The road to green steel: Obstacles and opportunities
Published on: June 5, 2024
The steel industry has taken a leading role in the industrial sector’s green transition by leveraging smart manufacturing and green technology.
Several startups have emerged in the steel sector, taking advantage of the green transition and the opportunity to build from scratch. These startups are utilising smart manufacturing techniques such as sensors, connected machinery, AI and data analysis tools — to optimise production and enable real-time monitoring. This transformation in heavy industry marks a new era and has the potential to change the entire market.
“Heavy industry is changing radically. It is a reset on a completely different level, almost like industrialisation all over again. Many old companies are at risk when new players come in, it can change the entire market. The new players also have a completely different structure and a completely different leadership,” says Fredrik Axby, Division Manager Energy & Industry at Sweco Sweden.
However, this transition presents challenges in terms of energy supply. Large-scale hydrogen production requires significant amounts of fossil-free electricity. Steel companies are moving their operations back to Sweden and Germany, which will increase the demand for electricity. The availability of cheap, fossil-free electricity will be crucial for the success of this transition.
Additionally, the demand for raw materials is set to soar as the world moves towards net-zero emissions. Meeting this demand responsibly is essential to avoid negative environmental impacts.
“The steel industry proactively tackled potential risks of falling behind on the climate transition by embracing change early. However, concerns remain regarding sufficient and affordable electricity and the optimal choice among various technologies, although the global scale of the industry suggests that a diversity of technologies can coexist worldwide,” says Björn Nykvist, researcher at SEI.
New solutions require new energy sources
Because of the new solutions used, several of the steel companies are dependent on hydrogen for their green steel processes. Production of hydrogen, in turn, requires large amounts of energy, which must be fossil-free for the hydrogen produced to be green hydrogen and, ultimately, to create green, fossil-free steel. In the short term, this is the main challenge for the steel companies’ transition. They require large-scale hydrogen production and, to achieve this, they need access to a sufficient amount of fossil-free electricity.
”There is an increased need for electricity all over Europe, but in northern Sweden the increase is exceptional, with usage potentially doubling. The main explanation is that we are moving the processing of steel back to Sweden and introducing new processes,” Fredrik Axby says.
The green industrial transition will also place new demands on the energy supply in Germany. Thyssenkrupp is going to build a green steel mill in Duisburg based on a process of direct reduction using hydrogen, which is expected to be ready by 2029 at the earliest. This steel mill will require electricity production equivalent to 500 wind turbines to produce the hydrogen gas needed.
”We have focused so much on the steel industry because they acted early, and they did so because they saw what was happening and understood that acting now involved a lower long-term risk than not acting. But there are also risks associated with this transition, for example, will there be enough green electricity at the right price? Also, the fact that there are different possible technologies, which one will be the best? That said, the steel sector is large, so there is probably room for the use of different technologies in different parts of the world,” Björn Nykvist says.
The availability of cheap, fossil-free electricity in sufficiently large quantities might thus assist the transition and possibly also lead to a geographical repositioning of heavy, energy-intensive industry. The Middle East and North Africa could become world leaders in green steel and the newly emerging trade of green iron, according to a report by the Institute for Energy Economics and Financial Analysis (IEEFA).
Using its abundant solar-energy resources to produce green hydrogen for direct reduced iron, DRI-based steelmaking, together with the MENA region’s rich supply of high-grade iron ore means that the region is perfectly positioned to supply India as the key growth market for steel, as well as demand for green steel in Europe, stated in the report from IEEFA.
Increasing demand for new raw materials
Access to raw materials can change the industrial game plan. As the world gears up for net zero, demand for raw materials is set to soar. Meeting existing demand already requires double the current amount of these raw materials. To reach net zero by 2050, governments and industry will need six times more raw materials. For instance, producing an electric car requires six times more raw materials than a conventional vehicle and an onshore wind plant demands nine times more minerals than a gas-fired power plant.
The graph above shows the increased demand for raw materials required to meet the clean energy goals of different climate mitigation strategies compared to 2020.
The energy transition presents unique challenges for metals and mining companies, which will need to innovate and rebuild their growth agenda.
However, if the raw materials required for the green transition aren’t sourced responsibly, there could be many negative impacts, from environmental pollution and biodiversity losses to carbon emissions from plant and soil disruption.
New business models and collaborations
Multi-stakeholder collaborations, between suppliers and customers, between industry and cross-industry colleagues and between the wider industrial ecosystem of stakeholders, is an important and sometimes crucial way to accelerate the green transition.
For the large green industrial projects in Sweden, the support of customers in the form of large pre-orders has helped to finance very costly projects.
”The so-called offtake agreements, i.e. a contract with a customer who undertakes to buy products when they are produced, are very important for investors in high-risk technologies. With these agreements in hand, you can go to the bank and get a loan,” says Aaron Maltais, researcher at SEI.
Swedish green steel investment company Hybrit is a good example of the value of cooperation in the event of major societal changes and challenges, between companies, between companies and customers and between the public sector and the private sector.
Hybrit is a joint-venture company with the steel company SSAB, together with the mining company LKAB and the energy group Vattenfall. Important prerequisites for the transition to fossil-free steel for SSAB are raw materials in the form of ore with a high iron content (from LKAB) and access to large amounts of fossil-free electricity for hydrogen production (from Vattenfall).
In the same way that the collaboration between Ericsson and Televerket once created solutions that gave Sweden telephony and a world-leading mobile phone company, Asea together with Vattenfall electrified Sweden and Saab’s collaboration with FMV and the defence forces means that the country still has one of the world’s most advanced fighter aircraft.
Emissions slashed by 97% with recycled steel use
At Sweco, we believe in the importance of sustainable solutions that reuse materials and resources.
Sweco, together with Tibnor and DEKRA, has conducted a pilot project that allows for the purchase of recycled steel profiles through the same channels as new ones. The pilot project showed a climate saving of 97 per cent compared to using new steel, without any increase in price.
By utilizing existing steel instead of producing new steel, emissions from production are avoided. Recycled steel can be purchased with quality certification, making it a sustainable and viable option. The availability of recycled steel profiles depends on recently dismantled structures. Additionally, if you already have a building that needs to be dismantled, consider reusing parts of it.
The project was recognised as the 2023 Sustainable Building Project of the Year at the Swedish Recycling Gala.
“We have added an important puzzle piece to move towards a circular economy and reduce emissions in the construction sector. Now we hope that this becomes everyday practice, that it becomes just as natural for someone demolishing a building to sell their used steel back to the steel supplier as it is to donate clothes to a second-hand store,” says Emma Danielsson, Sustainability Manager for Energy & Industry and project leader at Sweco Sweden.
Steel manufactured from 1972 onwards is best suited for reuse. Contact Sweco for assistance in determining the suitability of materials in your demolition project.
