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Recently, the shift from coal to greener tech in steelmaking has gained speed, especially in Europe. Yet, as 2024 came to a close, two major European steelmakers seemed to slow their progress towards using lower-emission tech.
This slowdown is partly due to the high costs of producing green hydrogen, which have not fallen as quickly as some experts had hoped. Investors and governments should critically evaluate claims from steelmakers promoting carbon capture and storage (CCS) as part of their emissions reduction strategies.
Is the transition slowing down?
In November, Thyssenkrupp announced it would lay off 11,000 workers at its steel division, struggling with global overcapacity and an influx of cheap steel imports from China. Over the last two years, Thyssenkrupp has devalued its steel unit by €3 billion.
Thyssenkrupp insists it is still dedicated to a green transformation and plans to complete its direct reduced iron (DRI) plant designed to eventually use hydrogen.
However, it appears they’ve scaled back their bigger plans for DRI. In 2022, Thyssenkrupp intended to replace all four blast furnaces at its Duisburg site with four DRI plants. Now, they say only two blast furnaces will be replaced with the first DRI plant, and another may change to an electric arc furnace (EAF) later on.
Similarly, in November, ArcelorMittal revealed it is delaying decisions on investments in its decarbonization projects, including several hydrogen-ready DRI plants.
It is also likely that ArcelorMittal will lower its 2030 emissions intensity targets.
ArcelorMittal stated it is still committed to exploring all technologies for achieving near-zero steelmaking emissions, including CCS. However, like green hydrogen, it may only significantly impact after 2030. They already have one operational industrial-scale CCU facility in Gent, Belgium, and two pilot projects in progress there.
The Steelanol project at Gent captures less than 2% of the plant’s annual emissions, illustrating why many steelmakers are favoring hydrogen-ready DRI over carbon capture solutions. Current plans for low-carbon steel production show nearly 100 million tonnes a year (Mtpa) coming from DRI projects, compared to just 1 Mtpa for commercial-scale CCS.
Some of the early excitement about green hydrogen is now being reevaluated. While this reaction might seem predictable, in the long run, DRI using green hydrogen is more likely to cut steel emissions than CCS.
Green hydrogen DRI will outperform CCS
CCS has struggled across all sectors, with its latest large projects showcasing its difficulties. The Gorgon CCS project in Western Australia, for example, was delayed and has been underperforming, capturing only about one-third of its target CO2 emissions.
Gorgon is not alone; other large CCS projects, like Equinor’s Sleipner, have experienced serious performance issues, revealing risks in carbon capture deployment.
Additionally, the world’s only operational steelmaking CCS plant, Al Reyadah in the UAE, captures only around 25% of emissions from its DRI-based plant. Like other sectors, steelmaking faces challenges with CCS due to multiple carbon emission sources in traditional coal-based operations.
Transporting captured carbon poses its own challenges, along with concerns about effective long-term storage. Each storage project has unique geological concerns, limiting the ability to draw from one project to another, which complicates cost reduction efforts.
Despite efforts over many years, the costs associated with CCS remain high. In contrast, while green hydrogen is also costly, its price might decrease as renewable energy becomes cheaper and production scales up.
Moreover, CCS at steel mills doesn’t address the methane emissions from coal mining, a significant concern. A recent tool showed that Australia’s methane emissions might be much higher than previously understood, highlighting an urgent issue.
Many organizations, including IEEFA, doubt the effectiveness of CCS in steelmaking. A European CCS ladder report concluded that CCS projects would likely be a financial burden on steelmakers.
Will green iron imports be reconsidered in 2025?
Plasticity in the steel industry prompts the question of whether to import green iron, as the production of green hydrogen in Europe remains costly. Importing from areas with lower costs and abundant clean power could be a better option.
Both ArcelorMittal and Thyssenkrupp have shown reluctance to consider this due to government subsidies supporting local low-carbon iron production.
If costs were the only factor, moving iron production to places with cheaper green hydrogen would make sense. However, European governments must weigh various factors like industrial policy and job security.
Thyssenkrupp’s planned government support for its transition isn’t sufficient to save the 11,000 jobs it intends to cut. This raises questions about whether Europe should rethink its approach to green iron imports in its transition from coal.
Iron ore giant Vale is looking into green hydrogen in Brazil, aiming to create a hub for producing low-carbon iron both locally and for export. Similar initiatives are also planned in other regions.
Meanwhile, South Australia is pushing forward with its green iron export plans, thanks to a strong renewable energy-based power grid aiming for 100% renewable energy by 2027.
As CCS struggles and new electrolysis methods for iron production take time, green hydrogen will be pivotal for decarbonizing steel in Europe. In areas with ready access to renewable energy, early green iron production could emerge soon.
However, the high costs of green hydrogen in Europe might impede the steel sector’s ability to transition smoothly and maintain job security.
Separating iron and steel production might mean shifting jobs abroad, but if this strategy can lower costs for Europe, it might ultimately safeguard more jobs in the steel industry.
This article first appeared in the January/February 2025 edition of Steel Times International.
