Low Carbon Steel Roadmap 2050: overview

Brussels, 24 May 2013

David Valenti

Steel Contribution to a Low Carbon Economy 2050

Project contracted to the Boston Consulting Group in collaboration with the German Steel Institute (VDEh)

Project started on 5 November 2012 (initially 10 week-project)

The objectives of the project can be summarized as follows:

Respond to the Commission Roadmap with a sound and credible alternative in order to engage constructively with stakeholders

Assess the technical-economical options over the mid and long-term. Knowing what our sector can do and at which cost will enable companies to make informed investment decisions

Demonstrate that stack emissions are just one side of the problem:steel is a strategic and sustainable material which will be instrumental in achieving the EU’s climate and resource efficiency objectives

2

Work divided in two workstreams

Workstream 2:Steel roadmap

low carbon Europe 2050

Workstream 1:Baselining and

technology assessment

2

1

Emission baselining

Techno-logy

profiles

Steel's own impact

Steel as mitigation enabler

Argumentation logic Content

Starting point for discussion: What has the steel industry achieved so far?

By how much can individual technologies reduce emissions and how much do they cost?

How can emissions be reduced until 2050 considering different technology scenarios?

CO2 balance: What role does steel play in other industries in enabling mitigation?

Baselining within defined system boundaries

Assessment of technologies based on abatement potential, costs, possible time of introduction as well as possible penetration rate

Construction of emission model based on projected steel production and scenarios derived from technology profiles

CO2 balance for selected use cases where only steel as a material is making mitigation possible in other industries

Steel Contribution to a Low Carbon Economy 2050

Structure of the report

1. Executive summary

2. Steel industry overview and development

3. Steel’s own impact

3.2 Abatement scenarios for 2050

3.3 Technology assessment

3.4 Steel & Scrap forecast

4. Steel as mitigation enabler

3.1 Baselining

Smelting reductionIntegrated route Direct reduction Scrap

Overview of iron- and steel-making routes

Rawmaterialpreparation

Ironmaking

Steelmaking

Raw material

Scrap

Lump ore

CoalO2, coal

Shaft pre-reduction

Hot metal

Melter-gasifier

Pellets

Lump ore

Natural gas

DRI

Scrap

Pellets

Lump ore Fine ore

Pellets

Sinter

Blast

O2

Coal, oil ornatural gas

Scrap Hot metal

Blastfurnace

Coke

Scrap

Fluidizedbed

HCI

HBIHBI

Fluidizedbed

Shaftfurnace

Fine oreFine ore

EAF steelBOF steel

Source: Steel Institute VDEh; WV Stahl; WSA; BCG

Coal

Casting

Rolling / processing

O2 O2

EAF EAFBOF BOF

Liquid steel Liquid steel Liquid steelLiquid steel

Crude steel

Finished products (flat & long)

Natural gas

Redu-cinggas

System boundaries

xx g CO2/t

xx g CO2/t

xx g CO2/t

xx g CO2/t

xx g CO2/t

xx g CO2/tBOF

EAFScrap

Iron-makingPelletizing

Coke-making

Sintering

Steel-making

Casting +

hot rolling

Cold rolling +

further processing

Scope I—direct CO2 emissions from the following facilities:

not included

Scope II—indirect CO2 emissions from purchased electricity

Oxygen

Pig iron

Burnt lime

Graphite electrodes

Credits for by-product gases1

Credits for slag2

Pellets

Steam

Scope III—indirect CO2 emissions from purchased materials (produced in EU27):

DRI

CokeSystem boundaries for base line

1. The utilization of by-products, such as process gases or waste heat is not counted as a credit, since such use helps to reduce the energy consumption of aggregates. Only by-product gases that are sold to a second party can be counted as a credit, since they help to reduce emissions of a different sector. 2. Emission factors for BF and BOF to cement industry not finalized yet Source: worldsteel; Project team analysis

