Eurofer Low Carbon Steel Roadmap 2050

A Steel Roadmap for a Low Carbon Europe 2050

Dr.-Ing. Jean Theo Ghenda

Steel Institute VDEh

IEA Global Industry Dialogue and Expert Review Workshop

Paris, 7 October 2013

Agenda

2

1. Objectives and Phases of the project

2. Steel’s Contribution to a Low Carbon Europe 2050

2.1. Steel industry overview and technology development

2.2. Baselining

2.3. Technology assessment

2.4. Steel and Scrap forecast

2.5. Steels’own impact – Abatement scenarios for 2050

2.6. Steel as mitigation enabler

3. Steel Roadmap for a Low Carbon Europe 2050

3.1. CO2 intensity pathways up to 2050

3.2. Challenges for an adequate set of climate policies for steel

3.3. Policy recommendations


3

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

Objectives of the project


4

First phase: technical-economical assessment contracted to the Boston Consulting Group in collaboration with the Steel Institute VDEh: ‘Steel’s Contribution to a Low Carbon Europe 2050’

Second phase: ‘EUROFER Steel roadmap’ built on BCG/VDEh’s findings but scope broadened to

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

main challenges of the various options

competitiveness issues

policy recommendations

Project Phases

Agenda

5




2.2. Baselining







3.2. Challenges for an adequate set of climate policies for steel


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’s Contribution to a Low Carbon Europe 2050

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 or natural 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

Baselining: 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

EU27’s specific CO2 intensity decreased by 15%;EU27’s absolute CO2 emissions dropped by 25%; Drivers: mainly Volume changes, Shift from BF-BOF to EAF route, efficiency gains, improved CO2 emission of electric generation (minor effect)

Steel intensity (SI) curves used to forecast finished steel consumption (FSC) 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 historical data

Steel Intensity

curve

Assess future industry

development

Sources: World Steel Association; EIU; BCG analysis.

Use of SI curves accounting for industrial structure of individual countries

SI curves calculated for each country by using historical data for FSC in relation to GDP per Capita and population

FSC forecasts calculated based on population and GDP forecasts by EIU

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

EU27

20402020 2030

1.5

0.5

1.0

20102000 2050

Methodology to compute crude steel production from finished steel consumption

205020402010 203020202000

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

Use Crude steel Production and Finished Steel Production are calculated from Finished Steel Consumption using Self-sufficiency rate and Conversion Rate

Assumptions: 1) EU27 Self-sufficiency by 2030 (FSC=FSP);

2) EU27 Conversion Rate rises to 95% in 2030 and remain constant until 2050

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

<

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


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

Finished steel cons.per sector

Scrap rate(%)

×

Finished steel cons.

per sector

Recycling rate (%)× ÷

CO2 emission projections

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

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• Optimization of Pellet

ratio to Blast Furnace • 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

• Heat recovery• Optimization

• Top gas recovery (TGR)

Technology review

CO2 emission projections

Likely outcomes analyzed using 2-step logic:

1. Determination of economic feasibility under different price scenarios.

2. Gradual implementation of the economically feasible technologies on the basis of varying adaptation curves for different scenarios

Economic feasibility was computed by comparing costs (CAPEX et OPEX) with the potential savings over considered investment period, depending on different price scenarios

The price scenarios included a reference-price scenario (inflation only), medium-price scenario (doubling of real input factor costs) and high- price scenario (fivefold increase of input factor costs)

Economic feasibility assessment of the technologies

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

Comparison of the Operating Expenses (OPEX) of Alternative Steelmaking Technologies

OPEX2010

(€ / t CS)

Sources: Steel Institute VDEh; project team analysis.Note: CS = crude steel1. Based on Midrex direct reduction technology. 2. Based on Finex smelting reduction technology

48912%440

88%

13%572

87%

18%

82%

24%

76%

429

+33% +3% +14%

Scrap-EAFBF-BOF Smelting reductionDRI-EAF

Other OPEXOPEX - input factor costs

Source: BCG/VDEh

OPEX

Costs are normalized to BF-BOF = 100

DRI-EAF

133

BF-BOF

100

Smelting reduction 2

103

Scrap-EAF

1142010

Comparison of Capital Expenditures (CAPEX) for Alternative steelmaking technologiesSource: BCG/VDEh

CAPEX2010

(€ / t CS)

1. BOF: 50% of Greenfield investment 2. BF: 50% of Greenfield investment 3. Sinter: 30% of Greenfield investment 4. Coke: 15% of Greenfield investment Note: CS = crude steelSources: Steel Institue VDEh; Project team analysis

+143% +131%+8%

149641

742265

114

441

51153

393128

128

230

184184

414

171

174

BOF Sinter plantBFCorex/FinexDRI Coke plantEAF

BF-BOFretrofit

Smelting reductionDRI-EAFScrap-EAF BF-BOF

greenfield

2010

CAPEX BF-BOFretrofit

Smelting reduction

100

DRI-EAF

231 242

Scrap-EAF

108

BF-BOFgreenfield

259

Cost are normalized BF-BOF retrofit = 100

-9%


[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 CCS

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

Lower theoretical boundary with CCS

• 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

Economically viable

Not economically viable

264

213

239

249

A

B

C

D-56%

-38%

Specific CO2 intensity

[kg CO2 / t crude steel]

