Jessica Allen, University of Newcastle and Tom Honeyands, University of NewcastleSteel is a major building block of our modern world, used to make everything from cutlery to bridges and wind turbines. But the way it’s made – using coal – is making climate change worse.
On average, almost two tonnes of carbon dioxide (CO₂) are emitted for every tonne of steel produced. This accounts for about 7% of global greenhouse gas emissions. Cleaning up steel production is clearly key to Earth’s low-carbon future.
Fortunately, a new path is emerging. So-called “green steel”, made using hydrogen rather than coal, represents a huge opportunity for Australia. It would boost our exports, help offset inevitable job losses in the fossil fuel industry and go a long way to tackling climate change.
Australia’s abundant and cheap wind and solar resources mean we’re well placed to produce the hydrogen a green steel industry needs. So let’s take a look at how green steel is made, and the challenges ahead.
Steeling for change
Steel-making requires stripping oxygen from iron ore to produce pure iron metal. In traditional steel-making, this is done using coal or natural gas in a process that releases CO₂. In green steel production, hydrogen made from renewable energy replaces fossil fuels.
A Grattan Institute report last year found if Australia captured about 6.5% of the global steel market, this could generate about A$65 billion in annual export revenue and create 25,000 manufacturing jobs in Queensland and New South Wales.
Steel-making is a complex process and is primarily achieved via one of three processes. Each of them, in theory, can be adapted to produce green steel. We examine each process below.
1. Blast furnace
Globally, about 70% of steel is produced using the blast furnace method.
As part of this process, processed coal (also known as coke) is used in the main body of the furnace. It acts as a physical support structure for materials entering and leaving the furnace, among other functions. It’s also partially burnt at the bottom of the furnace to both produce heat and make carbon monoxide, which strips oxygen from iron ore leaving metallic iron.
This coal-driven process leads to CO₂ emissions. It’s feasible to replace a portion of the carbon monoxide with hydrogen. The hydrogen can strip oxygen away from the ore, generating water instead of CO₂. This requires renewable electricity to produce green hydrogen.
And hydrogen cannot replace carbon monoxide at a ratio of 1:1. If hydrogen is used, the blast furnace needs more externally added heat to keep the temperature high, compared with the coal method.
More importantly, solid coal in the main body of the furnace cannot be replaced with hydrogen. Some alternatives have been developed, involving biomass – a fuel developed from living organisms – blended with coal.
But sourcing biomass sustainably and at scale would be a challenge. And this process would still likely create some fossil-fuel derived emissions. So to ensure the process is “green”, these emissions would have to be captured and stored – a technology which is currently expensive and unproven at scale.
2. Recycled steel
Around 30% of the world’s steel is made from recycled steel. Steel has one of the highest recycling rates of any material.
Steel recycling is mainly done in arc furnaces, driven by electricity. Each tonne of steel produced using this method produces about 0.4 tonnes of CO₂ – mostly due to emissions produced by burning fossil fuels for electricity generation. If the electricity was produced from renewable sources, the CO₂ output would be greatly reduced.
But steel cannot continuously be recycled. After a while, unwanted elements such as copper, nickel and tin begin to accumulate in the steel, reducing its quality. Also, steel has a long lifetime and low turnover rate. This means recycled steel cannot meet all steel demand, and some new steel must be produced.
3. Direct reduced iron
“Direct reduced iron” (DRI) technology often uses methane gas to produce hydrogen and carbon monoxide, which are then used to turn iron ore into iron. This method still creates CO₂ emissions, and requires more electricity than the blast furnace method. However its overall emission intensity can be substantially lower.
The method currently accounts for less than 5% of production, and offers the greatest opportunity for using green hydrogen.
Up to 70% of the hydrogen derived from methane could be replaced with green hydrogen without having to modify the production process too much. However work on using 100% green hydrogen in this method is ongoing.
Becoming a green steel superpower
The green steel transition won’t happen overnight and significant challenges remain.
Cheap, large-scale green hydrogen and renewable electricity will be required. And even if green hydrogen is used, to achieve net-zero emissions the blast furnace method will still require carbon-capture and storage technologies – and so too will DRI, for the time being.
