By Vijay Jayaraj
Steel is essential in our modern society. It makes houses, factories, bridges, vehicles and all kinds of other machinery and infrastructure. Since 2001, global crude steel production has doubled and demand will continue to rise in the coming decades.
In the climate-obsessed quest to “decarbonize” heavy industry, hydrogen-based steelmaking is being touted as a “clean” alternative to the traditional coal-based steelmaking process. Politicians, environmentalists and some industry leaders are seemingly unthinkingly promoting hydrogen-powered production with an enthusiasm once reserved only for solar panels.
However, a switch to hydrogen steel production could result in undoing a century of progress in efficient production. The high costs, technological challenges and limited scalability of hydrogen-based processes are guaranteed to make them less profitable than coal-based steel production.
The development of efficiency in steel production
The steel industry has been a cornerstone of industrial development and its evolution is a testament to human ingenuity and technological progress. At the beginning of the 20th century, the introduction of the oxygen blast furnace revolutionized steel production.
Over the decades, continuous improvements in blast furnace technology, process control and energy recovery have led to significant productivity and energy efficiency gains. China continues to dominate production capacity and exports, with industry giants such as the Baowu Group leading the way. Other major steel producers include Nippon Steel & Sumitomo Metal Corp. of Japan, Tata Steel of India, POSCO of South Korea and ArcelorMittal of Europe.
Today's integrated steel mills are engineering masterpieces capable of producing millions of tonnes annually with remarkable efficiency. The most powerful blast furnaces can achieve energy efficiency of up to 70%, a figure that seemed unattainable just a few decades ago. The risk of abandoning this proven method in favour of a relatively unproven hydrogen-based process cannot be overstated.
The dangers of hydrogen steel production
Hydrogen-based steel production, particularly the process of direct iron reduction with hydrogen, is presented as a solution to climate change. But the production of so-called green hydrogen, which is produced using “renewable” energy, can cost twice as much as coal.
Conservative estimates suggest that hydrogen-based steel production could be 20 to 30 percent more expensive than traditional methods. This cost difference is not insignificant in an industry with tight margins and intense global competition.
The increased costs would impact the entire economy, affecting the construction industry, automobile manufacturing and numerous other industries that rely on cheap steel.
Rystad Energy believes that “green” steel can only be made competitive by imposing high taxes on carbon steel or by granting huge subsidies to steel producers.
In addition, the production of hydrogen through electrolysis is very energy-intensive. To meet the needs of the steel industry, a massive expansion of renewable energy capacities would be necessary, far beyond current forecasts.
Although there are pilot projects for green hydrogen, it has not yet been tested on an industrial scale. One of the biggest advantages of coal-based steel production, on the other hand, is the ability to produce on a large scale.
Modern blast furnaces can produce up to 400 tons of steel per hour and operate continuously for years between major maintenance intervals. This production scale is crucial to meet global steel demand, which stood at 1.95 billion tons in 2021 and is expected to continue to rise.
This sustainable level of production is made possible by the abundance of coal and established supply chains. The industry's infrastructure for mining, transporting and using coal in steelmaking has been developed and refined over more than a century and is capable of supplying the steel industry with about one billion tonnes of coal annually.
On the other hand, hydrogen-based steel production is another absurd proposal by global warming alarmists that would have virtually no effect on the Earth's temperature but would slow down economic growth and the development of the infrastructure of our modern world.
This commentary was first published on RealClearMarkets on August 23, 2024.
Vijay Jayaraj is a research fellow at the CO2 Coalition in Arlington, Virginia. He holds a Master's degree in Environmental Science from the University of East Anglia, UK, and a postgraduate degree in Energy Management from Robert Gordon University, UK.
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