Iron and Steel Technology Roadmap

Steel is deeply engrained in our society. The construction of homes, schools, hospitals, bridges, cars and trucks – to name just a few examples – rely heavily on steel. Steel will also be an integral ingredient for the energy transition, with solar panels, wind turbines, dams and electric vehicles all depending on it to varying degrees. Since 1970 global demand for steel has increased more than threefold and continues to rise as economies grow, urbanise, consume more goods and build up their infrastructure. 

Among heavy industries, the iron and steel sector ranks first when it comes to CO₂ emissions, and second when it comes energy consumption. The iron and steel sector directly accounts for 2.6 gigatonnes of carbon dioxide (Gt CO₂) emissions annually, 7% of the global total from the energy system and more than the emissions from all road freight.1 The steel sector is currently the largest industrial consumer of coal, which provides around 75% of its energy demand. Coal is used to generate heat and to make coke, which is instrumental in the chemical reactions necessary to produce steel from iron ore.

Global demand for steel is projected to increase by more than a third through to 2050. The Covid-19 crisis has sent shockwaves through global supply chains, leading to an estimated 5% decline in global crude steel output in 2020 relative to 2019. The People’s Republic of China (“China”) bucks the global trend, with its production estimated to increase in 2020, based on strong levels of output in the first half of the year. After a global slump in the near term, the steel industry returns to a robust growth trajectory in our baseline projections. Without targeted measures to reduce demand for steel where possible, and an overhaul of the current production fleet, CO₂ emissions are projected to continue rising, despite a higher share of less energy-intensive secondary production, to 2.7 Gt CO₂ per year by 2050 – 7% higher than today.

Steel is one of the most highly recycled materials in use today. While iron ore is the source of around 70% of the metallic raw material inputs to steelmaking globally, the rest is supplied in the form of recycled steel scrap. Steel production from scrap requires around one-eighth of the energy of that produced from iron ore – mainly in the form of electricity, rather than coal for production from iron ore. This benefit results in high recycling rates (around 80-90% globally). However, scrap cannot fulfil the sector’s raw material input requirements alone because steel production today is higher than when the products that are currently being recycled were produced. This means that recycling alone cannot be relied upon to reduce emissions from the sector to the extent needed to meet climate goals.

Existing infrastructure cannot be ignored if energy and climate goals are to be achieved. Global crude steel production capacity has more than doubled over the past two decades; three-quarters of the growth took place in China and around 85% of total capacity today is located in emerging economies. This rapid growth has resulted in a young global blast furnace fleet of around 13 years of age on average,2 which is less than a third of the typical lifetime of these plants. If operated until the end of their typical lifetime under current conditions, these and other assets in the steel industry could lead to around 65 Gt CO₂ of cumulative emissions. This would exhaust most of the CO₂ budget compatible with a sustainable transition for the sector, leaving no room to manoeuvre for the capacity additions that will be required over the coming decades.

To meet global energy and climate goals, emissions from the steel industry must fall by at least 50% by 2050, with continuing declines towards zero emissions being pursued thereafter. The IEA Sustainable Development Scenario sets out an ambitious pathway to net-zero emissions for the energy system by 2070. While more efficient use of materials helps to lower overall levels of demand relative to our baseline projections, the average direct CO₂ emission intensity of steel production must decline by 60% by 2050, to 0.6 tonnes of CO₂ per tonne of crude steel (t CO₂/t), relative to today’s levels (1.4 t CO₂/t). 

More efficient use of steel lightens the load on the required shift in process technology. Pursuing a suite of material efficiency measures along supply chains reduces global steel demand by around a fifth in 2050, relative to baseline projections. Savings stem from measures undertaken within the sector and its supply chain (e.g. improving manufacturing yields) and those downstream of the sector (e.g. extending building lifetime), with the latter category contributing the majority of the material savings. Material efficiency strategies contribute 40% of the cumulative emissions reductions in the Sustainable Development Scenario.3

Energy performance improvements to existing equipment are important, but by themselves not sufficient for a long-term transition. The energy intensity of state-of-the-art blast furnaces is already approaching the practical minimum energy requirement. For inefficient equipment the gap between current energy performance and best practice can be much larger, but with energy making up a significant proportion of production costs, there is already an incentive to replace the least efficient process units. Improvements in operational efficiency, including enhanced process control and predictive maintenance strategies, together with the implementation of best available technologies contribute around 20% of cumulative emissions savings in the Sustainable Development Scenario.

