Wood Mackenzie said that carbon emissions in the steel sector must fall by 75% from today’s levels to limit global warming to within 2 degree Celsius, which means reducing global steel emissions from over 3,000 million tonnes of carbon dioxide equivalent in 2020 to just 780 Mt CO2 by 2050. Wood Mackenzie senior analyst Mihir Vora said “This is an extremely challenging target to meet. The steel industry would need to find the right balance between managing rising demand and pressure to decarbonise. The pathway to a 2 degree Celsius world is filled with obstacles compared to our base case view. Currently, steel is responsible for 7% of global CO2 emissions. The industry needs to prioritise decarbonisation if the world is going to achieve a 2 degree Celsius warming pathway aligned to the goals of the Paris climate agreement. Advanced economies will need to do more to curb emissions via innovative new steelmaking pathways such as hydrogen use, while developing nations will be slow adopters and small contributors to emissions reduction.”Wood Mackenzie has outlined five main outcomes that would need to be achieved for the steel sector to achieve a 2 degree Celsius warming pathway. They include (1) Doubling scrap use in steel making(2) Tripling direct reduced iron production and use(3) Reducing global average electric arc furnace emissions intensity by 70%(4) Reducing blast furnace – basic oxygen furnace emissions intensity by 30%, close to its theoretical minimum(5) Capturing and storing 45% of the residual carbon emissions (around 500 Mt per annum)Wood Mackenzie said “Aligning to a challenging 2 degree Celsius warming pathway in the steel industry would mean disruption to the iron ore and metallurgical coal markets. It would, however, be a boon for hydrogen demand in steelmaking as well as carbon capture and storage. Steel’s potential extreme decarbonisation in a 2 degree Celsius scenario would mean tripling DRI production. This presents a huge opportunity for suppliers of premium iron ore. Although the rise in scrap consumption would lead to total iron ore demand falling by 24% below our base case, the market for pellet products would expand by 35%. Under a 2 degree Celsius scenario, hot metal consumption is expected to decrease 667 Mtpa below our base case by 2050 to 795 Mt. This in turn leads to an almost halving of the total annual met`allurgical coal demand to 622 Mt from our base case by 2050. Seaborne metallurgical coal trade would fall in this scenario, although domestic coal in China would bear the brunt of declines.”Wood Mackenzie said “The decarbonisation of the steel sector in this scenario would boost DRI trade. Australia and Brazil could be well positioned to produce H-DRI for export. DRI using green hydrogen as the reductant can produce steel with almost zero CO2 emissions. China and Europe would be key DRI importers.”Wood Mackenzie said “To achieve scrap use growth, scrap recycling rates would have to increase from 80%-85% to 95%. India and China scrap supply chains would require substantial development which would contribute to displacement of iron ore demand, notably taking effect post 2030.”Steel demand is expected to rise 23% to 2,300 million tonnes between 2020 and 2050. Developing economies such as India, Southeast Asia and South America are expected to drive demand growth, while China and Europe would pare down their consumption.