Deployment of hydrogen and CCS technology at significant scale in the steel sector is “decades away”, leaving the industry needing to buy carbon credits to meet emission reduction targets, Australian mining group BHP said in its latest economic and commodity outlook.

BHP, which is a major supplier of metallurgical coal used in traditional blast furnace steelmaking, said its analysis shows current levels of cost competitiveness and technological readiness will inhibit the uptake of alternative “high-cost abatement levers” such as hydrogen and CCS.

“We assess that the emerging technologies that are expected to feature in a low carbon end–state for the industry, such as green hydrogen enabled direct reduced iron/electric arc furnace and direct reduced iron/electric smelting furnace, are some decades away from being deployed at scale,” Huw McKay, vice-president, market analysis and economics at BHP, said in the outlook.

“We expect that the industry will need to be a purchaser of carbon credits for a considerable period even as it positions itself to pursue long run carbon neutrality” McKay, BHP

The Oxford Institute for Energy Studies said cost is the main barrier to greening steel production. On average, costs of producing greener steel – whether through CCS or hydrogen integration – can be up to 50% higher than conventional production, it noted in a recent research paper.  “This is largely due to the high capital costs inherent in carbon capture technologies and electrolysers, despite projections for cost reductions with increased deployment,” it said.

BHP said existing blast furnace steelmaking is unlikely to be displaced at scale by emergent technologies for decades. This argument hinges partly on the sheer size of the existing fleet of operating blast furnaces – which account for 70% of global steelmaking capacity – and the expected lifespan of those plants. The average age of blast furnaces in China, the world’s largest producer, is only 12 years, BHP added

BHP and other Australian miners are disadvantaged in the development of hydrogen-fuelled steelmaking because the grade or iron ore they produce does not work well with direct-reduced iron technology, the Australian Hydrogen Council said recently.

Credit demand

BHP noted continued use of blast furnaces will force steelmakers to buy carbon credits to achieve emissions reductions.  “We expect that the industry will need to be a purchaser of carbon credits - as required to meet regulatory or voluntary commitments - for a considerable period even as it positions itself to pursue long run carbon neutrality,” McKay said.

BHP is working with seven major steelmakers, accounting for nearly a fifth of reported global steel production, to reduce scope three emissions from the burning of its metallurgical coal.

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Author: Stuart Penson