China’s steel industry is on a journey to prioritize the production of green steel in a suitable and effective way, in this article, we interview Frank Zhong, the deputy director general of World Steel Association about China’s decarbonization strategy.
A few steel mills have started to achieve results with ongoing energy efficiency improvement. Replacing iron ore and coal with steel scrap is common in steel mills around the world, including China.
Automakers’ green steel strategy
The world’s biggest steel mill, Baowu, has successfully produced auto-making flat steel with 100% scrap. Arcelor Mittal and German-based mill Salzgitter have also adopted such practices in their production technology, Zhong said.
This is in response to the demand for green steel from automakers.
Almost all multinational automobile enterprises have officially announced action plans to become carbon-neutral, with the goal of achieving carbon neutrality from 2040-2050.
Taking BMW for example, the automaker aims to reduce a single vehicle’s average carbon emissions by 40% across its entire lifecycle – by 2030 – compared with carbon emissions in 2019. This includes a 20% reduction in the supply chain, an 80% reduction in production level and a 50% reduction in the usage stage.
A concerted effort will be made to achieve carbon neutrality along with automaking’s full-value chain by 2050.
It also plans to reduce the total carbon emissions of China’s production chain by 80% by 2030
BMW has stated it will purchase low-carbon-emission steel starting in 2022 and has begun using Hegang’s low-carbon-emission steel at the Shenyang production base in 2023.
Fellow luxury car maker Mercedes-Benz aims to achieve carbon-neutral automotive production in the whole chain, and zero-carbon emissions for all new cars by 2039.
It will purchase “hydrogen-based steel” produced via non-fossil-fuel means by Swedish Steel (SSAB).
Iron ore to remain key raw material
Iron ore will continue to be one of the main raw materials, at least for the foreseeable future, Zhong said, and hydrogen metallurgy is the technology used to reduce carbon emissions when using iron ore to produce steel.
Baowu was able to build and put into operation a hydrogen-rich gas injection demonstration device for 5,000-cubic-meter blast furnaces at Baoshan Base in Shanghai as early as 2020.
In 2023, Baowu will adopt the hydrogen-rich carbon cycle oxygen blast furnace process to a 2,500-cubic-meter blast furnace in its Xinjiang-based mill Bayi Steel.
The first phase of the 1.2-million-tonne hydrogen metallurgical project of Hegang was fully completed by the end of 2022.
Besides China’s leading domestic mills, other countries’ advanced technology can also be introduced to Chinese mills. Currently, Brazilian steel mills have advantages in utilizing biomass carbon.
SSAB’s hydrogen metallurgy technology is the world’s first in producing zero-
The scrap-making process does not have a high technical threshold and can be introduced to China’s steel mills, Zhong added.
But there are two major obstacles: The cost of adding new facilities and insufficient global supply.
In China, about 90% of steel is made by the blast furnace-basic oxygen furnace route, and this equipment is still very new. In the uncertain demand for low-carbon steel, steel mills do not have the courage to invest in decarbonization technologies or equipment in the short term, he said.
The supply of steel scrap was around 260 million tonnes in 2022 in China, according to the China Association of Metal Scrap Utilization, while crude steel supply stood at 1.01 billion tonnes last year. The current scrap supply falls far below what steelmaking requires.
More government support is needed
To encourage steel mills to invest in green steel and decarbonization technology and equipment, central and local governments should implement a stimulus package, Zhong said.
Firstly, steel mills that successfully reduce their carbon emissions should be rewarded, while those that refuse to undergo low-carbon transformation should be penalized.
Several steel mills were rewarded for practicing decarbonization, Fastmarkets heard. For instance, Shagang’s branch Huaigang received one million yuan in 2022 for its effort to reduce energy consumption.
Secondly, the government should create a low-carbon steel market, including purchasing green steel for government-backed projects, providing subsidies to green steel users and introducing relevant policies that encourage downstream users to share decarbonization costs with steel mills.
Thirdly, policies should be implemented to mobilize the power of financial institutions to support low-carbon transformation
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