Steel industry sounds alarm over slow progress on green steel

SINGAPORE/BEIJING: Delays to green steel projects are growing and government support is far short of what is needed, jeopardising the industry's drive to cut emissions, steel associations warned at an annual meeting in Singapore this week.

About half of the ‌world's planned green ⁠steel projects ⁠have already been delayed, while governments have committed just $20 billion of the $1.5 trillion needed to decarbonise the sector, according to the World Steel Association.

Industry executives said progress on cutting emissions has been slow and is likely to remain so without a major increase in state funding or customers willing to pay more for cleaner steel. The gloomy assessment stands in contrast to renewed investor interest in renewable energy and clean technology following the Iran war, which has driven up oil and gas prices.

CUSTOMERS WON'T PAY A PREMIUM

Green steel - generally steel produced ⁠with a ‌lower carbon footprint - is critical because the industry accounts for about 7% to 9% of global emissions.

Yet the current global project pipeline would deliver only about 70 million metric tons of ⁠green steel a year by the end of the decade, a fraction of the roughly 2 billion tons of total steel production forecast, said Shaoliang Zhong, deputy secretary general of the World Steel Association.

Roughly half of that already modest pipeline has been delayed by financing constraints, weak demand or shortages of green hydrogen, which some producers hope could replace metallurgical coal in blast furnaces, Zhong told Reuters on Friday.

"Over the past 10 years, steel emission intensity remained almost flat despite commitment among steelmakers to reduce carbon emissions," Zhong said, referring to emissions per ton of steel produced.

Traders ‌and steelmakers told Reuters during the conference that many customers remain unwilling to pay a premium for cleaner steel. Meanwhile, investment in conventional blast furnaces continues across India and Southeast Asia. Many of those facilities have lifespans of up to ⁠40 years, locking in emissions for decades.

New blast furnace capacity planned in the two regions between 2024 and this year roughly matches the size of the entire global green steel pipeline outlined by Zhong, according to OECD forecasts.

"Producing green steel is good, but you need to survive first," Yeoh Choon Kwee, deputy president at Malaysia Iron & Steel Industry Federation told delegates.

"The focus on green steel has always been on the supply side, but the demand reform is equally important," he said. "The government should also play a key role, they need to mandate the use of green steel in key infrastructure."