Written evidence submitted by UK FIRES

Professor Julian Allwood, Dr Jonathan Cullen, Dr André Serrenho, Dr Pippa Horton and Dr Sandy Skelton, at the University of Cambridge, on behalf of the UKRI funded UK FIRES Research Programme, March 2022.

Key Message

The biggest opportunity for short- and medium-term delivery of green steel is recycling powered by renewables. At present the UK exports 80% of its scrap steel, while importing iron ore and coal for new steel production. But we already have the steel we need in the UK, if instead we could recycle scrap domestically. This would supply sufficient steel for our needs; cut emissions towards zero; develop skills and create innovative upcycling technologies that we can export; secure jobs in the UK steel industry; and reduce our resource dependency on imports.

Framing

• In the short term, steel recycling offers a scalable technology that is immediately compatible with zero emissions, while blast furnace steel makers have no immediate options.
• To date, Parliament and BEIS has sought to consult with the Steel Industry as if it has one voice, represented by UK Steel. However, this single representation is creating confusion, because the two forms of steel making face opposite futures: electric recycling can and must grow while blast furnace production must be phased out to meet the legally binding requirements of the Climate Change Act. The powerful lobby of the high-emitting blast furnace operators, dominates the messages of UK Steel and is therefore distorting messages to government.
• The power of this lobby is reflected in the fact that blast furnace operators (high-emitting steel producers) negotiated exemption from the Emissions Trading Scheme, where steel recyclers (low-emitting producers) pay ETS charges on their electricity supplies.
• There is an opportunity to address this imbalance as the UK ETS is adjusted to align with Net Zero this year.
• The fundamental lobbying position of the primary blast furnace operators, that “blast furnace steel is high quality” while “recycled steel is poor quality” is false.
• Parliament should seek complete clarity about the roles of these two different lobbies in any information received under this call.
• Separately, we are recommending that the steel recyclers should leave UK Steel and create their own independent representation.

Options to make steel from iron ore with zero emissions.

There are no commercially ready, scalable options for making steel from iron ore without emissions. The three approaches which have been the focus of lobbying by blast furnace operators are:

• CCS (Carbon Capture and Storage): One plant in Abu Dhabi makes a small amount of steel in a dedicated newly constructed plant, from which carbon dioxide is separated and used to increase oil production. Carbon Capture and Storage cannot be retrofitted to existing blast furnaces, would be extremely expensive, the UK currently has no storage in operation despite 20 years of talking about it, and public attitudes to carbon storage are entirely untested. It is a technology for research and development, and with total global capacity less than 0.1% of global emissions, almost all of which is used for enhanced oil recovery, it is not yet ready for widespread deployment. Industry is recognising the complexity, cost and risk associated with CCS steel production and recent trends suggest they are moving away from lobbying based on this production route. It should therefore not be a priority for the UK. There are currently no global investment announcements of full-scale CCS steel production (global green steel tracker). One new pilot CCS project has a planned start date before 2050. This is the ArcelorMittal DMX Demonstration plant in Dunkirk which has received £20million in funding and plans to be operational with storage capability by 2035.

• Hydrogen. Steel can be made with no/low emissions using hydrogen as a reductant. However, this requires a supply of hydrogen produced with no emissions, and the UK currently has none. Emissions-free hydrogen could in future be made using conventional steam reforming linked to CCS, but see above for absence of any CCS in the UK. Emissions-free hydrogen can also be made by electrolysis, but this requires a very large surplus of emissions-free electricity. The UK has no such surplus and it’s unlikely to have it in the coming decades, as the demand for electricity is growing much more rapidly than supply (due to commitments to decarbonising the grid while electrifying non-electric end-uses like cars and space heating.) The Net Zero Strategy sets out the ambition to install 5GW of hydrogen capacity in the UK by 2030, enough to deliver 42TWh energy. Hard to decarbonise sectors – including aviation, shipping and high-grade heat in industry – currently account for 200TWh. If the current 2030 hydrogen ambition is delivered on time and target it would meet a fifth of demand from these hard to decarbonise sectors in a third of the time from now until 2050. Whether the stated ambition is achievable is questionable given the lack of funding. The Net Zero Strategy commits £100m in 2023 to award contracts for 0.25GW hydrogen capacity i.e. 5% of the total 5GW 2030 ambition. If this were an annual commitment (which it is not) it would take 20 years (i.e. until 2043) to deliver 5GW hydrogen capacity which would be enough to meet even a fifth of demand from the key sectors that are vying for this resource in their net zero plans. A pilot plant for steel production with hydrogen, HYBRIT, is being constructed by Vattenfall in Sweden. Early in their development cycle they produced figure 1 below which demonstrates that making steel with hydrogen from electrolysis takes seven times more emissions-free electricity than recycling steel. 62% of current investment commitments are for steel production via the hydrogen route (28 plants), however the impact on energy demand is becoming apparent, the European Parliamentary Research Service recognises that total European energy demand would increase by 20% through the requirement for hydrogen steel alone.

