Has steel sector decarbonisation progressed in 2024?

As 2024 draws to an end, optimism on steel sector decarbonisation can feel in short supply. While impacts of the climate crisis accelerate, emissions are stubbornly high, sector debates are more focused on trade protection than on climate protection, and governments and companies are wobbling on their ambition. But stepping back, it is not all gloom. 2024 may be the year when tipping points were reached, and cracks in the status quo became undeniable.

December 2024

As 2024 draws to an end, optimism on steel sector decarbonisation can feel in short supply. While impacts of the climate crisis accelerate, emissions are stubbornly high, sector debates are more focused on trade protection than on climate protection, and governments and companies are wobbling on their ambition. But stepping back, it is not all gloom. 2024 may be the year when tipping points were reached, and cracks in the status quo became undeniable.

The scale of the problem is certainly still vast. The steel industry is still emitting 3.7 billion tonnes of CO2 each year, with no sign that emissions have even peaked.¹ Despite iron and steelmaking already set to burn nearly a quarter of the remaining carbon budget by 2050, this year saw new coal-burning blast furnaces built and old ones relined, locking in emissions for decades ahead. Ferocious wildfires,  devastating floods and scorching heatwaves around the world in 2024 mean the toll of climate change is already harming millions of lives, with so much more yet to come.

Political headwinds in the US and excess steelmaking capacity in China are both rippling across the industry far beyond country borders. Gloom is palpable in Europe, where the industry faces a ‘perfect storm’. Coping with immediate pressure is a hotter topic than the stuttering clean transition. Thousands of workers are threatened with job losses. Decarbonisation is blamed. Inertia is palpable in Japan, where coal-based business as usual remains deeply entrenched. 

However, looking at the big picture of 2024, SteelWatch sees an industry that is perhaps, at least, at the tipping point. Cracks opened up this year which could become avenues for inexorable change.

Are trends going in the right direction yet?

This century, CO2 emissions from steel production have more than doubled. This year’s data still shows emissions getting worse not better: between 2022 and 2023, direct emissions from iron and steel, and emissions intensity increased by over 2%.

But some indicators are now flat-lining: total steel production, total met coal consumption, and total number of blast furnaces in operation. And it seems likely that China has now passed the peak for total steel production, blast furnace steel production, and sector emissions, which will have a huge influence on total global emissions.

Which indicators of steel decarbonisation trends are getting worse or better?

The available data on new steelmaking capacity gets carefully scrutinised. It is at the point where bad news is sprinkled with better news. Blast furnaces are still being built, locking in emissions for decades to come. Net change is small but still growing, as coal-based blast furnace capacity is idled or retired in richer economies and built afresh in emerging economies, particularly in India. 

Globally, of newly announced capacity, blast furnaces (BF) still outweigh Direct Reduced Iron (DRI) plants by a ratio of 1.5:1.⁹ That’s bad.However, the pace of new dirty announcements has slowed and the BF:DRI ratio is falling. That’s progress.

New DRI capacity announcements are also going up, and most of these are hydrogen ready. However, in Europe, around 80% are still awaiting Final Investment Decisions, and timelines for actually switching from hydrogen-ready to  hydrogen use are weak or weakening.

There are indicators clearly going the right way, but they are tiny and starting from zero. As we end 2024, three hydrogen-based (as opposed to hydrogen-ready) DRI projects are under construction¹⁰, seven steelmakers have climate targets verified by the Science Based Targets Initiative (SBTi), and one steel product is certified by Responsible Steel. But at least these indicators now exist and the needle starts to move.

Signals of Change

As the industry’s emissions approach a tipping point, trends are hard to spot, and trend lines are hard to plot. The  “slope of the curve” seems set to change now, and the question is how rapidly. So we also look at key moments or ‘signals of change’ that happened in 2024, which could be indicative of trends to come.

Setbacks were plentiful this year. 

Political ambition grew but then wobbled. After huge steps forward for industrial decarbonisation under the Bipartisan Infrastructure Law and the Inflation Reduction Act in the US, Donald Trump was re-elected on promises to roll back global diplomacy and federal subsidies for industrial decarbonisation. In the EU, the year started with ambition in development of regulations on emissions trading, corporate due diligence and sustainability reporting. But it ends with tougher political and populist headwinds which risk slowing down ambitious climate action. The G7 in June failed to land a phase out of metallurgical coal and any COP push on industry decarbonisation is simply waiting another year for Brazil. 

Chinese over-capacity and double-digit surge in exports to every region has led to market challenges, cuts and setbacks. These immediate challenges are intense, but have been tangled with long term decarbonisation efforts,¹¹ and used as reasons to delay the urgently-needed clean transition.  

The global hype on green hydrogen also burst in 2024. In one sense this is positive: deflating the hydrogen souffle was much needed for the many inappropriate uses of green hydrogen that have been touted. For steel industry decarbonisation, which is among the key uses of green hydrogen (from a CO2 saving lens¹²), it means that right now, production is still at near zero while costs are higher than was promised. 

Lastly, steel decarbonisation projects were delayed. Notably, ArcelorMittal just announced all of European decarbonisation projects would be on hold despite billions in subsidies.

