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| Steel Industry |
Decarbonization Strategies in Steelmaking: BF-BOF vs EAF
The steel industry contributes 7-9% of global greenhouse gas emissions, making decarbonization essential. The traditional blast furnace-basic oxygen furnace (BF-BOF) route dominates steelmaking in coal-rich countries like China, India, Russia, and Germany. However, BF-BOF emits 2.2 to 2.4 tons of CO₂ per ton of steel, which is significantly higher than the 0.4 to 0.7 tons from electric arc furnace (EAF) processes using natural gas-based direct reduced iron (NG-DRI). As a result, many regions prioritize EAF technologies for green steel production. Countries such as those in the Gulf, North Africa, and Iran have already achieved near-carbon-neutral steel through NG-DRI-EAF integration.
Technological Advances and Investment Trends in Steel Decarbonization
Two main decarbonization routes have emerged: replacing BF-BOF with NG-DRI-EAF, followed by hydrogen-based DRI (H2-DRI-EAF), and hydrogen injection in blast furnaces. Leading companies such as Tata Steel UK, ArcelorMittal North America, and Liberty Steel are investing billions to shift towards NG-DRI-EAF. Meanwhile, hydrogen injection trials at mills in the US, India, Turkey, and Japan show limited CO₂ reduction potential (up to 20%) and require carbon capture, utilization, and storage (CCUS) technology to meet climate goals. However, CCUS costs remain prohibitive and deployment faces technical challenges.
Market Dynamics and Policy Incentives Supporting Green Steel Production
The growing EAF capacity worldwide will increase demand for steel scrap and low-carbon iron products like DRI, HBI, and CBI. Scrap availability is limited and subject to export restrictions, making green iron ore materials vital for countries without domestic production. Notable green steel projects are underway in the Gulf States, North Africa, Brazil, Canada, and Australia. Government policies, including tax credits in Japan, loans in the UK, and emission fees in Canada, critically support decarbonization investments. Additionally, emission trading systems (ETS) and the EU’s Carbon Border Adjustment Mechanism (CBAM) aim to incentivize low-carbon steel but face complex international trade implications.
ScrapInsight Commentary
The steel industry's transition to net zero hinges on balancing technological innovation and raw material supply. As EAF capacity expands, scrap availability tightens, elevating DRI and green hydrogen demand. Policymakers must harmonize incentives and trade measures to avoid market distortions while accelerating decarbonization investments worldwide.
