SteelWatch

SteelWatch Explainer: Why steelmaking drives climate change – and why it doesn’t have to be this way

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What needs demystifying?

Steel is strong, shiny and essential to modern life. It is at the heart of our infrastructure and our economy. It plays a key part in the ‘green transition’ to a more sustainable future, essential for everything from wind turbines and solar panels to electric vehicles and green buildings. 

But the way most steel is made now – using coal-based blast furnaces to produce iron as part of the steelmaking process – is a prime driver of climate change. And yet that is not well known nor understood.

Making iron and steel accounts for around 11% of all global CO2 emissions. This must – and, crucially, can – change, if we are to have a hope of meeting climate targets.

This SteelWatch Explainer sets out:

  • What steel is and how it is produced;
  • Why making iron in coal-based blast furnaces emits the gases that cause climate change (Figure 1);
  • Steel’s share of responsibility for climate emissions;
  • Why it does not need to be a major cause of climate change.

Figure 1: Ironmaking in the blast furnace is at the heart of steel sector emissions

Sources: World Steel in Figures 2024, Agora and GEI 1

What is steel?

Steel is a metal alloy composed mostly of iron, with a tiny amount of carbon (between 0.05%  and 2%) plus some other alloys, depending on the type of steel.

Steel is highly valued because it is both strong and flexible. This makes it ideal for everything from construction to cutlery. It can also be recycled – melted down and used again.

Steel is not found in nature; it has to be manufactured. Humanity has been hugely successful at making steel. In 2014, the mass of steel on earth was more than seven times that of all living animals and 70 times that of humans (Figure 2: Steel’s massive presence on earth today).2

How is steel produced?

Steel is produced by adding alloys to molten iron, along with a small amount of carbon. Impurities are removed and the chemical composition of the mix adjusted. The resulting liquid steel, also called crude steel, can then be moulded into any shape and size required.

Iron is the prime ingredient of steel. It is sourced in two different ways:

  • By turning iron ore into iron (also called ‘virgin iron’, ‘ore-based iron’ or ‘metallic iron’). Iron ore (iron oxide) is the raw material extracted from mines. The transformation of iron ore into iron is called ironmaking, and predominantly takes place today in blast furnaces using coal;
  • By recycling scrap steel (offcuts from the production process plus recycled material from old skyscrapers, cars, ships and more).

Steel production is often depicted as two separate routes, respectively called primary production using virgin iron, and secondary production using scrap. However, in reality, virgin iron and recycled material are mixed in various proportions depending on steel quality requirements, the availability of materials and the type of steelmaking furnace. The volume of available scrap depends on past steel production, so it is limited and is currently not sufficient to cover the entire demand for iron and steel, though this volume is expected to grow. At present, scrap covers around 30% of total iron use.

The key fact is that around 70% of steel is currently produced using coal-based blast furnaces to make iron. This accounts for the vast majority of steel-related emissions, and it’s this that urgently needs to change.

Why iron production drives climate change

In very broad terms, currently, the majority of virgin iron is made like this:

Iron ore and coke (from metallurgical coal) are loaded into a blast furnace, where the coke is heated at a very high temperature and turns into gas. This gas reacts with oxides in the melting iron ore, producing liquid iron and CO2.

Metallurgical coal plays four key roles. It:

  • Serves as a reducing agent of iron oxides contained in iron ores;
  • Is a fuel that helps reach the very high temperature needed to melt iron;
  • Is a source of carbon, which is a constitutive ingredient of steel;
  • Provides an ideal physical structure for a blast furnace: coke layers act as beds on which iron oxides can lie, while enabling gases to pass through.

Coke is not the only coal product used in the blast furnace. The different types of coal used in the production of iron and steel fall under the label of metallurgical coal (also called met coal). The size of the steel industry, and the predominant role in it played by met coal today, means that the steel industry accounts for 14% of total global coal consumption (as of 2022)The modern blast furnace cannot function without a solid, carbon-intensive material like coal (Figure 3).

Figure 3: Structure of the Blast Furnace

Every stage of steel production emits carbon dioxide (Figure 4), specifically through:

  • Transforming coal into coke (by heating at high temperatures)
    •  This contributes 0.71 tonnes of CO2 emissions per tonne of steel produced
  • Burning it in the blast furnace
    • Contributes 1.41 tonnes CO2 per tonne of steel
  • Processing the iron into steel
    • Contributes 0.21 tonnes CO2 per tonne of steel. 

In total, that means every tonne of steel produced results in 2.33 tonnes CO2 being emitted.3

Figure 4: GHG emissions per tonne of steel at each stage of production

Sources: SteelWatch Sunsetting Coal, Rio Tinto and World Steel in Figures 2024

Factoring in the methane and other emissions which result from mining and transporting the coal would lead to an even higher figure. Data is inadequate although improving. Estimates suggest it would add around 0.72 tonnes of CO2e (i.e., including methane’s impact) per tonne of steel produced. 

Across the entire industry, the direct emissions from iron and steel making account for 2.6 gigatonnes CO2 per year (2019 figures) according to the International Energy Agency. This is 7% of the world’s total CO2 p.a., and 90% of these emissions come from blast furnace-based steel production. In addition, the indirect emissions resulting from energy use by steel producers needs to be included. When that is added to the mix, it results in an overall total of 3.7 gigatonnes of CO2 being emitted to produce steel in plants across the world – which is 11% of total global CO2 emissions. (As above, methane and other non-CO2 greenhouse gases are not included in this number.)

It does not have to be this way

The world’s governments have agreed to pursue efforts to limit global temperature rises to 1.5C.

Modern blast furnaces are more efficient than older ones, but they will always depend on coal, and so emit high quantities of CO2. 