Positive signals of change

We also see six signals that are significant for the opportunities they represent. On their own, they do not change an industry. But they are cracks in the status quo, and signals of trends to follow, that can grow into the kind of structural transformation needed to get the steel industry on track for climate stability.

1. No new coal-based steelmaking facilities permitted in China

The first half of 2024 marked the potential turning point for decarbonisation in China, with no new coal-based steelmaking facilities permitted for the entire half year. From January to June, only EAFs were approved, marking the first half year with no coal-based Basic Oxygen Furnace approvals.

Since then, policy direction has continued. In August, China announced suspension of the steel capacity replacement policy. This means, as far as we know from available data, no coal-based steelmaking was permitted in 2024.

Meanwhile, DRI construction is underway and EAF share of production in 2025 is estimated to rise sharply¹³. More than USD7 billion has been invested into hydrogen-based steelmaking, with He Steel (a 1.2 million tons DRI pilot), Baowu Steel, Jinnan Steel, and several others implementing successful pilots. This pipeline suggests ‘China should be on track to deliver world leading production volumes of 15-20 Mtpa of low carbon primary steel by 2030’.

As China has probably passed peak production ahead of its own schedule, the question now is whether it surges into leadership in green steel.

2. Fortescue sets the target of supplying 100 Mtpa of green iron metal to China

In June, Andrew Forest, Non-executive Chairman of Fortescue, the world’s 4th largest miner, re-affirmed this 100 Mtpa green iron ambition during a visit by the Chinese Premier to Perth. The green hydrogen plant has been commissioned and in August, Fortescue started construction of the Green Metal Project in Pilbara, a pilot green iron project, with first production anticipated in 2025.

The great majority of Fortescue’s current production is low-grade iron ore, so progress on its ambition will mean finding ways to use low-grade ore in DRI-based steelmaking – with global ramifications.

Meanwhile, the very first examples of cross-ocean and cross-company trade in green iron emerged this year. German producer of autoparts, Benteler signed an offtake agreement for 0.2 Mtpa of green hot briquetted iron (HBI) with HyIron, a new company building an H2-DRI plant in Namibia, due for operations in early 2025.

3. Turkey’s Tosyali and Libya’s United Steel Company sign major DRI deal 

The Turkish steelmaker Tosyali Holding signed an agreement to build the world’s largest DRI complex together with the Libyan United Steel Company, in July. The Libyan-based plant will produce HBI for its neighbours and the EU – initially with fossil gas, indicated to transition to hydrogen over time.

This is one of many announcements and developments bubbling in the Middle East and North Africa (MENA) region. Though projects are still dominated by fossil-gas use, a pilot by EMSTEEL and Masdar is already making steel with green hydrogen DRI in Abu Dhabi, and there is a clear focus on the installation of hydrogen ready technologies across projects. 

MENA already has four decades of experience in iron making with DRI technology. It is projected to hold over a third of the global DRI capacity by 2030, nearly four times that of the EU. The uptick in momentum for green hydrogen DRI in 2024 creates the possibility of competition for leadership in the green iron race.

The markets and the mining companies already know that the DRI race is on. Vale and Anglo American highlighted how they are responding to an expected long-term rise in demand for DR-grade ore, while demand for blast furnace-grade has entered long-term decline.

4. India’s Ministry of Steel published “Greening the Steel Sector” report.

India is home to the dirtiest and fastest growing coal-based steel production fleet, baking in emissions for decades to come, and that remains a huge challenge for the carbon footprint of steel. Just this week Global Energy Monitor flagged that the surge in coal-based steelmaking threatens the country’s net zero target, even though it is set only for 2070¹⁴.  

Nonetheless, 2024 has seen early movements on green steel in India. In September, the Indian Government produced a Roadmap to help shape the steel industry’s future. The report analyses tools needed to accelerate the transition and provides the framework for policies to follow.

Next, a green steel taxonomy, expected this month, will set out a star-rating system and guide public procurement. The Government plans to follow this up with a National Mission for Green Steel, which will more explicitly set out the policy and financial support available, from supporting renewables uptake in the steel sector, to further demonstrating low emission technologies. There are now three known DRI demonstration plants blending green hydrogen and fossil gas, being taken forward by companies including JSW, JSPL and Matrix Gas and Renewables.

Small steps, but a journey has begun.

5. Metre by metre, Stegra’s H2-DRI plant rises  

At Stegra’s H2-DRI site at Boden (Sweden), construction of a commercial scale H2-DRI plant continues at pace, rising in the December snow, heading to production in May 2026.

2024 was the year when it became impossible to argue that H2-DRI is “just a Swedish thing”. Stegra announced Portugal is top of their scale-up list. Meanwhile in Germany, both Salzgitter and thyssenkrupp broke ground at brownfield sites for their own H2-DRI.

6. ING rules out financing for blast furnaces as well as for met coal 

The start of the year marked the beginning of a turning tide on blast furnace investments and metallurgical coal mining. Dutch bank, the ING Group became the first major bank to end dedicated finance for new unabated steel blast furnaces, and for the extension of existing blast furnaces. In addition, ING will no longer finance new metallurgical coal mines or the expansion of existing ones.

