Wind turbines and washing machines, skyscrapers and ships — they all have one thing in common: steel. Strong, durable and recyclable, this alloy of iron and carbon is one of the world’s most common manufacturing materials.
But the steel industry is also one of the most polluting, accounting for 7-9 per cent of global carbon dioxide emissions, according to the World Steel Association. The dominant way of making steel today — by converting iron ore into iron and then into steel, inside blast furnaces using coking coal as a fuel — pumps huge quantities of the gas into the atmosphere. This method emits about 2 tonnes of CO₂ for every tonne of steel produced.
As a result, steelmakers and industry stakeholders are racing to find ways to reduce their carbon footprint, including investing in capturing these carbon emissions. But by far the biggest bet is on “electric arc” furnaces, which melt down recycled or scrap steel and offer the biggest single reduction in emissions.
Ultimately, to get as close as possible to carbon neutrality, the ambition is to use these new furnaces in combination with direct reduced iron (DRI) plants. These can be operated with natural gas — or, ideally, green hydrogen — and produce a type of iron that can go into an electric arc furnace to make new steel.
How does it work?
An electric arc furnace melts down scrap or recycled steel rather than converting raw materials, notably iron ore, as in a blast furnace. This method can take up to 100 per cent scrap.
The electric arc furnace works by generating a high-temperature electric arc between graphite electrodes, using electricity as the energy source. This arc — almost like a lightning bolt — melts the scrap inside a large refractory-lined vessel into pure steel.
What are the pros and cons?
Electric arc furnaces are much smaller and more flexible than the blast furnaces used in traditional steelmaking. They are also much cheaper to build. Because they use electricity to melt the scrap, making steel using an EAF can reduce emissions by 75-80 per cent compared with a blast furnace.
But there are notable challenges. Global scrap supplies are limited and cannot always produce the quality of steel required for certain applications, such as cars.
The quality of the scrap is another hurdle — it is difficult to remove impurities from it, especially copper, so better sorting and recycling methods will be needed.
The cost of electricity is further challenge, especially in countries such as the UK where prices are high, as is sourcing the vast amounts of green power that will be needed.
Will it make a difference?
More and more electric arc furnaces are coming online. Last year, 43 per cent of planned new steelmaking capacity was based on EAF technology, while 57 per cent were still to be coal-based furnaces, according to Global Energy Monitor. This was progress compared with a year before that, when only 33 per cent of planned capacity was set to use EAF.
Despite this shift, the industry is still falling short of what is needed to limit global warming to 1.5C above pre-industrial levels, as per the Paris Agreement. The International Energy Agency’s Net Zero by 2050 scenario calls for more than half (53 per cent) of steelmaking capacity to use EAF by 2050. But, on current plans, only 32 per cent of total capacity will be using EAFs by then, according to Global Energy Monitor.
Much will depend on China. The country accounts for about 62 per cent of global steel emissions and, without substantial progress there, the rest of the world’s efforts to get the industry on track will fall short.
Has it arrived yet?
Electric arc furnaces are a mature technology and have been used around the world for decades. They are already the dominant way of making steel in the US. Nucor, North America’s largest steelmaker, started its first “mini mill” in South Carolina in 1969. Today, electric arc furnaces account for about 29 per cent of global production.
Electricity-based production is increasingly regarded as the preferred route for many legacy producers to reduce their emissions.
Given the limits around scrap supply, there is also a strong push for the industry to invest in “direct reduced iron” technology, to be used in combination with electric arc furnaces.
A DRI plant normally uses natural gas instead of coking coal to reduce iron ore. The resulting product, called sponge iron, can then be fed into an electric arc furnace. Ultimately, the ambition is to replace the natural gas used in DRI plants with ‘green’ hydrogen made from renewable electricity — which would all but eliminate carbon from the production process.
This method would enable primary steel production — made from raw materials rather than scrap — and so allow for the manufacture of higher grades of steel. But it would require much greater availability of green hydrogen.
Who are the winners and losers?
Moving to electric arc furnaces will require billions of dollars of investment. Legacy steelmakers have said they need taxpayer support to help pay for this transition.
Another of the biggest challenges for the industry — and for governments — is the spectre of substantial job losses, because electric arc furnaces are much less labour intensive. The pressure will be on policymakers and other stakeholders to offer a “just transition” and ensure there are alternative sources of employment for the workers affected.
The winners will be newcomers to the steel industry that are not saddled with ageing legacy infrastructure. Those based in regions with access to cheap green energy, such as Scandinavia, Australia or the Middle East, will also have an advantage. Many stakeholders believe the production of steel will inevitably move to these regions.
Who is investing in it?
Several of Europe’s biggest steel groups, including ArcelorMittal, Thyssenkrupp and Tata Steel, have announced plans to shift from blast furnaces to new electric arc furnaces. However, much will depend on securing taxpayer support, ensuring promises are kept to develop the necessary infrastructure — such as electrolysers to produce hydrogen.
Scandinavia’s H2 Green Steel and SSAB are among those building electric arc furnaces that will be powered by renewable energy.
