Greener steel exists

KEEPING COOL WITH

Hi there,

Today’s newsletter is a deep dive into Nucor, the #1 producer of steel in the U.S. and a global leader in producing steel with a significantly lower emissions footprint compared to international averages. In fact, Nucor is so far ahead of steel decarbonization targets and the typical competitor globally that this newsletter asks a key question: How appropriate is it to view steel as a ‘hard to abate’ sector?

DEEP DIVE

Steel. Cement. Fertilizers. Chemicals and more. 

When many of us call these foundational global industries and products to mind, we understand they are a source of a lot of greenhouse gas emissions. Steel and cement individually account for somewhere between 7%+ of carbon dioxide emissions globally, depending on whom you ask. Add the other products and industries listed above, and together, you’re looking at somewhere from a quarter to a third of all carbon dioxide emissions.

When many of us call these foundational global industries to mind, we also carry preconceived notions about them being difficult to decarbonize or “hard to abate.” There are glimmers of truth to these ideas. Whether for steel or cement, the emissions from typical production processes aren’t just a consequence of the heat and electricity required for production. Emissions are also a direct byproduct of chemical reactions inherent to the production processes. Hence, full decarbonization of these industries requires different production techniques and technologies to scale globally, which is no small feat.

Considering the scales at which products like steel and cement are produced, that level of decarbonization is difficult to imagine. Thanks in part to how much steel and concrete the world has made historically, there is now more human-made stuff on Earth than there is living biomass. Nor is the world slowing down in terms of cement and steel production; for instance, between 2011 and 2013, China used more concrete than the U.S. did in the 20th century. Hence, it’s crucial that major producers of these products do find ways to reduce their emissions intensity. The task seems simultaneously inevitable and impossible.

Green(er) steel exists

What if I told you that there is already steel sold in high volumes that is significantly lower in carbon dioxide emissions across its entire lifecycle than steel sold in high volumes elsewhere? What if I told you there’s a way to make steel with close to a two-thirds emission reduction, namely an emissions reduction more significant than the one achieved by driving an electric vehicle versus a car with an internal combustion engine?

Steel produced in typical blast furnaces yields 2,300 kilograms of CO2 per metric ton of steel. For the ‘dirtiest’ operations, the stat could range as high as 3 tonnes of CO2 per metric ton of crude steel cast. The global average is more than 1.9 tonnes of CO2 per metric tonne of crude steel cast.

Nucor, the largest steel manufacturer in the U.S. produces steel with about 770 kilograms of CO2 per metric ton (using Worldsteel parameters), a fact that Tim Hill, the General Manager of Sustainability Solutions at Nucor, recently relayed to me in an interview.

This raises an interesting question. If Nucor can already produce steel with less than a third of GHG emissions as the global BF/BOF (extractive) steelmaking, per Worldsteel, is it really fair to say that steel is “hard to abate?” Sure, there may be a ways to go to ‘complete’ net zero. But should the predominant global focus be on finding ways to refine or transition Nucor’s process so they fall from 770 kg of CO2 per ton of steel to, say, 400 or 300?

You can probably tell where my opinion leans. Learning that Nucor already produces steel today that emits less than one third of the global BF/BOF emissions, was an eye-opening moment for me, one that makes me wonder how appropriate it really is to talk about green steel as some desirable future product. Here's more detail from my discussion with Tim:

Tim: "If we compare ourselves to Worldsteel data that's published, [and] if you look at kilograms of CO2 per metric ton of steel globally for blast furnaces, it's about 2300. Okay. If you look at Nucor, we're a third of that. When do we have a conversation about how there are really good options available on the market right now? People don't understand that, right? Our customers recognize it, though. And that's before we even start to apply renewable energy."

Nick: "Yeah. And it raises an interesting question. Obviously, long term, the actual scientific net zero is the goal. But in the intervening decades, what's more important? Is it getting 770 down to 200? Or is it getting the rest of the world from 2,300 to 770? The second seems more salient, even just from a pure magnitude perspective."

Shouldn’t our first global emphasis entail taking all the learnings from Nucor’s operations and exporting those to the rest of the world? If all global steelmakers produced steel in the way Nucor does, and if all global steelmakers were held to that standard, it would yield significant global CO2 emissions reductions.

How Nucor makes green(er) steel

Here's how Nucor produces steel with a much lower emissions intensity compared to global averages, and especially compared to production data from Europe, China and India. 

1. