide | MOE | Molten oxide electrolysis |
CO2 | Carbon dioxide | NG | Natural gas |
CO2e | CO2 equivalent, using global warming potential as conversion factor | NAFTA | North American Free-Trade Agreement |
DAC | Direct Air Capture | NG | Natural gas |
DRI-EAF | Direct Reduced Iron-Electric Arc Furnace production process | NG DRI-EAF | DRI-EAF production process using natural gas |
EAF | Electric Arc Furnace | NZE | Net Zero Emissions |
EBITDA | Earnings before interest, taxes, depreciation, and amortization | O2 | Oxygen |
EW-EAF | Electrowinning-Electric Arc Furnace | OECD | The Organization for Economic Cooperation and Development |
Gt | Gigatonne, equal to 1 billion metric tonnes | OPEX | Operational expenditure(s) |
H2 | Hydrogen | SR-BOF | Smelting Reduction-Basic Oxygen Furnace |