Why green steel? Meeting rising demand, reducing carbon emissions

 

The steel industry is facing a perplexing puzzle: The world needs more steel. It also needs to reduce greenhouse gas emissions, a primary cause of global warming and climate change. But steel production and emissions reduction have struggled to co-exist.

By 2050, global steel demand is expected to grow by 30%. Yet steel is the largest source of carbon emissions among heavy industries. Given how steel is made, it’s considered one of the most difficult sectors to decarbonize.

Yet if the steel sector could decarbonize, the benefits to other industries would be significant. Every other heavy industry depends on steel as a core material. That includes all sorts of renewable energy sources, from wind turbines to solar power to electric vehicles.

 

A difficult sector to decarbonize: How Cargill can help

Transitioning to production that helps decarbonize industry, rather than hold it back, is the mission of Cargill’s metals business.

Its 150-plus team members connect iron ore miners, steelmakers, steel users — power generation, transportation, building materials and so on — to solutions that help them embrace opportunities and overcome challenges. Increasingly, that includes decarbonizing their products.

How? Decarbonization will introduce a host of new technologies, regulations in different countries, production processes and trade flows across a globally integrated sector. Below are a few examples of how Cargill is aiding the transition.

 

Gunnar and Rana Gruber turned to Cargill. We helped with risk management and working capital. We also handled all of Rana Gruber’s sales and marketing.

The result? Rana Gruber strengthened its sales and marketing positioning and secured a broader customer base across Europe and China.

“As the market continues to get more complex, integrated solutions are going to be more important than ever,” says Leon Davies, who manages the relationship with Rana Gruber for Cargill. “We cultivated this relationship for a while to show them what we can really do for them as they navigate that world.”

High-quality ore helps lower carbon intensity

Together, our firms ran technical studies to continue boosting Rana Gruber’s product quality —making it one of the highest-grade options in the market. This not only helps Rana Gruber reduce its carbon dioxide emissions, but it also helps the European steel mills who need that high-quality ore do the same. Our companies’ partnership would go on to help grow investor confidence when Rana Gruber went public in 2022.

“The fact that we had a long-term agreement with Cargill (through 2030) was very important for the success of the IPO process,” says the CEO. “It took away the uncertainty of off-take. The very competent team from Cargill, both on the commercial and the technical side, was very important for us when we went into this agreement, and we have not been disappointed. We are sure that we will widen our relations to develop Rana Gruber in the future.”

Cargill also recently entered a partnership with Nordic Iron Ore to purchase high-quality iron ore and accelerate the production of green iron ore products and green steel.

 

Is green steel possible? Hydrogen might provide a lift.

Reducing steel’s greenhouse gas emissions requires changing how steel is made.

Steel is fundamental to our lives — from cutlery to cars to cargo ships.

It’s also one of manufacturing’s three biggest producers of carbon dioxide.

Seventy percent of steel today is produced in traditional blast furnaces powered by coal. This fossil fuel acts as a reducing agent and a source of energy, carbon — and of greenhouse gas. Seven to 9% of direct emissions from the global use of fossil fuels come from the production of steel.

The carbon intensity of steel production has declined somewhat in recent years, according to the International Energy Agency. Almost 30% percent of steel is now made in electric arc furnaces, which use less fossil fuels and more scrap steel. However, total greenhouse gas emissions produced have increased as demand for iron and steel have grown with the world’s population.

To reduce steel’s GHG emissions requires changing how steel is made.

 

Technologies bring alternative to fossil fuels

One way is by using green hydrogen — produced by using clean energy sources to separate hydrogen from oxygen in water. Currently, hydrogen is much more expensive than fossil fuel combustion. But that may not always be the case.

Blastr Green Steel is seeking to use regional raw materials and carbon-free energy for its production in Finland. Its goal: produce 2.5 million tons of cost-competitive, ultra-low CO2 steel with around 90% lower scope 1-3 emissions than conventional steel production. This represents a yearly reduction of almost 6 million tons of CO2, 25% more than the yearly CO2 emissions from all passenger vehicles in Finland. Cargill is supporting Blastr Green Steel throughout the whole supply chain. 

Cargill has also secured an exclusive steel offtake from H2 Green Steel and is working with them in other areas of the supply chain. H2 Green Steel are building a steel plant that will run on renewable electricity and produce its own green hydrogen — reducing emissions by up to 95% compared to traditional steelmaking. 

 

All in the emissions reduction effort together

By working with Cargill, companies gain access to technology, technical knowledge, connection to a broader customer base, and a partner who understands what it takes to achieve large-scale commercial viability and adoption. After all, Cargill moves around 50 million tons of physical iron ore and 6 million tons of physical steel each year, making us a natural to both lead and enable the progress that must come.

As Lee says, “For the supply chain of tomorrow, every element will be sustainable, from mine all the way through to the finished product.”
 

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