Some steelmakers are attempting to make blast furnaces defensible in a climate-constrained world by adding carbon capture technology and replacing a fraction of the coal used with other materials. However, none of these methods can reduce CO2 emissions at levels close to those required for a 1.5C pathway. Regarding carbon capture, there is no working installation nor even a detailed project plan that would capture CO2 emissions from a blast furnace at levels close to those required for a 1.5C pathway.

In short, we cannot hope to hit the 1.5C target if we carry on manufacturing steel with iron produced in coal-based blast furnaces. The good news is that we don’t need to. We can act on four fronts to reduce steel’s climate impact massively by moving beyond the blast furnace, and these are all within our power to achieve. They are: 

  1. Transforming steel production processes, in particular how iron is made.
  2. Increasing the share of steel production based on recycled (‘scrap’) steel.
  3. Ensuring renewable energy is used for the electricity and heat consumed across all stages of steel production.
  4. Producing and consuming less steel overall, by using it more efficiently, or substituting materials that have a lower climate impact.

These can all play their part. But the prime target must be (1): the transformation of primary steel production and particularly how virgin iron is produced from iron ore. This is where the major wins can – and are – being achieved.

Steel’s future beyond coal

Steel is often described – particularly by those in the industry – as a ‘hard to abate’ sector (meaning its carbon emissions can be tough to bring down). But this is outdated thinking. Numerous innovations now hold out promise for driving down emissions.

In particular, the expansion of the DRI – ‘Direct Reduction of Iron Oxides’ – method allows iron to be produced without using coal-based blast furnaces. Already, around 7% of iron is produced using this method, mainly with (fossil-fuel) gas as the input. This reduces carbon emissions significantly compared with coal-based blast furnaces. 

Sources: World Steel in Figures 2024 and Hybrit, August 2024

But a much greater prize comes from substituting the fossil gas with hydrogen, especially if the hydrogen is produced using renewable electricity (so-called ‘green hydrogen’). The resulting near-zero-emissions iron can then be loaded in an electric arc furnace, and if this furnace is also powered by renewable electricity, the whole steelmaking process from start to finish is coming close to being zero-emission. The first successful production of steel using this method was in 2021. The hydrogen-based DRI method (‘H2-DRI’) is now being installed in several large-scale steel plants that are scheduled to enter production in 2026

This ‘H2-DRI’ method is technically feasible, proven in practice, and, as the process improves and goes to scale, economic viability will increase, particularly in geographies well-resourced with renewable energy. This could play a major role in helping curb steel’s climate impact. Other technologies are also promising but still far from ready.

The overall challenge remains stark and urgent. If we are serious about curbing climate change, we need to move decisively to take coal out of steelmaking, once and for all.

Endnotes

  1. Emissions intensity from World Steel in Figures 2024. Estimates of the percentage of total CO2 emissions vary around the 90% mark, with Agora reporting over 95% and GEI estimating 86%.
  2. Emily Elhacham, Liad Ben-Uri, Jonathan Grozovski, et al. Global human-made mass exceeds all living biomass. Nature 588, 442–444 (2020), https://doi.org/10.1038/s41586-020-3010-5. Fridolin Krausmann, Christian Lauk, Willi Haas, Dominik Wiedenhofer, From resource extraction to outflows of wastes and emissions: The socioeconomic metabolism of the global economy, 1900–2015, Global Environmental Change, Volume 52, 2018, https://doi.org/10.1016/j.gloenvcha.2018.07.003.3.
  3. SteelWatch Sunsetting Coal in Steel Production 2023; Rio Tinto Scope 1, 2 and 3 Emissions Calculation Methodology – Addendum 2023 and World Steel in Figures 2024

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Glossary of terms

Carbon emissions

This explainer focuses on steelmaking’s responsibility for the emission of carbon dioxide (CO2) – the primary contributor to global warming causing climate change. There is currently inexact data on methane which is also a significant greenhouse gas (GHG) requiring attention.

Blast Furnace / BF-BOF

A blast furnace (BF) is where iron oxides are mixed with coal to produce molten iron. The iron is then processed into steel in a basic oxygen furnace (BOF). This overall iron and steelmaking process is referred to as BF-BOF.

Electric arc furnace (EAF)

This is a furnace that uses electricity to make liquid steel from iron and other raw materials. It can be fed by scrap iron or by certain forms of virgin iron.

Direct reduction of iron ore (DRI) / H2-DRI

Direct reduction of iron oxides (DRI) is an ironmaking process that is an alternative to the blast furnace. Unlike the blast furnace which cannot function without coal-based products, DRI can operate with a broad range of materials (coal, gas, hydrogen) to reduce iron oxides. 

DRI is today commonly used with gas. It can get close to zero CO2 emissions if it uses green hydrogen. This process is hydrogen-based direct reduction of iron, known as H2-DRI.

Confusingly, DRI is also used to refer to direct-reduced iron (the product rather than the process). This iron can be fed into an electric arc furnace or a combination of electric smelter and basic oxygen furnace to make steel, but certain other processes are involved along the way.

Virgin iron or ore-based iron 

This refers to iron that is produced directly from iron ore. It is contrasted with iron obtained by processing and melting scrap steel.

Metallurgical coal (also called met coal)

Metallurgical coal is a broad term referring to coal used for metallurgical purposes. It encompasses a family of coal types that are used for making metal, particularly virgin iron, rather than to a single type of coal. The term is used to distinguish from thermal coal, although some coal types labellable as metallurgical coal can also fall under the category of thermal coal for the purpose of power generation.

This is part of the SteelWatch Explainer series, which aims to demystify confusing issues and set the facts straight on common industry claims, so as to build understanding and momentum for transformative steel decarbonisation.


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