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Steel

Published on: Nov. 1, 2021, 11:45 a.m.
Steeling against carbon emission
  • Production of 1 tonne of crude steel emits 1.8-2.8 tonnes of CO2

By Daksesh Parikh. Executive Editor, Business India

Iron & Steel and Cement are two economy sensitive industries which are heavy carbon emitters. Globally the steel industry’s emission ranges between 6-7 per cent of the total emissions.  Cement is marginally higher. Both industries use resources which are carbon rich – coal and power. Fresh water is also required. In addition limestone is used for the manufacture of cement. Dust is emitted in the air during mining processes. By-products also emit GHG.

It may not be possible for these heavy industries to bring down emission to zero levels. At best  GHG emissions can be brought  down to some extent through adoption of new technologies, investing in modifying plants, improving processes, carbon capture and bringing energy efficiency in the system and better water conservation and management. Till date, no such technology has been developed which can totally eliminate GHG emission in both these industries. What companies are planning to do is to bring the emission down to net zero levels by offsetting carbon credits earned in other related areas. 

Converting traditional steel making processes to new ones is both time and money consuming. While steel is a totally recyclable material the time taken for steel to become reusable is quite long – especially, when it is used in buildings, infrastructure or railways. The scrap which is normally useable, are consumer durables and bodies of cars and scooters. This is not adequate to meet the demand of the 1,500 million tonnes steel produced across the globe. In UK and Europe where industrialisation had started long back more scrap is being generated. However, the capacities to produce steel in the UK are nowhere near what it is in India now.

When demand outstrips supply

While supplies of scrap are limited, demand for steel – both flats and longs – is on the rise. When countries after countries go in for infrastructure development, as is being done currently across the globe, demand for steel will outstrip available supplies. Hence, the chances of steel prices as also other metal prices remaining at elevated levels is high for at least over the remaining part of this decade. The elevated prices resulting in better profitability in FY22 and beyond will also provide companies with the much needed funds to accelerate the transition to a lower carbon economy. But to what extent this will be used to reduce GHG emission and what will be used to create new capacities is a matter of debate.

Until and unless consumers demand lower carbon steel products and are willing to pay a marginal premium over traditional steel, producers will be reluctant to convert  to Electric Arc Furnaces or switch from iron-ore and coal to scrap and natural gas or hydrogen.

For India, like other developing countries, limiting new capacities from coming up in steel industries is next to impossible. More so, as steel is extensively used in building houses. More than 50 per cent of steel goes to the construction industry. The rest finds its way to infrastructure projects including roads and rails besides two wheelers, automobiles and other appliances. 

India currently has a capacity of nearly 140 mtpa. This is expected to go up to 300 mtpa by 2030. Its production in FY21 was 110 mtpa. While a part of the excess steel produced can go for exports, setting up new capacities will be a daunting task. Cutting GHG across the entire cycle of producing steel will be even more challenging.

Traditionally steel, as produced from iron ore and coal, emits roughly between 1.8-2.8 tonnes of CO2 in the production of 1 tonne of crude steel.  While traditionally steel was produced in blast furnaces, using coal as the reducing agent, many plants are using electric arc furnace. In this case scrap is used as the raw material instead of iron ore and coal.  In recycling scrap, the ratio goes down to 0.25 tonnes for making 1 tonne using electricity and scrap. If green hydrogen (produced from hydro power) is used, carbon dioxide emission will be even lower.

However, capex investments will be required for shifting to natural gas or hydrogen. Renewable energy will be required. In France, they use nuclear energy to produce hydrogen. The challenge for hydrogen is transportation and how quickly can one get good quality renewable fuel, natural gas will cut carbon emission by 50 per cent as compared to traditional coal.

The government of India has committed to reduce GHG emission between 33-35 per cent by 2030. The ministry of Environment Forest and Climate Change in consultation with all economic ministries is implementing Intended Nationally Determined Contributions (INDC) for reducing carbon footprint. CO2 in heavy industries is proposed to be brought down to 2.4 tonnes for every tonne produced by 2030.

In India many leading companies including Tatas, Steel Authority of India, JSW and Jindal Steel and Power have undertaken initiatives for reducing carbon footprint. JSW Steel, which is on a capacity expansion spree in a big way, is contemplating production of green steel. Business India looks at the initiatives taken by Tata Steel, one of the largest steel makers, globally.

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