September 2021
September 2021 Rapid shift in business models needed from European steel compaines to reach climate goals European steel will burn through emissions budget 15 years ahead of time, unless new technologies are deployed within the next decade
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new report from Industry Tracker, the climate research house for investors, has found that the European steel industry has less than 26% (12-35%) of its carbon budget remaining and companies must rapidly shift their business models to reach net zero. This means the industry’s existing assets could release 2.3 billion tonnes of CO 2 in their lifetime, compared to a 2050 budget of just over 3 billion (based on the IEA’s Net Zero Emissions scenario). The report, Steeling for Net Zero, provides an indepth assessment of 10 of the largest and most impactful steel companies, that account for 68% of primary steel production in Europe, including ArcelorMittal, Tata Steel, Thys-
nO nly a quarter of these companies’ carbon budget remains, and current trajectories would see the industry exceed its budget in 2035. nC ompanies have between now and 2033 to stop using current production methods and invest in new steelmaking technologies. n T he cost of transitioning is estimated at between US$4 and 34 billion for these companies, so they will need to rely on public funding and partnerships. nS SAB and ArcelorMittal rank highest on their readiness for the transition, while Severstal, Metinvest and Erdemir are identified as being least prepared. senkrupp and SSAB. The research analyses how these companies are positioned to action transition plans and achieve net zero, based on their targets and existing asset portfolios. Having been on an upward trajectory since the mid-20th century, emis-
sions from steel now account for 7-9% of all global emissions, and demand for the metal is on the rise. The biggest contributor to emissions from the steelmaking process comes from the blast furnace. This is the dominant method of making primary steel and has been in
use since the 14th century. With this carbon intensive method, there is no way of achieving the required reduction in emissions to meet the EU’s 2050 net zero target. Reductions from efficiency improvements have all but plateaued – over the last two decades, the companies analysed have only reduced their emissions intensity by an average of 1% per year. Blast furnaces have a long life cycle of about 15-20 years before they need upgrading. This is an expensive process, costing on average US$175 million, meaning these furnaces cannot be shut down prematurely without incurring write-offs. This risks companies getting locked in to carbon intensive methods unless they start investing in new technologies and timing their transition correctly. 4