Green steel to reset industry cost structure

Steel making is responsible for around 7 percent of global emissions, emitting pollutants not only through burning of carbon but also through the chemical process involved in its manufacturing.

- Sumit Maitra & Tamajit Pain

Green steel to push up cost structures

World over, particularly in developed economies and also in China, low-emission steel-making technologies are being worked out at significant costs though some are still confined within labs. Scaling them up and achieving commercial scale is also expensive.

Till such technologies achieve economies of scale, makers of ‘green steel’ are looking at subsidies in the form of cheap funding, financial support towards research and development and taxing non-green steel.

Move towards greener steel has already started impacting markets everywhere in terms of pricing and the recent price rally was spurred, to some extent, by China’s move to cut emissions.

According to T V Narendran MD & CEO of Tata Steel, the global steel sector is passing through a structural shift.

“The last 10 years would be quite different for the coming 10 years for the global steel sector,” he recently told analysts.

A key shift would be rise in the cost structure in China which is trying to cut down on inefficient and low-value productions to reduce emission while in Europe, levy in the form of carbon tax would be imposed on imports.

Each company’s choice of which breakthrough technology to invest in will to a large degree depend on the resources available and the policies in place, according to a policy paper prepared by World Steel Association.

“It is clear that the production of low-carbon steel is going to be more expensive than steel production today,” WSA said.

The higher production cost will result from a combination of the following:

♦ Increased operational expenses, due to, for example: use of more expensive low carbon resources such as green hydrogen or low-carbon electricity; CCS equipment requiring additional energy to operate and for CO2 storage