How will the Decarbonisation Programme Impact ASEAN Steel Industry and How should the Industry Behave?
Posted on 08 July 2021
A Brief on Regional Steel Operation Trends (Australia, South Korea, Taiwan, and ASEAN-6) amid the COVID-19 Pandemic
A special article was published on the January 2021 SEAISI Newsletter, which covered short term solutions for steel operations i.e. energy saving / process optimization, restructuring, digitalization, and customer engagement programmes. At the same time, the advanced steel Companies in the region have been embracing their strategies for the long-terms achievements i.e. tracking global trends with R&D introduction, product & service developments, advanced digitalization (AI, Smart Production, IoT, etc), and strengthening environmental protection-emission reduction technology.
In spite of all the efforts that have been carried out, it is necessary to also understand how the global steel industry deploys its steel operation strategy post COVID-19.
Heading Towards on Global Steel Operation Trends Post COVID-19
During the 50th Anniversary SEAISI e-Conference & Exhibition @ 2021, Director General of World Steel Association, Dr. Edwin Basson, has provided an interesting view on Vision and Strategy for the Global Steel Industry, of which the focus is the following:
- Growing along the market
- Steel Product as solution provider
- Smart & Digital Manufacturing
- Carbon Neutral Target
No doubt, the global and regional operation trends are on the same
paths with each other, however, there are some questions which may be raised by steel industry personnel, e.g.:
- Which strategy/trend is the most urgent and important to be implemented?
- What is necessary for each of the strategy?
The answers given may not so difficult on what the enhancement strategies for Market, Steel Products, and Digitalization, however, the debates have moved on the necessity of applying Carbon Neutral Target (Decarbonisation) for Steel Industry.
Interesting Facts on Decarbonisation Programme across Region
Issues on climate change trends and CO2 emissions are starting to emerge in ASEAN recently, with the intent to phase out coal fired power and to bring on carbon tax (Yeoh Wee-Jin, 2021), for example:
- G7 to phase out coal power financing
- EU Sustainable Financing Efforts, EU Carbon Tax and Carbon Border Tax Adjustment
- Big oil companies forced to review direction
- ADB stops funding project on new coal generation
- China, Japan, and Taiwan are imposing Carbon Net Zero emission programmes
- Malaysia Banks phase out coal financing
- Malaysia – Singapore commit to climate-linked investments
- Singapore Carbon Tax started in 2019
- Indonesia halting approval for coal fired power and considering carbon tax
How will the Decarbonisation Programme Impact the World and ASEAN Steel Industry, Currently and in the Future?
According to the Worldsteel and IEA, the Iron and Steel Industry is the 2nd largest industrial emitter of CO2 after cement industry, which is responsible for 25% of industrial and around 9% of total CO2 emissions.
As a result, Global Action led by Governments, Investors, and Customers (as described earlier) generate additional pressures to decarbonize steel production which effects on increasing carbon pricing and requesting green steel product in low CO2 emission.
How should the Steel Industry React on the Decarbonisation Programme?
In order to reduce CO2 emission, there are three main approaches proposed by Worldsteel to be considered by steel industry, i.e. to optimize process efficiency, to maximize scrap consumption (raw material selection) and/or to shift towards for a cleaner steel process.
In terms of process optimization, steel industry is urged to improve on their respective mill operations to efficiency levels, in line with the steel industry’s top performers (potential of reducing direct and indirect emissions by 20%), e.g.:
- Increasing energy efficiency and minimising waste
- Improving yield
- Improving process reliability
The second approach is by applying circular economy on maximizing scrap use (recycle). Steel scrap
is an important input material for the steel industry both in the iron ore and scrap-based routes and every tonne that is collected is being used. Scrap use reduces energy demand every tonne of scrap used for steel production avoids the emission of 1.5 tonnes of CO2.
Last, is on the development and deployment of breakthrough technologies. There are several promising approaches that could be taken to reduce iron ore at industrial scale without the release of CO2 and they fall into three broad categories:
- Using carbon as a reductant while preventing the emission of fossil CO2, by using CCUS. The implementation:
- Shougang and ArcelorMittal both operate facilities that convert process gases to ethanol.
- Emirates Steel, since 2016, has been running the first Carbon Capture and Storage (CCS) project in the steel industry, which up to 800.000 tonnes of CO2 per year is captured from the CO2-rich gas stream from the ironmaking plant and stored.
- Substituting hydrogen for carbon as a reductant, generating H2O (water) rather than CO2. Implementation:
- HBIS with its 1.2 milloin tonnes capacity hydrogen based DRI demonstration plant.
- Using electrical energy directly through an electrolysis-based process similar to what is used to produce aluminium today:
The Siderwin project (currently at TRL4), being led by ArcelorMittal, is looking at
- using low temperature electrolysis using a water-based electrolyte.
- Renewable Energy:
- Several EAF plants around the world are shifting to renewable electricity, including Evraz’s Rocky Mountain Steel in Colorado, USA, which is transitioning from coal to solar
What are the Main Challenges for Implementing Decarbonisation Programmes?
1. Ferrous Scrap Generation and Consumption
Scrap availability is limited as global scrap availability is a function of steel demand and the arising of scrap at the end of life of steel-containing products (WSA, 2021). Scrap prices will be under severe pressure due to over demand.
Comparing long-term projections for steel production and scrap generation (BCG, 2018), the total scrap availability is expected to be sufficient for about 50% of the average feedstock. At the same time, decline of scrap quality (density, concentration of tramp elements) is expected to continue.
2. Production Cost Implications on Applying Low-CO2 Steel Technology
IEA estimated the additional cost of production of low-CO2 steel technology is between 10% and 50% compared to the conventional steel production. A cost increase that significantly exceeds production margins.
The higher production cost will result from a combination of:
- Increased operational expenses, due to, for example, the use of more expensive low carbon resources such as green hydrogen or low-CO2 electricity.
- Increased capital expenses due to, for example, the replacement of coal-based blast furnace units with hydrogen-based DRI units.
- Capital losses due to, for example, the potential early retirement of existing steelmaking assets.
Efficiency, Recyclability, and Low CO2 technology are the key points to support the decarbonisation programmes that have been implemented by the advanced steel industries and this phenomena will soon be impacting the ASEAN Steel Industry as well.
The steel industry is urged to also create sustainable partnerships to enable transformation and acceleration. Engagement with advanced steel producers, technology suppliers and governments will allow access to low-COs technologies, resources and finance to develop or implement low-CO2 Steel Technologies economically .Source : SEAISI