Scope investigated: Primary/secondary steelmaking to hot rolling

Reduction of CO2 emission from 1990 to 2010

Mt CO2

300

200

100

0Total

emissions 2010

223

OHF route effect

3

EAF route efficiency

gain

15

EAF route volume effect

11

BF-BOF route

efficiency gain

8

BF-BOF route volume

effect

59

Total emissions

1990

298

BF-BOF route EAF route

BF-BOF efficiency gain -80kg CO2/t CS• 1990: 1,968 kg CO2/t CS• 2010: 1,888 kg CO2/t CS

EAF production +16 Mt• 1990: 55 Mt CS• 2010: 71 Mt CS

EAF efficiency gain -212 kg CO2/t CS• 1990: 667 kg CO2/t CS• 2010: 455 kg CO2/t CS• Effect of better indirect emission

(electricity) only minor (~10%)

Note: Includes all direct and upstream emissions as well as casting and hot rolling; OHF route volume 1990: 11 M CS = crude steelSource: EUROFER Benchmark 2007/08; VDEh data exchange 1990/2010; Project team analysis

BF-BOF production -30 Mt• 1990: 131 Mt CS• 2010: 101 Mt CS

197.4 Mt

172.8 Mt

Basic assumtions

Basic assumptions used for the buiding of the various scenarios:

• Steel self-sufficiency assumption: EU27 self-sufficient (by 2030, production=consumption), CAGR=0,8%

• Scrap self-sufficiency assumption (by 2035), increasing scrapavailability, CAGR:0,9%

Technology review

Incremental

Breakthrough

Substitution

Agglomeration Integrated route EAF route

• Sinter plant cooler heat recovery

• Coke dry quenching (CDQ)

• Injection of H2 rich reductants1

• Injection of H2 into shaft• Pellet ratio to BF optimization• Top gas recovery turbine

(TRT)• Waste gas recovery

• Corex• Finex• HIsarna

• Midrex / HyL based on natural gas

• Finmet / Ulcored based on natural gas + fine ores

Synergies between different technologies2

Combination of technologies with CCS3

1. Includes the potential use of coke oven gas as reductant 2. E.g., use of coke oven gas for DR, BF+Corex/Finex+DR, use of Corex/Finex gas for DR 3. BF: CCS after power plant, TGR with CCS, Corex/Finex with CCS, HIsarna with CCS EAF: gas based DR with CCS, Ulcored with CCS

• Heat recovery• Optimization

Three-level approach: energy price sensitivity analysis on 3 levels

NB: efficiency increase in waste gases-fired power plants not in the scope

• Top gas recovery (TGR)

BF-TGR (top gas recycling)

Gas cleaning

CO2 400 Nm3/tCO2

scrubber

Oxygen

PCI

Gas heater

Coke Top gas (CO, CO2, H2, N2)

Re-injection

Gas net(N2 purge)

CO, H2, N2V4900 °C

1250 °C

V3

1250 °C

XV1900 °C

25 °C

Expected C-savings

25 % 24 % 21 %

Gas cleaning

CO2 400 Nm3/tCO2

scrubber

Oxygen

PCI

Gas heater

Coke Top gas (CO, CO2, H2, N2)

Re-injection

Gas net(N2 purge)

CO, H2, N2V4900 °C

1250 °C

V4900 °C

1250 °C

V3

1250 °C

XV3

1250 °C

XV1900 °C

25 °C

V1900 °C

25 °C

Expected C-savings

25 % 24 % 21 %

Expected C-savings

25 % 24 % 21 %

Ulcos-BF concept:- Retro-fit to existing BF- Lower coke consumption- Higher productivity- But a lot of technical challenges to

overcome

-9%

Crude steel production

[Mt crude steel]

Sources: EUROFER Benchmark 2007/2008; VDEh data exchange 1990/2010; Project team analysis.1. 2009 crude-steel production with 2010 CO2 intensity and 2010 Scrap-EAF share.

