Global steelmakers face $518bn in stranded asset threat

The world metal business could have to put in writing down as a lot as $518bn in property over the approaching years as a result of it’s nonetheless constructing conventional blast furnaces regardless of international locations searching for to scale back their carbon emissions, in line with a report.

Countries have continued to announce new coal-based vegetation whereas on the identical time setting more durable pledges to decrease emissions, in line with Global Energy Monitor, an unbiased non-governmental organisation that tracks fossil gasoline and renewable power tasks.

As a consequence, coal-powered blast furnaces might change into pointless or inoperable over time, leaving the sector with stranded property value between $345bn and $518bn, the report estimates.

The forecasts are considerably greater than earlier estimates that put the stranded asset threat for the business at as much as $70bn.

Much of the stranded asset threat is concentrated in Asia, notably China and India, the place 80 per cent of the world’s new coal-based steelmaking capability is deliberate. The report says 345.3mn tonnes per 12 months of such metal manufacturing is presently proposed or below building.

Decarbonising the manufacturing of metal, necessary for engineering and building, is seen as important to assembly world local weather targets. The business is answerable for 7-9 per cent of all direct emissions from fossil fuels, in line with the World Steel Association.

Traditional blast furnaces use coking coal to soften the metallic in iron ore and take away oxygen. A byproduct of this chemical response is carbon dioxide, whereas giant quantities of power are additionally required to warmth the furnaces above 1,000C. 

Some of the world’s largest producers have launched initiatives to scale back their carbon footprint by increasing using electrical arc furnaces, which soften down scrap metal and emit a fraction of the carbon dioxide. Many firms are additionally growing hydrogen and carbon seize applied sciences however progress stays gradual and can want billions of {dollars} of funding.

The report goes on to warn that the worldwide shift from conventional blast furnaces to electrical arc furnaces is “too slow” and “dangerously behind decarbonisation targets” specified by the International Energy Agency’s web zero 2050 report.

Currently 31 per cent of working steelmaking capability makes use of electrical arc furnaces however solely 28 per cent of capability presently below building will use the know-how. By 2030, a minimum of 37 per cent of steelmaking capability ought to use EAF know-how, and 53 per cent by 2050, in line with the IEA.

“We need to move away from coal-based steelmaking, which means we need to be shutting down coal-based plants, not building new ones,” mentioned Caitlin Swalec, analysis analyst at Global Energy Monitor and creator of the report.

“The path to decarbonising the steel sector may be complicated, but some pieces are very clear. We need to add electric arc furnace capacity and less coal-based steelmaking.”