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Does carbon capture from steel make sense?

Steel production, alongside cement, are considered the two most significant "hard-to-abate" industries. Both industries require very high temperature processing, which is technically challenging to electrify, and both create CO2 as a chemical side-product of manufacture. This set of CO2 emissions is independent from its power source - steel requires coke for reduction of iron ore, while cement releases CO2 from the conversion of calcium carbonate to calcium oxide - and thus electrification alone is insufficient for abatement. The steel and cement industries combined emit between 12-15% of global greenhouse gases due to the large quantities of material consumed. In a world where the power grid is electrifying, steel and cement may become the most significant remaining focal points for carbon capture.

At present, there is only one operating CCUS plant in the steel sector and no commercialized carbon capture and storage (CCS) plant in the cement industry.

The steel industry has three main production processes, the first of which is the integrated blast furnace and basic oxygen furnace process (BF-BOF), the most traditional method that uses coke as a reducing agent, and therefore has a large CO2 footprint.

More modern processes use direct-reduced iron, which apply reducing gases including carbon monoxide and hydrogen that are sourced from coal or natural gas. In principle, a DRI system can run entirely on green hydrogen, eliminating the need for fossil fuel sources entirely, and such systems are being scaled today. However, it is unlikely that any significant new production of steel using direct hydrogen reduction will come to market before 2030.

Finally, an increasing amount of steel in the US and Europe is produced by recycling scrap steel using an electro-arc furnace. This process inherently has 80% lower emissions than virgin steel production, and its carbon footprint can drop to zero if the furnace is supplied by renewable energy..

Any thought towards investment in carbon capture for traditional steelmaking needs to consider DRI and recycling as potential competition. However, the prospects for new steel infrastructure in the US is not high, as sufficient steel is available from recycling to meet many needs, at a far lower economic cost and carbon footprint. Abatement of the plants that exist today seems to offer a compelling economic payback, and these conventional plants are likely to continue to operate over the long haul.

To understand the cost of capture for steelmaking, we can turn to the Abu Dhabi CCUS plant, the world's only commercial-scale CCUS facility capturing CO2 from steel production. The project, the first phase of which cost US$122 million for abatement of just less than 1 MT/yr CO2,, aimed to reduce the United Arab Emirates' carbon footprint and implement enhanced oil recovery (EOR) in subsurface oil reservoirs. Operational cost numbers for the plant are not available, but Phase 2 of the plant is currently on schedule to open in 2025 with an additional CO2 capture capacity of about 2 MT/yr. The long term vision for the plant is to capture 5 MT/yr by 2030. Based on the capex costs alone, it appears that this system could be implemented profitably in the US under the tax credit system of the IRA.

The bottom line is carbon capture for steel seems economically viable. The total impact will depend on long term forecasts for steel production, which is trending slightly down YoY as the manufacturing infrastructure continues to age. The macro environment may be as important as tax credits in determining the speed of adoption of carbon capture in this industry.

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