1,508

197.4

1,293

172.8 204139.3 236

A

1,046 778

1,219 1,145 BC

Upper boundary

• Crude steel production forecast & CO2 intensity on 2010 level

• Increased EAF-share on the basis of scrap availability & best-practice sharing

Economic scenarios

Lower theoretical boundary without CCUS

• 44% Scrap-EAF, 45% DRI-EAF, 11% BF-BOF; increased improvements, especially for BF-BOF

Lower theoretical boundary with CCUS

• 44% Scrap-EAF, 56% BF-BOF+TGR, DRI-EAF, or SR-BOF

A

B

C

D

~550 D

100

50

-80% compared

to 1990

0

350

Mt CO2

300

250

200

150

1990

223

180

20091

2050

298

20302010

264

184

213

305

~130

Economically viable

Not economically viable

271

258239

249

A

B

C

D -56%

-38%

Specific CO2 intensity

[kg CO2 / t crude steel]

Absolute CO2 emissions in 2050 only 60% lower than 1990’s if CCUS are fully implemented in 2050

Abatement cost of moving fromexisting BF-BOF to DRI-EAF: 200 to 600€/tCO2

Development of average specific CO2 intensity for different scenarios without CCUS

1,500

1,600

kg CO2 per ton of crude steel (including hot rolling)

1,400

1,300

1,200

1,100

1,000

900

800

0

2050

2049

2035

2034

2033

2032

2031

2030

2045

2028

2027

2026

2025

2024

2023

2022

2021

2020

2019

2018

2017

2016

2015

2014

2013

2040

2011

2010

1990

2041

2039

2038

2037

2029

2048

2047

2046

2044

2043

2042

2036

2012

Sources: EUROFER Benchmark 2007/2008; VDEh data exchange 1990/2010; Project team analysis.Note: All scenarios are without CCUS.1. Input factor prices adjusted for inflation. 2. Doubling of (real) input-factor prices from 2010 until 2050. 3. Fivefold increase of (real) input-factor prices from 2010 to 2050.

-14%

-24%

1990

-26% to -28%

-48%

2010

Base line

Lower boundary c

Economic scenariosReference scenario1

Medium price scenario2

High price scenario3

C

Upper boundary aA

Upper boundary bB

-63% CCUS scenario

Abatement potential up to 2050

13

Commission Roadmap for a Competitive Low Carbon Economy 2050

Abatement potential compared to 2010 (intensity)

184

2030 2050Economic scenario +7,2% (-9,4%) +15,7% (-15,5%)Maximum abatement w/o CCS

-4,5% (-19,2%) -17,5% (-39,7%)

Maximum abatement with CCS

na -41% (-57,4%)

Steel as a mitigation enabler

• Inland water transport

• CCS

<

Initial list• Weight reduction cars

• Onshore/offshore wind power

• Leaf springs• Rubber-enforcing steel structures for tires

• Motor systems• Assembled camshafts

• CCS• Structural steel• …

Focus onEU-27

Relevantpotentialby 2030

Cases with abatement

≥ 5 MtCO2 / year

8 case studies with distinct

potential

Geo

grap

hy

Pote

ntia

l im

pact

vs.

201

0

Subs

titut

ion

of m

ater

ials

Abs

olut

e po

tent

ial

23

4

1

• Nuclear power plants

• Solar power• Bridges• Onshore wind

mills• Rail• Jet engines

No comparative examination of

alternatives

Sources: VDEh; BCG analysis.

Case studies for EU27 result in annual CO2 savings of about 440 Mt while emitting only 70 Mt of extra CO2

1. Bioenergy . 2. Net reduction refers to reduction attributable to steel.Note: PP = power plantSource: BCG analysis

Mt CO2 / yr.451050

5.3

14.0

42.1

3.2

1.2

0.16

3.0

0.7

~ 4:1

~ 17:1

< 1

Efficient fossil fuel PPs

Offshore wind power

Other renewables1

Efficient transformers

Efficient e-motors

Weight reduction cars

Weight reduction trucks

Combined heat / power

Energyindustry

Traffic

Household / industry

3

5

1

2

4

6

7

8

~ 2:1

~ 155:1

~ 23:1

~ 9:1

∑ ~ 443 ∑ ~ 70

~ 148:1

~ 6:1

Mt CO2 / yr.200100500

49.6

6.3

165.9

6.9

19.6

22.2

69.7

103.0

Case studyCase studyEmissions in thesteel production Emissions in thesteel production

Net CO2 reduction potential2

Net CO2 reduction potential2

Ratio between CO2reduction / emission Ratio between CO2

reduction / emission

Energyindustry

Steel Roadmap for a Low Carbon Europe

16

The BCG study will be used as an input to Steel Low CarbonRoadmap

The Steel Carbon Roadmap will have a broader scope:

options for deeper cuts (HIsarna, Ulcored, electricity and hydrogen-based reduction,…)

main challenges of the various options

competitiveness issues

policy recommendations (role of the ETS)

The Steel Low C Roadmap will be published in June but the workdoesn’t stop here.

Thank you

17

Back-up slides

18

Moderate annual crude steel production growth of 0.8% from 2010 until 2050 expected

150

100

50

02011

17826

2010

173

148

25

152

Mt

250

200

2009

139

118

21

2007

210

176

35

2000

193

163

30

1990

197

154

43

1980

210

160

50

Historically, crude steel production stable in EU15 but declining in Eastern Europe

Note: e = estimate.Sources: World Steel Association; BCG analysis.

EU15Oth. EU

Going forward, slow growth expected for EU27, 2007 production level will be reached

in 2032

Mt

15250

150

250

200

100

0

0.8%

2050e

236

2040e

222

2030e

204

2020e

191

2011

178

2010

173

148

2625

Oth. EU EU27EU15

Steel intensity curves used to forecast finished steel consumption per country

0

GDP/Capita (k$ PPP)

706050403020100

Steel/GDP (kg/k$)

50

40

30

20

10

Steel Intensity (SI) curve Finished steel consumptionCrude steel production

2012-2050

Plot historicaldata

SteelIntensity

curve

Assess future industry

development

Assessed parameter for industry development 2012 – 2050

Industrialization• Share of industrial production of total

economy• Assumption: No deindustrialization in EU

Industry structure• Development of steel-intensive industries• Assumption: Stable industry structure

Steel efficiency gains• Efficiency gains in steel application• Assumption: Certain efficiency gains

Sources: World Steel Association; EIU; BCG analysis.

EU27

20402020 2030

1.5

0.5

1.0

20102000 2050

Methodology to compute crude steel production from finished steel consumption

205020402010 203020202000

Con

vers

ion

rate

Self

suffi

cien

cy

rate

Fi

nish

ed s

teel

co

nsum

ptio

n

204020302020

95%

90%

85%

EU27

205020102000

100%

Sources: World Steel Association; EIU; BCG analysis.

Crude steel production

Finished steel

production

Finished steel

consumption

Self sufficiency

rate

Conversionrate (yield)

Steel/GDP

GDP/Capita

Net importer

Net exporter

<

26

12

2030e

113

77

25

10

2011

99

17

16

65

100

50

0

0.9%

2050e

136

2010

96

62

16

18

2009

84

58

1313

2007

111

66

25

20

2005

94

54

22

18

1990

102

41

19

43

98

150

Scrap availability forecasted to grow by 0.9% annually until 2050, mainly driven by obsolete scrap

Obsolete scrap(adj. for trade)

New scrapHome scrap

Source: BCG analysis.

Total available scrap in EU27 (in Mt)Scrap availability driven by three scrap

types

Obsolete / old scrap

Home scrap

New / prompt scrap

Crude steelproduction

Scrap rate(%)

×

Lifetime (y)

• Production waste and errors in conversion of crude to finished

• Depending on efficiency of production process

• Production waste and errors in steel-using sectors

• Depending on industry sector

• Steel in products at the end of their life cycle

• Depending on scrap recovery rate and life cycle per sector

Finishedsteel cons.per sector

Scrap rate(%)

×

Finishedsteel cons.

per sector

Recycling rate (%)× ÷