Private sector investment is needed to create a global-scale export industry. Australian governments also have a big role to play, in building skills and capability, helping workers retrain, funding research and coordinating land-use planning.
Revolutionising Australia’s steel industry is a daunting task. But if we play our cards right, Australia can be a major player in the green manufacturing revolution.
Australia has an historic opportunity to build a new, export-focused manufacturing sector based on renewable energy.
As a bonus, it could enable a less politically fraught conversation about climate change. Global action on climate change is in Australia’s national interest.
The changing climate is already reducing profits for Australian farmers. Tens of thousands of jobs depend on the again-bleached Great Barrier Reef.
But for too long, political leaders have struggled to balance the national interest with the legitimate concerns of Australians who live and work in regions that host coal mining and other carbon-intensive industries – most notably central Queensland and the Hunter Valley in NSW.
This climate conundrum has greatly complicated the national debate about climate change: neither commitments to a “just transition” to a low-emissions future, nor promises of coal exports in perpetuity, have proven convincing, leaving regional jobs in the lurch.
Australians want industry
In the 2019 federal election, voters in these carbon regions, perhaps fearing for their livelihoods, seemingly rejected Labor’s more ambitious climate policies.
Australia needs a credible plan to replace carbon jobs as the world decarbonises, and ideally the new jobs will offer similar salaries, need similar skills, and be located in similar places.
This is the key to cracking the climate conundrum: a plan based on sound economics that can offer hope to communities that currently depend on carbon-intensive activities.
A new Grattan Institute report, Start with steel, finds that manufacturing green steel for export is the largest job opportunity for these regions of Australia.
We can start with steel
Green steel can be made by using renewable energy to produce hydrogen, and then using that hydrogen in place of metallurgical coal in the steelmaking process.
The byproduct is water, rather than carbon dioxide.
Winding back the 7% of global emissions that come from steel production will require creating demand for low-emissions steel.
Australia has far better renewable resources than many of our major Asian trading partners, allowing us to make low-emissions hydrogen more cheaply, and therefore to make cheaper green steel.
And because hydrogen is expensive to transport, it makes sense to use it to make green steel here rather than exporting it to make green steel somewhere else.
The Pilbara in Western Australia is the world’s largest iron ore province, which makes it look like the natural place to make green steel.
But it is difficult to attract workers to remote Western Australia. Making green steel for export would require large industrial workforces like those in central Queensland and the Hunter Valley.
Our calculations suggest that the availability of reasonably-priced labour on the east coast of Australia more than outweighs the cost of shipping iron ore from Western Australia to turn it into green steel there.
If Australia captured just 7% of the global steel market, it could create 25,000 ongoing manufacturing jobs.
Seven per cent is much higher than the 0.3% of globally-traded steel that Australia produces today – but it is much less than our share of iron ore production, which is 38%.
Crucially, the opportunity does not rely on leaps of faith or endless subsidies – it is one of the few economically-credible ways to make the low-emissions steel the world will need if it gets serious about tackling climate change.
We should act quickly
The markets for these products are less certain, but if the world moves decisively to limit emissions, the projects that respond will deliver thousands of jobs.
Governments cannot single-handedly create these industries, and nor should they.
Instead, they should focus on bringing down the cost of the key intermediate product – hydrogen – by funding pre-commercial studies of geological structures suitable for storing hydrogen cheaply.
And they should invest in Australia’s low-emissions steel making capabilities by partly funding a flagship project that uses the direct reduction technology needed to use hydrogen to make steel.
The politics of climate change skewered a decade’s worth of prime ministers. And an inability to communicate the costs of action – and why they’re justified – contributed to a would-be prime minister losing an unlosable election.
Green steel offers Australia a reset button: a chance to get bipartisan cooperation to tackle a wicked problem that threatens our national interest.
We’ve heard plenty about the climate crisis. It’s time to talk about the opportunities.
