On 7th December 2022, Stéphane Tondo, the head of government affairs and climate change at Arcelor Mittal, one of the world’s largest steel-makers, gave a presentation that included the following statement: ‘By 2030, most of EU’s steel production will be decarbonized’.[1]

Tondo also asserted that over half of the 90 million tonnes a year of European steel made in blast furnaces today would switch to a process using hydrogen and electric arc furnaces by that date. This will reduce the demand for metallurgical (coking) coal by a similar percentage.

On the same day, the UK government gave permission for a new coking coal mine in north west England. Its principal justification was that Europe’s steel sector would continue to need large amounts of this type of coal for many decades to come. The government’s 400 page decision further said that decarbonisation of the industry, if it occurs at all, will be made possible by the use of carbon capture and storage. Hydrogen steel-making is not, and will not be, a financially viable way of making steel, said London.

The conflict between these two views of the industry could hardly be sharper. Who is right?
I try to answer this question in three ways.

First, I look at the published intentions of the owners of each of the 27 operating blast furnace sites in the European Union and the UK. I show that all but four of these sites have stated a strategy of switching away from using coal to using hydrogen or increasing the use of electric arc furnaces.

We cannot know how long the transition will take but many of the operators have stated a plan to stop using coal by 2030. We shouldn’t be surprised; the world steel industry is responsible for almost 8% of global CO2 emissions and the main participants know that they face extinction if they do not make aggressive moves to decarbonise their businesses this decade. They are being heavily supported by national governments in funding the transition.

Second, I add up the expected capacity of the direct reduction plants in the cases where the company has provided an estimate of expected size. I do this to compare the operators’ plans with the UK government’s estimate that, at most, the European steel industry will have switched 10 million tonnes of output from coal to hydrogen by 2030. I show that the government’s figure is a gross underestimate.

Third, I list the published decarbonisation commitments of the main European steel makers. Typically, they have promised to reduce their emissions footprint by 30% by 2030.

The stated plans for the 27 EU and UK blast furnace sites

Almost all the blast furnace operators in Europe have publicly indicated how they expect to move away from coal. The only exceptions I could find are the two sites in the UK, a Polish operator and the Hungarian steel manufacturer. (The owner of the Port Talbot site in the UK has said that it has asked for government support to switch to electric arc furnaces but as far as I can see has not said that it intends to shift to this route to making steel).

Blast furnace sites and capacity information from Eurofer.eu. DRI and EAF intentions from published documents

Of these 27 sites, 15 have indicated an intention to build direct reduction furnaces using hydrogen and 15 have said they will invest in electric arc furnaces. Seven are indicating they will have both types of steel-making at these locations. This is logical; a direct reduction plant using hydrogen needs to an electric arc furnace to turn the iron into steel.

So, despite what the UK government said in its coal mine decision, the European steel industry has firmly suggested the routes it intends to take away from coal. Few companies are ignoring the imperative to move to low carbon manufacturing. However we don’t know how fast the industry will move.

To the list in the table above should be added the entirely new site of H2 Green Steel, a Swedish start-up funded by over €3.5bn of debt and equity. This company will use hydrogen, and not coal, from the start of its business. Despite its high profile in the European steel industry, the decision documents did not mention this company once in more than four hundred pages. (There is virtual no mention of any European or other steel-makers in the entire document).

H2 Green Steel’s enthusiasm for a transition to hydrogen is being bolstered by the evidence of an increasing preference of customers for low carbon steel and also by findings that steel made without coal is typically of a better quality than its conventional equivalent. Major car companies are helping to fund H2 Green Steel and are committing to buying hydrogen steel from the company and other hydrogen steel manufacturers. The car industry is the second most important user of steel after the construction of buildings.

It may also be worth noting that only one of these 27 sites has started to invest in any form of carbon capture. Arcelor Mittal’s site at Gent/Ghent in Belgium is experimenting with converting flue gas to ethanol using the Lanzatech process. Arcelor Mittal tells us that the maximum saving of emissions from the ethanol production is about 125,000 tonnes a year, which represents between one and two percent of the site’s total emissions. The UK government’s faith in large-scale CCS for the steel sector is at variance with almost all opinion within the industry.

How much direct reduction capacity does the European industry expect to install before 2030?

The UK government’s inspector asserted that ‘even if all the announcements made by the industry come to fruition this only amounts to 10 million tonnes per annum of hydrogen based steel production in Europe by 2030 which is less than 7% of overall current production of around 160 million tonnes per annum’.

