The Institute for Energy Economics and Financial Analysis’s Steel Sector Analyst Mr Simon Nicholas and Energy Finance’s Analyst Mr Soroush Basirat have opined that as there is increasing investor pressure on steel manufacturers to reduce their carbon emissions in tandem with global commitments under the steel breakthrough agenda at COP26, a commitment to have near-zero steel technology established in every region by 2030, to which Australia is a signatory, Australia’s biggest steel producer BlueScope operates within a hard-to-abate industry and its 2030 steel-making decarbonisation target is just 1% reduction annually. BlueScope’s Port Kembla Steelworks and GFG Alliance’s Whyalla Steelworks use the BF-BOF route but take different approaches to scrap.Port Kembla, with annual production capacity of about 3.0 million tonne, is Australia’s largest supplier of flat steel by volume, producing slab, hot rolled coil and plate. In financial year 2021, this plant topped Australian steel output and accounted for 65% of BlueScope’s operational carbon emissions. Port Kembla’s blast furnace is projected to reach the end of its operating campaign in the latter half of this decade. BlueScope has stated in its Climate Action Report that the most feasible technical and economic solution is to reline the blast furnace to keep operating for another 15-20 years rather than switching to scrap-EAF or DRI-EAF.The Whyalla Steelworks has a nominal annual capacity of 1.2 million tonnes. GFG Alliance’s June 2020 updated Whyalla Transformation Plan includes an EAF and a DRI facility to produce steel from South Australian magnetite iron ore and domestic scrap. Initially, gas will power the DRI plant; ultimately, it will use green hydrogen from GFG’s renewable energy projects. With this low-carbon steel, it aims to become globally competitive in a decarbonizing sector. GFG Alliance also owns InfraBuild, Australia’s largest long steel manufacturer with a capacity of about 1.5 million tonnes, producing 100% via scrap-EAF. InfraBuild’s recycling chain has an annual capacity of 1.4 million tonnes, supported by four shredders and 26 recycling centres. As with the rest of the GFG Alliance, InfraBuild is aiming for carbon neutrality by 2030.In addition, Molycop’s Australian operations, including the Comsteel brand, are entirely scrap-EAF, with annual capacity of 0.25 million tonnes.According to the World Steel Association, in 2020 Australia produced 5.5 million tonnes of crude steel, 74% via blast furnaces. The share of EAF grew from 17% in 2010 to 26% in 2020, significantly lower than EAF’s share in the US 71%) and EU 42%.Scrap-EAF is a mature technology and EAFs powered by renewable energy provide a zero-carbon route that is already cost-competitive. In 2020, Australia exported 2.1 million tonne of scrap steel, equivalent to 38% of the year’s crude steel production, suggesting there is at least some potential for further recycling. Technical, geographical and cost questions remain over further scrap use in Australia but investor pressure will only increase as companies’ climate plans come under the spotlight. Commitments to net-zero by 2050 that are heavily weighted towards carbon abatement in the late 2030s and 2040s will increasingly be seen as inadequate– investors increasingly want strong 2030 decarbonisation targets, even in the “hard-to-abate” steel sector.The Institute for Energy Economics and Financial Analysis examines issues related to energy markets, trends, and policies. The Institute’s mission is to accelerate the transition to a diverse, sustainable and profitable energy economy.
The Institute for Energy Economics and Financial Analysis’s Steel Sector Analyst Mr Simon Nicholas and Energy Finance’s Analyst Mr Soroush Basirat have opined that as there is increasing investor pressure on steel manufacturers to reduce their carbon emissions in tandem with global commitments under the steel breakthrough agenda at COP26, a commitment to have near-zero steel technology established in every region by 2030, to which Australia is a signatory, Australia’s biggest steel producer BlueScope operates within a hard-to-abate industry and its 2030 steel-making decarbonisation target is just 1% reduction annually. BlueScope’s Port Kembla Steelworks and GFG Alliance’s Whyalla Steelworks use the BF-BOF route but take different approaches to scrap.Port Kembla, with annual production capacity of about 3.0 million tonne, is Australia’s largest supplier of flat steel by volume, producing slab, hot rolled coil and plate. In financial year 2021, this plant topped Australian steel output and accounted for 65% of BlueScope’s operational carbon emissions. Port Kembla’s blast furnace is projected to reach the end of its operating campaign in the latter half of this decade. BlueScope has stated in its Climate Action Report that the most feasible technical and economic solution is to reline the blast furnace to keep operating for another 15-20 years rather than switching to scrap-EAF or DRI-EAF.The Whyalla Steelworks has a nominal annual capacity of 1.2 million tonnes. GFG Alliance’s June 2020 updated Whyalla Transformation Plan includes an EAF and a DRI facility to produce steel from South Australian magnetite iron ore and domestic scrap. Initially, gas will power the DRI plant; ultimately, it will use green hydrogen from GFG’s renewable energy projects. With this low-carbon steel, it aims to become globally competitive in a decarbonizing sector. GFG Alliance also owns InfraBuild, Australia’s largest long steel manufacturer with a capacity of about 1.5 million tonnes, producing 100% via scrap-EAF. InfraBuild’s recycling chain has an annual capacity of 1.4 million tonnes, supported by four shredders and 26 recycling centres. As with the rest of the GFG Alliance, InfraBuild is aiming for carbon neutrality by 2030.In addition, Molycop’s Australian operations, including the Comsteel brand, are entirely scrap-EAF, with annual capacity of 0.25 million tonnes.According to the World Steel Association, in 2020 Australia produced 5.5 million tonnes of crude steel, 74% via blast furnaces. The share of EAF grew from 17% in 2010 to 26% in 2020, significantly lower than EAF’s share in the US 71%) and EU 42%.Scrap-EAF is a mature technology and EAFs powered by renewable energy provide a zero-carbon route that is already cost-competitive. In 2020, Australia exported 2.1 million tonne of scrap steel, equivalent to 38% of the year’s crude steel production, suggesting there is at least some potential for further recycling. Technical, geographical and cost questions remain over further scrap use in Australia but investor pressure will only increase as companies’ climate plans come under the spotlight. Commitments to net-zero by 2050 that are heavily weighted towards carbon abatement in the late 2030s and 2040s will increasingly be seen as inadequate– investors increasingly want strong 2030 decarbonisation targets, even in the “hard-to-abate” steel sector.The Institute for Energy Economics and Financial Analysis examines issues related to energy markets, trends, and policies. The Institute’s mission is to accelerate the transition to a diverse, sustainable and profitable energy economy.
