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Electric arc furnace-based mills are the closest the industry has come to making green steel, with the carbon footprint below 500 kg of CO2 per ton at some facilities, Russian steel pipe and railway wheel manufacturer OMK told S&P Global Platts.
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However, ferrous scrap recycling cannot meet all demand for steel, making the production of direct-reduced iron (DRI)-- the best solution for green steel output -- a necessity, Dmitry Chernyshev, Director for Development, Investments and Strategy at OMK also said in an interview.
The steel industry's decarbonization lies through the transition from blast furnaces (providing 66% of all Russian steel: worldsteel) to the production of steel in EAFs using DRI or hot-briquetted iron (HBI), Chernyshev said.
Several steelmakers have already adopted it and the method is expanding constantly, with more followers in Russia and internationally.
The only Russian steelmaker using mostly/only DRI/HBI is the Metalloinvest-owned Oskol plant in west Russia's Belgorod oblast, but this decade will see it joined by more players.
One is Ecolant, a project of OMK owner Anatoly Sedykh. Since 2020, it has been building a Rb150 billion ($2 billion) DRI-fed 1.8 million mt/year EAF mill in central Russia using Energiron -- the innovative HYL DR technology jointly developed by Techint and Danieli.
The technology boasts one of the lowest carbon footprints and provides for 24 MW generation. To produce its own power, DRI and steel when online in 2025, the plant will source domestically-produced iron ore pellets and natural gas, both plentiful in Russia. Later, it might be adapted to use hydrogen.
In 2021, steel major NLMK signed a memorandum of intent to build a $3.4 billion mining and metallurgical complex near Belgorod producing 2.5 million mt/year of HBI by 2027. NLMK might then set up a 3 million mt/year steel mill running on HBI feedstock.
"Green steel is the steel produced with zero or the lowest possible carbon footprint, but since obtaining steel with nil emissions in the entire production process is a task not yet solved today, green would be the steel made with best available technologies and minimum possible carbon footprint," Chernyshev said.
The OMK-owned Vyksa casting and rolling plant in European Russia emits 0.26 mt of CO2 per ton of steel, while the average carbon intensity of steelmaking in Russia is 1.96 mt/mt of CO2 -- a figure that reflects two thirds of steel being made by coke-burning integrated steelworks.
In future, electrometallurgical mills can lower their emissions by minimizing losses in processes and reducing the carbon footprint of electricity used.
But as it is impossible to make all steel by using scrap due to insufficient supply, using DRI input will become the mainstream technology for green steel, OMK said.
For integrated [BF-BOF operating] mills, the transition will take decades -- the period during which their major equipment and production chain elements, such as blast furnaces, coke ovens and sinter plants, will be replaced by new technologies and units using green hydrogen and electricity from low-carbon energy sources and providing for carbon capture/utilization.
It makes no economic sense to demolish old capacities prematurely, Chernyshev said.
Severstal reckons the Russian steel industry needs Rb10 trillion to convert to DRI, while maintaining the same 70 million mt/year steel output.
How soon green steel becomes a separate category in a commercial sense depends on when consumers will be prepared to absorb extra costs, according to OMK.
Moscow-based investment bank VTB Capital assessed that 100% decarbonization [to be achieved by 2060] of the Russian steelmaking and iron ore mining operations requires Rb22-23 trillion.
Decarbonization of the country's entire metallurgical industry -- effectively removing 250 million mt of CO2, the industry's footprint as of 2019 and equating to 12% of Russia's overall greenhouse gas emissions -- implied an average CO2 cost of $48/mt and Rb1.2 trillion/year through 2060.
Domestic metals producers' current capex plans total Rb0.8 trillion/year and raising that to the new threshold will make metals 7% more expensive for end-users, VTB Capital estimated.
Going to such great lengths as building DRI/HBI plants from scratch, "steelmakers are primarily incentivized by pending carbon cross-border and domestic taxes and similar regulations limiting their access to markets, as well as shrewd understanding of the general trend that not moving along will leave them on the sidelines," Chernyshev said.
ESG -- environmental, social and governance -- factors were also important, he said
"Product buyers, government officials, investors -- all have come to use it to evaluate us. Each and every stakeholder looks at ESG ratings, banks send many ESG-related requests, ESG indicators are found in every supplier qualification questionnaire."
Finally, metallurgical companies are plugged in to the climate change agenda: they realize well that averting the risks of more frequent natural disasters and hunger that GHG emissions are leading to is largely their duty too, Chernyshev said.
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