A new report by Wood Mackenzie said decarbonizing the iron ore and steel industry would require a $1.4 trillion investment by 2050. According to the Horizons research report, 2.2 billion metric tons of steel production are needed to meet the global demand by 2050 – 15% more than in 2021.
Iron ore mining and steel production are high-emitting industries producing 3.4 billion tons of CO2 per year – or 7% of global emissions.
“Decarbonising the steel industry is a staggeringly big task,” said Malan Wu, research director at Wood Mackenzie, and lead author of the report. To meet 2050 targets, steel emissions must go down by 90% from present levels, he added.
Action is needed at every stage of the value chain to achieve the decarbonization targets set for 2050, the report stated. $800-900 billion would be needed to decarbonize the steelmaking infrastructure alone.
Mining companies will need to invest in high-grade mines and green pellet capacities, Wu said. “This will require five times the current supply of high-grade pellet feed, an equivalent to 750 million tonnes, translating into an investment of US$250-300 billion.” Three-quarters of steel production will need to switch to low-carbon technology to achieve the net zero goals by 2050, he also said.
According to Wu, a hydrogen ecosystem is also needed to produce green steel. He estimates that this will require about 50 million tons yearly of competitively priced clean hydrogen.
The study pointed out that an additional US$200-250 billion investment in Carbon Capture, Utilisation and Storage (CCUS) and similar offset measures would be needed to reach the targets.
Green premiums will also be required since the new technologies will bring up steel production costs by 15 to 20%.
“While steelmakers will have to swallow the price hikes for raw materials, carbon abatement costs will ultimately be passed onto steel end-users, meaning it is the consumer who must pay for the green premiums,” Wu explained.
According to him, while global carbon policy is needed, “global response looks unlikely.” Mature economies would spend more on CO2 mitigation tactics and decarbonize much faster, he said.
“The transition to net zero calls for collaborative action globally and a unified approach across the value chain to turn risks into opportunities,” Wu concluded.