Absolute CO2 emissions in 2050 only 56% lower than 1990’s if CCS fully implemented in 2050

Abatement cost of moving from existing BF-BOF to DRI-EAF: 260 to 700€/tCO2

~130

305

271

184

258

Abatement potential up to 2050

20

Commission Roadmap for a Competitive Low Carbon Economy 2050 (table 9, source: PRIMES, GAINS)

Abatement potential compared to 2010 (intensity)

Reference year 2010 (specific emissions) 2030 2050Economic scenario -9% -15%Maximum theoretical abatement without CCS -19% -40%Maximum theoretical abatement with CCS -9% -57%

Reference year 2005 (absolute emissions) 2030 2050Overall -35% to -40% -77% to -81%

ETS -43% to -48% -88% to -92%non-ETS -24% to -36% -66% to -71%

Steel as a mitigation enabler

• Inland water transport

• CCS

<

Initial list• Weight reduction-cars

• Onshore/offsho re 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.

Innovative steel-based emission-saving applications may help reduce CO2 emissions

Only saving that are 100% attributable to steel are taken into account

Stringent 4-step logic applied to isolate the case studies for evaluating steel’s own mitigation potential

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 the steel production Emissions in the steel production

Net CO2 reduction potential2

Net CO2 reduction potential2

Ratio between CO2 reduction / emission Ratio between CO2

reduction / emission

Energyindustry

Agenda

23




2.2. Baselining







3.2. An adequate set of climate policies for steel


Steel Roadmap for a Low Carbon Europe

24

Base on findings of the BCG/VDEh study

Broader scope:

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

deeper look into CCS

main challenges of the various options

competitiveness issues

policy recommendations (role of the ETS)

Steel Low C Roadmap published in July 2013 but the work doesn’t stop there.

25

CO2 intensity pathways up to 2050

What?

26


How?

27

Conditions for success


economic CO2 reduction potential

maximum theoretical abatement without CCS: -40%

maximum theoretical abatement with CCS: -57%

hypothetic breakthrough technologies in combination with CCS

• continued decarbonisation of the power sector

• increased scrap availability• best practice sharing• implementation of cost-effective

incremental technologies

• access to scrap and energy at competitive prices

• incentives through e.g. sectoral energy efficiency programmes

• full offset of distortive CO2 costs until level- playing field is restored

partial shift from BF-BOF to DRI- EAF

BF-TGR, ULCORED/HIsarnaCCS on all emission sourceselectricification of heatinghydrogen-based reductionelectrolysis,…

use of BF-TGR technology in combination with CCS

support for R&D, demonstration and deployment of breakthrough technologies

support for demonstration and deployment of BF-TGR, access to CCS widespread at competitive prices

NG and electricity prices such that natural gas-based DRI becomes competitive in Europe

What? Conditions for successHow?

+

+

+

An adequate set of climate policies for steel

29

The CO2 reduction potential in the EU steel industry estimated to be about 10% between 2010 and 2030 (specific emissions).

Steel will not be able to come anywhere near the interim reduction objectives suggested in the Commission Low Carbon Roadmap of 43-48% for the ETS sector between 2005 and 2030.

Going beyond the 10% mark would require having recourse to yet unproven technologies, as well from a technical point of view as in terms of cost- effectiveness.

These technologies need further research and funding for pilot and demonstration tests.

Their implementation will be costly, not only because of the investments involved but also because of the higher operating costs stemming a.o. from the use of CCS and the problems stemming from it.

In a long-term perspective, the EU ETS carbon price signal alone will not to put steelmaking breakthrough technologies on-stream.

Breakthrough technologies can only be put on-stream via adequate funding in R&D, pilot, demonstration and deployment.

What’s wrong with the projected policy framework

An adequate set of climate policies for steel

30

The 2030 Climate and Energy Framework has therefore to acknowledge that steel cannot move at the same pace than other sectors. Leading principles for the 2030 policy framework:

Policies have to make industry more competitive by securing globally competitive energy prices (NG, electricity) instead of increasing (carbon) costs.

Emission reduction pathways for the steel industry have to be built ‘bottom-up’, based on the technical and economic abatement potentials of the sectors (sectoral approaches).

Climate goals should be dependent upon comparable reduction effort by other major economies.

In the context of cap and trade, best performers need 100% of their allowances for free (no correction factor should apply) and their indirect CO2 costs must be fully and consistently offset through a truly effective EU mechanism (based on realistic benchmarks) at least until international distortions to competition are removed.

The continuation and generalization of exemptions from energy taxation, levies and tariffs stemming from support for renewables and other climate-related initiatives (CCS).

Funding in research, demonstration and deployment of potential new technologies is therefore key to success. In this regard, ambitious climate objectives require public funding commitment that is consistent with the level of effort envisaged.

Policy recommendations

Thank you

31

Eurofer Low Carbon Steel Roadmap 2050

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