Blast furnace investments are meeting increasing opposition from civil society. Many steelmakers have been trying to hide their relining announcements in footnotes and financial statements, but civil society organisations have gotten wise and vocal. As the South Korean steelmaker POSCO resumed the delayed relining of its Gwangyang Blast Furnace no. 2, Solutions for Our Climate (SFOC) was quick to point out that this lifetime extension would result in the emission of an additional 137 million tonnes of CO2 over the next 15 years. 

Like blast furnaces, met coal came into the glare of campaigners’ attention in 2024. Met coal mining was fiercely contested, from Australia, where Nippon Steel and JFE Steel Corporation faced reputational risk for investing in BlackWater mine, to the UK where an extensive battle on the proposed Whitehaven mine in Cumbria saw planning permission quashed in September 2024.

Looking ahead to 2025

We all know that trade issues will dominate steel minds as we enter 2025. But these signals of change suggest there is much more to look out for next year: faster action by China, MENA and even India on green steel transition;  emergence of green iron deals between companies and between sites within a company; and evidence that we’ve passed the peak steel sector emissions. And of course, more contested battles over investments in blast furnaces and met coal. All these will influence the path and speed of change.

SteelWatch also expects the scrabble for scrap to show up strongly next year, and a much greater focus on how to ensure a truly just transition for workers, because as value chains dislocate and companies move across sector boundaries, change will be messy.

We anticipate chaotic geo-political fracturing, particularly on trade and national politics, to intertwine with the decarbonisation pathway of iron and steel. This makes it all the more important that companies and governments keep a long-term focus on a globally decarbonised industry. Rather than getting bogged in ad hoc battles, leaders must ensure clarity and certainty for a future-fit industry that is compatible with a 1.5C climate limit.

The decarbonisation of iron and steel is inexorable and underway. The only question is whether it will be fast enough to halt catastrophic climate change. Companies and governments must look beyond short term political gain and economic fixes, and take their responsibility to rapidly and deeply transform steelmaking in the coming decade as a critical priority. Because it is.

Footnotes:

1. IEA, 2020 Iron and Steel Technology Roadmap, October 2020. This estimate for the year 2019 comprises direct emissions (2.6 GtCO2) as well as indirect emissions (1.1 GtCO2) coming from the generation of electricity needed to power steel plants.
2. Calculated as global crude steel production reported by worldsteel divided by direct CO2 emissions from the iron and steel industry estimated by the International Energy Agency in its World Energy Outlook.
3. Global Energy Monitor, Why India’s ‘build now, decarbonize later’ approach to achieving a net-zero steel industry will fail, December 2024.
4. Global Energy Monitor, Global Blast Furnace Tracker, April 2024. South East Asia covers here Vietnam (16.2 Mtpa), Malaysia (11.6 Mtpa), Indonesia (5.8 Mtpa), Cambodia (4.1 Mtpa), Myanmar (4.0 Mtpa) and Philippines (3.6 Mtpa).
5. Derived from Global Energy Monitor, Global Blast Furnace Tracker, April 2024.
6. Global Energy Monitor, Global Blast Furnace Tracker, April 2024. The tally includes blast furnaces labelled as “operating” or “operating pre-retirement” by GEM. Blast furnaces labelled as “mothballed” haven’t been included, though some may have been restarted since GEM latest update of its Global Blast Furnace Tracker, or may be restarted in the future.
7.  Science Based Targets Initiative, Target dashboard, last accessed in November 2024.
8. ResponsibleSteel, Issued and ongoing certifications, last accessed in November 2024.
9. Derived from Global Energy Monitor, Global Steel Plant Tracker, April 2024.
10. Stegra (previously H2 Green Steel) in Boden (Sweden), thyssenkrupp in Duisburg (Germany) and Salzgitter in Salzgitter (Germany). thyssenkrupp and Salzgitter DRI plants will initially run on fossil gas and will progressively ramp up the use of green hydrogen.
11. In the words of Eurofer and industriALL: “the ever-increasing steel excess capacities in third countries and unfair trade practices threaten the viability of the European steel sector and hinder further investments in green steel made in Europe” (A European Steel Action Plan, industriALL and Eurofer, November 2024).
12. Paul Martin, chemical engineer and member of the Hydrogen Science Coalition, who is very critical of the hydrogen hype in general, labels H2-DRI as one of the 5 no-regret applications for the use of green hydrogen. Paul Martin, Hydrogen hype is crashing – but we can’t afford to give up on renewable hydrogen, Hydrogen Science Coalition, 1 August 2024.
13. CREA shows an estimated rise of roughly 50% in EAF share of total production
14. The increase in steel emissions is partly driven by ArcelorMittal Nippon Steel India (AM/NS India), which is currently building 2 coal-fired blast furnaces and planning more, with an overall ambition to reach a total of 40 Mtpa steel production capacity in 2035 – more than four times today’s capacity. AM/NS India doesn’t even have a concrete target date to reach net zero, unlike its parent companies ArcelorMittal and Nippon Steel. AM/NS website last accessed November 2024.