There are two problems with this statement. First, it doesn’t reflect reality. The table below lists all the planned introductions of DRI that are accompanied by a figure for expected capacity in million tonnes per year.

Proposed capacity of installations at major steelworks that have committed to DRI with hydrogen (Million tonnes annual capacity)

Ghent 2.5

Dunkerque 2.5

Bremen 3.5

Dillingen 2.5

Duisburg 2.5

Gelati 1.5

Gijon 2.3

Lulea 2.7

+ H2 Green Steel 5.0

Total 25.0

This table, collected from publicly available information, tells us that the UK government’s estimate of 10 million tonnes of maximum DRI capacity by 2030 is a large underestimate of promised installations. Simple research would have shown the error of the inspector’s conclusion.

The second point is that the inspector suggests that the total amount of steel produced in the EU and the UK is 160 million tonnes a year. While this figure is broadly correct – it was 153 million tonnes in 2021 – this number includes output from electric arc furnaces, which use electricity and not coal.

Steel production from blast furnaces in 2021 was 86 million tonnes in the EU + UK. This is the part of the steel industry that can be decarbonised using DRI. Electric arc furnaces are decarbonised by using renewable electricity.

So the planned installations of DRI, mostly due to be installed by 2030, actually represent about 29% of the possible total. To make the point in a different way, almost a third of the EU and the UK’s steel production using coal may be switched to hydrogen by 2030 if current plans are fulfilled, not the maximum of 7% claimed by the UK government.

Planned overall rates of decarbonisation

According to steel industry analysts at Kallanish, seven of the major EU manufacturers have made promises about their rate of decarbonisation.[2] With one exception, the companies commit to cutting their emissions by a specified percentage by about 2030. (Kallanish doesn’t specify the date from which the percentage is calculated in these seven cases)

Promised rates of decarbonisation

Arcelor Mittal 35% by 2030

Thyssenkrupp >35% by 2030

Tata >30% by 2030

SSAB .>50% by 2030

Voestalpine 35% by 2032

Salzgitter 50% by 2030

Saarstahl ‘significant savings by 2035’.

Decarbonisation on this scale can only occur by reducing coal use by switching to DRI and/or moving to producing more steel using electric arc furnaces and scrap steel.

Conclusion

The UK government has allowed the construction of the mine in the north west because it believes that the European steel industry will not decarbonise rapidly and, if it does, it will use carbon capture and storage (CCS). It asserts that hydrogen DRI is an immature technology that is unlikely to be rapidly employed.

Publicly available information that the government’s inspector should have used shows that this assertion is highly inaccurate. Almost all large EU steelmakers have released plans for moving to hydrogen DRI, either partly or in entirety. DRI is a well-understood technology that is widely used already, usually for making steel in smaller quantities. Currently DRI furnaces use natural gas, not hydrogen, but companies and their investors are confident that the fuel can be switched with no adverse consequences.

Only Arcelor Mittal is even experimenting with CCS on coal-fired blast furnaces and its support seems to be rapidly shifting away and towards hydrogen. CCS technology is far less well established than DRI. CO2 capture at blast furnaces is widely seen in the industry to be difficult and costly.

As is frequently the case, the UK government and its agencies has taken a decision without any research into trends in the rest of Europe. The lack of any substantial reference in the 400 page government document to the opinions of the EU steel industry is almost incomprehensible. Or perhaps not.

In the research for this article I came across a similar decision by the province of Alberta in Canada which recently approved metallurgical coal mining but then rapidly reversed the policy when faced with widespread protest. Blake Shaffer, assistant professor of economics at the University of Calgary, told The Narwhal newsletter in February 2021 that the expansion of metallurgical-coal mining in Alberta is an example of the province ‘chasing the next thing that’s going to die.’ [3]

That seems a strikingly accurate way of also describing the UK’s decision.

[1] https://media.kallanish.com/filer_public/cb/43/cb43922b-24d5-47b0-ad24-ad08eec3bdf1/h4s_kpm_webinar_dec_22_final_all.pdf

[2] https://media.kallanish.com/filer_public/cb/43/cb43922b-24d5-47b0-ad24-ad08eec3bdf1/h4s_kpm_webinar_dec_22_final_all.pdf

[3] https://thenarwhal.ca/alberta-rockies-ucp-coal-mine-policy-reinstated/