Shell report highlights key barriers to decarbonising the steel industry

Phil Black - PII Editor 07/12/2022

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Today, Shell released “Decarbonising Steel: Forging New Paths Together” — a report, developed with Deloitte, providing an in-depth look at how the global steel industry can overcome major barriers and unlock its decarbonisation potential. The report is the result of more than 100 comprehensive interviews with executives and experts, representing 57 organisations involved in all key aspects of the steel industry.

“There are a number of potential solutions to decarbonising steel, but one approach is crystal clear: if the industry is to cut carbon emissions at the speed and the scale needed, it must work together to deliver change,” said Steve Hill, Executive Vice President, Energy Marketing at Shell.

Steel is the world’s most important engineering and construction material. And while steel offers excellent formability and durability, the industry, from mining to production, is a significant emitter of greenhouse gases.

The “Decarbonisation Steel: Forging a Cleaner Future” report highlights six key barriers to decarbonisation:

Lack of abundant and affordable green electricity and green hydrogen;
Absence of policy and regulatory incentives to promote global low-carbon steel standards to make green steel more competitive;
Limited availability of high-grade iron ore suitable for the direct reduced iron-electric arc furnace (DRI-EAF) decarbonisation route;
Shortage of a skilled workforce to support the decarbonisation transition across the value chain;
Limited capital available to invest in decarbonisation solutions;
Uncertainty of sufficient and long-term demand for low-carbon steel with green premiums.

To overcome these barriers, feedstock and production processes will have to adapt, driving transformations in the steel value chain. One possibility could see a geographical separation of traditional iron and steel making operations, with ironmaking being based in locations with low-cost green hydrogen availability.

The report found that a successful commercial coalition could play a crucial role in helping derisk investments by miners (to generate the suitable iron-ore grade), steel producers (to progress low-carbon steel production), end-markets (to guarantee the purchase of low-carbon steel), energy providers (to ensure a growing supply of green electricity and hydrogen), while also encouraging policymakers to include carbon requirements in government tender processes.

To enact change, one thing is certain: no one company can decarbonise alone. To successfully decarbonise, core stakeholders in the mining and steel production value chain must work together with end markets such as automotive and construction industries.

A coalition with partners across the value chain — in addition to support from financial institutions and governments — will be required. This collaboration will trigger collective action, spark conversation, drive increased investment and deliver tangible results.

As we have seen in other industries, commercial coalitions with achievable goals are crucial to making the right progress,” Steve Hill said. “And for this, all stakeholders along the value chain have an important role to play.”