New steelmaking processes are critical, but there is no one right answer. Hydrogen, carbon capture, use and storage (CCUS), bioenergy and direct electrification all constitute avenues for achieving deep emission reductions in steelmaking, with multiple new process designs being explored today. Energy prices, technology costs, the availability of raw materials and the regional policy landscape are all factors that shape the technology portfolio in the Sustainable Development Scenario. Access to low-cost renewable electricity (USD 20-30 per megawatt hour) in several countries provides a competitive advantage to the hydrogen-based direct reduced iron (DRI) route, which reaches just under 15% of primary steel production globally by 2050. Innovative smelting reduction, gas-based DRI and various innovative blast furnace concepts, all equipped with CCUS, prevail in areas where the local policy context is favourable and cheap fossil fuels are abundant. Hydrogen and CCUS together account for around one-quarter of the cumulative emission reductions in the Sustainable Development Scenario.

New technology must be deployed at a blistering pace, with new infrastructure to boot. While a smooth transition to larger shares of scrap-based production is possible as economies start to mature and scrap availability increases (e.g. China), a rapid roll-out of technologies that are currently at early stages of development will need to accompany this shift. In the Sustainable Development Scenario the deployment of one hydrogen-based DRI plant per month is required globally following market introduction of the technology. This raises electricity demand by 720 terawatt hours by 2050, equivalent to 60% of the sector’s total electricity consumption today. The concurrent deployment of CCUS-equipped plants requires around 0.4 Gt CO₂ capture globally in 2050, equivalent to the deployment of a large CCUS installation (1 million tonnes CO₂ capture per year) every 2-3 weeks from 2030. 

Deep emission reductions are not achievable without innovation in technologies for near-zero emissions steelmaking. Of the cumulative emission reductions to 2050 in the Sustainable Development Scenario, 30% stem from steelmaking technologies that are at demonstration or prototype stages today. The rapid deployment of facilities utilising CCUS and low-carbon hydrogen in the Sustainable Development Scenario will not materialise without continued efforts to spur these technologies through the innovation pipeline. Our Faster Innovation Case explores the technology implications of bringing forward to 2050 the date at which net-zero emissions for the energy system is reached. In the Faster Innovation Case nearly three-quarters of the annual emission savings in 2050 stem from currently pre-commercial technologies, relative to around 40% in the Sustainable Development Scenario.

By 2050 almost one-fifth of the steel produced globally is expected to come from India, compared to around 5% today. India is already the world’s second-largest steel-producing country and is expected to increase its annual production volumes by 2050 by an amount equivalent to twice that of the European Union’s total production in 2019. The Covid-19 crisis is hitting the country’s steel industry hard, but the underlying factors that point to growth in the future – a population whose number and prosperity are growing, a proven commitment to economic reforms that improve competitiveness and a supportive policy environment – still persist.

A diverse technology portfolio emerges in India to tackle an array of challenges. India’s existing production fleet can be characterised as relatively young, energy-intensive and growing at a faster pace than domestic scrap availability. Furthermore, the country has vast renewable resources and long-held experience in DRI production. These factors lead to multiple options being pursued in the Indian steelmaking context. In the Sustainable Development Scenario innovative CCUS-equipped blast furnace concepts are retrofitted to efficient new blast furnaces that are installed during a period in which few low-carbon alternatives are available. By 2050 this technology family accounts for around 7% of steel production from iron ore. The hydrogen-based DRI route accounts for a further 22%, taking advantage of India’s access to low-cost solar PV electricity in particular. The innovative smelting reduction process with CCUS, which negates the need to use coking coal – a resource that is in short supply in India – accounts for a further 26%. 

A sustainable transition for the iron and steel sector will not come about on its own; governments will play a central role. Policy portfolios will be diverse, but the following recommendations serve as a starting point for those seeking to effect change and accelerate the transition:

• Establish a long-term and increasing signal for CO₂ emission reductions.
• Manage existing assets and near-term investment.
• Create a market for near-zero emissions steel.
• Support the demonstration of near-zero emission steelmaking technologies.
• Accelerate material efficiency.
• Increase international co‑operation and ensure a level global playing field.
• Develop supporting infrastructure for near-zero emission technologies.
• Track progress and improve data collection.

The projection horizon of this technology roadmap extends to 2050, but governments and decision makers should have 2030 firmly in mind as the critical window to accelerate the transition. Tangible and measurable target-setting in three short-term priority areas can begin today: 

1. Technology performance and material efficiency. To ease the burden of deploying innovative technology and enabling infrastructure later on, opportunities must be seized immediately to make more efficient use of energy and materials through a suite of readily-available best available technologies and measures.
2. Existing assets and new infrastructure. A plan must be put in place to deal with existing assets that acknowledges the decline in the CO₂ intensity of production required just one investment cycle away. At the same time, a co‑ordinated push on new hydrogen and CO₂ transport and storage infrastructure is needed to pave the way for deploying innovative technology.
3. R&D and demonstration. Pilot and demonstration projects for innovative near-zero emission technologies over the next decade must be consistent with deployment ambitions post-2030. 

The ensuing economic crisis in the wake of the Covid-19 pandemic presents both challenges and opportunities in this regard, but these critical interim milestones are prerequisites for a sustainable transition.