Green Steel Transition Progress
I’ve been wondering recently if the steel sector is on the edge of disruption as the developments around green steel continue to attract attention. Sectors like steel and cement are often referred to as ‘hard to abate’, however the H2 Green Steel Project in Sweden has shown that green steel is scalable and its success shines a light on what the future of the industry may look like. A key indicator is that we see banks like ING and HSBC avoiding financing metallurgical coal (the kind used for traditional steel making) due to their increased confidence that low-carbon steel production alternatives will take hold.
A transition to green steel industry is not as simple as just deciding to. Green steel is most commonly made using hydrogen which itself is usually produced using electrolysis. For enough hydrogen production to convert the entire European steel sector green, the EU would have to deploy renewable power roughly equal to the total current electricity capacity in the UK. Although the deployment of so much renewables would lead to further cost reductions in renewables and therefore lower costs for green steel, creating a virtuous circle of disruptive change. The prospects of natural hydrogen deposits offer another alternative as well, as discussed in a previous post.
With the long investment cycles in the industry, we can expect increased attention to the likelihood of disruption, such as banks getting cautious about financing the dirty steel value chain. While many questions remain, it is definitely one to watch.
#GreenSteel #Hydrogen #Disruption
Warning Signs Flash for Steel’s Traditional Business Model
Published by Financial Times | 24 January 2024