Amidst the violence and humanitarian crisis unfolding in Ukraine, the dramatic spikes in the oil and natural gas markets have captured widespread attention, but the steel used in everything from vehicles to bridges and buildings is also entangled in these events. Steel is also essential for the development of renewable energy systems, but its emissions also need to be addressed. Unfortunately, as the metal’s global market is rattled by war and rising prices, Russia’s invasion of Ukraine removes the focus on decarbonization to more immediately pressing issues of security.
As the third-largest steel exporter, Russia shipped out 33.3 million tonnes of steel to over 130 countries in 2018. Ukraine also has an active steel industry and exports about 15 million tonnes of steel each year, making it the eighth-largest steel exporter. But as Ukrainians were called to fight and the Black Seas’ ports were closed, many of the country’s mills were forced to shut down. Some mills in Europe also idled their operations due to the surging natural gas prices.
Steel markets were already seeing volatile and high prices due to disruptions caused by COVID-19. At the onset of the pandemic, steel demand and prices dropped as mills idled, but even after demand rebounded, supply remained low as operators were slow to ramp up production amidst continued uncertainty and other disruptions along the supply chain. By March 2021, steel prices were about $1,547/ton (187% higher than in March 2020). In March 2022, following Russia’s invasion, steel prices rose to over $1,880/ton. In addition, the EU recently announced sanctions on Russia’s iron and steel products, which could lead to further implications for prices and availability.
THE KINK IN STEEL’S SUSTAINABLE ROAD
The metal is an essential material for low-carbon infrastructure and renewable energy technologies, especially wind turbines, which are over 70% steel. Steel’s swinging market trends, therefore, complicate the advancing energy transition. Nickel prices have also fluctuated wildly since Russia’s invasion, rising 250% in just two days to briefly surge over $100,000/ton before the London Metal Exchange suspended trading. Nickel is considered a critical mineral in the United States because of its importance for producing stainless steel and batteries for electric vehicles.
While necessary for the transition to renewable technologies, the iron and steel industry itself consumes about 7% of the global energy supply. Its processes require high temperatures and are often fueled by large amounts of coal, making it the most greenhouse gas-intensive industry. While it poses a challenge, decarbonizing this hard-to-abate sector is necessary to create a sustainable future for the industry and to meet the Paris Agreement’s goal of limiting global temperature rise to less than 2°C.
With global steel markets sent into a frenzy from the war, ramifications of Russia’s relentless attack have spilled across borders, hindering crucial progress toward a sustainable industry.
The iron and steel sector can implement cross-cutting solutions across the global value chain, including processing raw materials, making the steel, transforming steel into useful products, and dealing with the waste. For example, typical raw materials like coke, coal, and natural gas could be substituted with alternatives. Using low-carbon solid recovered fuels would reduce landfill waste and the resulting methane emissions. Replacing natural gas with low-carbon hydrogen could even reduce direct CO2 emissions by as much as 91%.
The majority of the energy consumption and emissions come from the iron- and steel-making processes themselves, which are largely at their limit for thermodynamic efficiency. One of the most effective changes would be switching the energy supply from fossil fuels to renewables. China and India produce considerable amounts of steel while relying on coal for electricity. Over 50% of steel operations in China use blast furnaces, which use coal. These furnaces could be updated with more efficient equipment, but because the nation’s industry only expanded about 20 years ago, the replacement of relatively young equipment is uneconomical and unlikely. Last year, China did announce a deadline for the steel sector to reach peak emissions by 2025 and reduce emissions by 30% by 2030. Still, the country recently pushed the deadline back to achieve peak emissions in 2030 and adopted a goal of carbon neutrality by 2060. In India, some individual operators have announced a movement toward more sustainable production, but there are no decarbonization targets in its nationwide policy. The Rocky Mountain Steel mill in Pueblo, Colorado, is the largest solar-powered steel production facility. Its solar-generated electricity prevents 434,000 metric tons of carbon dioxide from being released into the atmosphere every year. Coincidentally, its parent company, Evraz, is partially owned by a Russian oligarch who has been sanctioned by the British government. While production appears to be continuing as expected, for now, it is difficult to say if Pueblo’s mill will feel any effects of the sanctions.
Carbon capture, utilization, and storage may also provide an economically feasible solution that can be applied during steel-making and when turning crude steel into useful products like sheets, wire, and pipes. Changing the design of these products can also reduce emissions. For example, switching to high-strength steel to reduce the weight of vehicles would lower their fuel consumption. And at the end of its useful life, steel can be recycled to reduce waste and conserve energy. Producing new steel from recycled scrap steel requires much less energy. Since 1900, over 22 billion tons of steel have been recycled, resulting in a reduction of 28 billion tons of iron ore and 14 billion tons of coal that would otherwise have been consumed in production.
STEEL CAN BE SUSTAINABLE
Steel has helped build the modern world and will continue to be a resource for advancing technologies and emerging economies. These low-carbon interventions still face significant barriers, not just technological or market-related but also economic and organizational. For example, the top seven steel-producing countries account for about 79% of global production. While these big players have the capital to invest, they are hesitant to do so without seeing the clear profitable returns.
As one of these top steel-producing countries, Russia has the power to help shape a sustainable future for the sector. Clearly, though, climate action is not a priority for the Kremlin. With global steel markets sent into a frenzy from the war, ramifications of Russia’s relentless attack have spilled across borders, hindering crucial progress toward a sustainable industry.
Brooke Bowser is a Communications Associate at the Payne Institute. She is an environment and science writer.
Morgan Bazilian is the Director of the Payne Institute for Public Policy. Previously, he was the lead energy specialist at the World Bank.