Despite a wealth of evidence to the contrary, some still propagate the myth that the world will need Australian coal for decades to come. Last weekend Opposition Leader Anthony Albanese joined in, saying thermal and metallurgical coal mining and exports would continue after 2050, even with a net zero emissions target.
Metallurgical coal (or “coking coal”) is mined to produce the carbon used in steelmaking, while thermal coal is used to make steam that generates electricity.
Albanese argues there’s no replacement for metallurgical coal, but this is not the case. The assertion stems from a fundamental misunderstanding of modern steelmaking, and places Australian manufacturers at risk of missing out on massive opportunities in the global shift to a low-carbon economy.
Just as thermal coal can be replaced with clean energy from renewables, we can use low-emissions steel manufacturing to phase out metallurgical coal.
The problem with steel
Steel is the second-most polluting industrial material in the world after cement, causing 7-9% of global emissions.
Australia manufactures a relatively small amount of steel – 5.3 million tonnes, or 0.3% of world output. Yet, we’re one of the biggest exporters of raw materials for steel production.
There is potential to not only strengthen Australia’s steel manufacturing industry, but also to grow it using the ore (rock containing metals like iron) we currently export and our extensive renewable energy sources.
Doing so would work to our manufacturing strengths, history, abundant resources, and would cater to the future low-carbon market that will still require steel.
There are a few ways we can do this.
Seventy-two per cent of the world’s virgin steel (steel made from ore, not from recycled material) is created from a high emissions manufacturing process – via the integrated steel-making route. This involves a blast furnace and a basic oxygen furnace, using coal, coke, iron ore and gas.
We can replace the coal and coke with rubber tyres that would otherwise end up in landfill, as shown by University of NSW’s Professor Veena Sahajwalla, who dubbed this process “green steel”.
Right now we can also boost the recovery of steel from landfills in greater percentages. According to a 2018 national waste report, Australia generated an estimated 67 million tonnes of waste in 2016-17.
Steel makes up 2.5% of this. That’s more than 1.5 million tonnes, enough to build 150,000 buses.
‘Direct reduction’ from renewable hydrogen
But the best way to reduce emissions in steel manufacturing is to shift to “direct reduction”. This process produces more than 60 million tonnes of primary steel each year.
And almost 50 plants around Australia already make steel this way. It results in 40% lower greenhouse gas emissions, while supporting a viable and thriving manufacturing industry, which uses our own raw materials rather than exporting them.
Here’s how it works. Direct reduction removes the oxygen in ore, which produces metallic iron. The chemical reaction that drives this process uses carbon monoxide and hydrogen, sourced from greenhouse gases – reformed natural gas, syngas or coal.
But there’s no reason these fossil fuels can’t be entirely replaced with renewable hydrogen in the near future.
We’ve seen this from two leading direct-reduction technologies, called Midrex and Energiron. Both use fossil fuels, but also with a high proportion of hydrogen. In fact, Energiron facilities can already use up to 70% hydrogen, and they’ve also trialled 100% hydrogen.
The source of this hydrogen is critical, it can be made from fossil fuels, or it can be made using renewable energy.
At least five companies in Europe are also working on producing low emissions steel. What’s more, three companies (SSAB, LKAB and Vattenfall) are collaborating to progress the technology, creating the “world’s first fossil-free steel-making technology, with virtually no carbon footprint” – called the “HYBRIT system”.
In fact, SSAB recently announced they’re bringing their plans forward to will produce fossil-free steel by 2026.
A new Aussie industry
The key message is this: it is possible to create low-emissions steel, without metallurgical coal. And it is already happening.
With the support of industry and government, non-metallurgical, low-emissions steel could provide an opportunity to create jobs, develop a decarbonised industry and extend the steel market’s contribution to Australia’s economy.
Not to mention what products we can produce from the steel – adding value in many more ways than just exporting ore – and taking advantage of an increasing consumer demand for low carbon products. This is especially relevant for communities transitioning away from fossil fuels.
There’s not much stopping low-emissions steel from forming a core new Australian industry. Australia must address the costs involved in transitioning the infrastructure, to upgrade plants and processes.
But it needs to start with working from facts – and effective government support and vision.