Figure 1: Electricity requirements for DRI Steel production with hydrogen electrolysis

• The ULCOS programme in the EU, which ran for a decade from around 2000, explored many options for making steel from iron ore with less emissions, rather than zero. Among these, the small scale Hisarna experimental facility in Ijmuiden has received most attention. It has better efficiency than conventional blast furnaces, but still has high emissions. There are no other large scale developments arising from the UCLOS programme.

Occasionally, researchers point to charcoal as a substitute for coal in producing steel from iron ore, but this will not scale due to constraints on biomass supply.

Regardless of whether any of these technologies is scaled, none of them can be retrofitted onto existing blast furnaces. As a result, the UK’s existing law requires that all existing blast furnaces will be illegal by 2050, 78% of 1990 capacity must close by 2035, and the target for zero emissions steel in 2035, requires that all of them are shut by 2035. It is likely that the plants will all reach the end of their viable life before then, so the critical question for government is about what, if any, investment support is offered for to support new plant investments. We recommend that this support is entirely focused on electric arc furnace recycling linked to innovation in composition control in recycling. 

Zero-emissions resource constraints

In separate analysis, UK FIRES has demonstrated that all technological options for mitigating climate change depend on three fundamental zero emissions resources: zero-emissions electricity, carbon storage and biomass. The supplies of these resources are already constrained (effectively zero for storage, and already over-stretched for biomass). Future growth rates are limited not only by the complexity of the construction projections required to deliver them, but also by the requirements for consultation on public finance, land rights, societal acceptance, safety, legal and environmental compliance, access and more. Hinckley Point C will have taken 22 years from political commitment to commissioning, it if is ready on time in 2026. The Hornsey 2 Wind Farm will have taken 16 years. It is therefore unlikely that supplies of zero emissions free electricity will grow significantly faster than the linear rate at which they have expanded, both in the UK and globally, in the past decade.

Figure 2 below illustrates the consequences of this constraint on the future of global steel production. At current rates of capacity growth in zero-emissions electricity generation, and assuming “fair shares” of access to new generation across all forms of demand, the global steel industry will be able to use an additional ~500 TWh of zero emissions electricity in 2050. The figure demonstrates the trade-off between using this electricity for DRI-Hydrogen-Electrolysis or for electric steel recycling – the recycling route allows much more volume.

Figure 2: Trade-offs in global steel production subject to electricity supply constraints

Figure 2 also indicates a total limit on recycling due to scrap availability.

Localising the global analysis to the UK, steel recycling in the UK is currently (2018 data) around 1.6Mt/year, but we collect around 11Mt/year of scrap steel. Based on UK FIRES analysis, current growth rates of emissions-free electricity generation will deliver about 60% of the energy required in 2050 if we electrify all current activities (including steel making). Therefore, we can anticipate that in 2050 the UK will have sufficient power for recycling around 7Mt/yr of scrap steel. However, if instead we used the same total power for making new steel with hydrogen electrolysis and DRI production (as in figure 1), the total production would be just 1Mt/yr. We currently use about 15Mt/yr of new steel in new construction and products. However, the strategies of Material Efficiency, would allow all existing final service to be delivered with a reduced supply of 7Mt/yr.

High quality steel by recycling without emissions

Most steel recycling today produces lower grade products, in particular reinforcing bars for concrete construction. This is mainly a product of path dependency and is not a physical necessity. For example, Liberty Steel in Rotherham makes the highest quality aerospace steel from recycled scrap and Nucor in the USA, where 70% of steel production is by recycling, produce high quality products across all steel grades by recycling.

The fundamental problem of maintaining quality in steel recycling is to control contamination by copper and tin, which enter the steel waste stream via electric motors and wiring (in cars, and domestic appliances which are shredded without disassembly) or via food packaging. These contaminants lead to the problem of “hot shortness” – surface cracks in cast steel, which can grow during downstream rolling and forming operations.

Tin, in the scrap steel supply chain, is generally well controlled, because it is limited to food containers. However, copper contamination is currently a problem. Six innovation opportunities to respond to this contamination have been identified by UK FIRES, all of which could become profitable entrepreneurial business opportunities in the UK

• Increased disassembly, facilitated by design and process innovations
• Better shredding – for example shredding to smaller particles allowing improved separation
• Improved sorting post-shredding, for example with automated composition detection.
• New processes for copper removal in the melt, to improve on the high cost and low speed of the vacuum arc remelting processes used by Liberty in Rotherham
• Copper-tolerant casting, including the new belt-casting processes explored by Arcelor Mittal
• Reducing the copper content of steel intensive goods, for example by using aluminium windings in electric motors, as promoted by the UK’s Advanced Electric Machines Ltd.

Steel recycling, even with zero-emissions electricity, continues to cause emissions from two sources, both of which create further opportunities for UK innovation and growth:

• Lime flux used to purify the melt and create a slag that protects liquid steel from the air, is currently made from limestone, by calcination which leads to process emissions. Other forms of flux are possible, for example, when combined with cement paste recycling as patented by UK FIRES, and to be explored in a new UKRI-funded research programme announced in early March 2022.
• Gas flames are used to pre-heat equipment prior to steel making and could be replaced by innovative electric-plasma torches.

Global steel market and the problem of investment

The global steel market is saturated, with more blast furnace capacity that required, yet the Indian Government is committed to building up to 300Mt/year of additional blast furnace capacity. As a result, European Blast Furnace operators are currently in a fight to the death, with very tight margins if any. This greatly limits their ability to invest in their own facilities, and the resulting low steel prices for both primary and recycled steel are a disincentive to innovation and new capacity development in steel recycling.

UK Government action in steel production should therefore be focused on supporting a rapid transition from blast-furnace steel production from iron ore to electric production from scrap.

The options for government support include:

• Re-balancing carbon charges in the UK’s ETS replacement, to remove distorting free allowances from blast furnace operations

• Removing remaining hidden subsidies to Blast furnace operators
• Use crises to leverage change, rather than subsidise the status quo. In response to the 2016 Port Talbot crisis and that in 2019 at Scunthorpe, the government subsidised the existing operation until prices rose/a foreign buyer appeared, spending taxpayers money with no strategic gain. Instead, these crises – which will inevitably recur – are an opportunity for strategy redirection, exactly as has happened in France and Austria when bailouts to state airlines have been linked to commitments to phase out domestic flights in favour of trains, to reduce emissions.
• Innovation support related to reducing the costs of high-quality upcycling in electric arc furnaces could lead to future UK high value exports.
• Investment support for new steel recycling capacity could be provided through various mechanisms ranging from a form of the Green Investment Bank up to temporary Nationalisation, which was the mechanism used to fund the last major upgrade at Port Talbot in the early 1970’s.

Supporting Information

• “Steel Arising” an analysis of the opportunity for growing steel recycling in the UK.
• ZERPAs – a proposal for a new financial instrument to support asset valuations in the light of shortages of zero-emissions electricity, carbon storage and biomass.
• Recent papers from our research group, on Copper Contamination and options to deal with it.
• List of Steel investment declarations from the (global green steel tracker)

March 2022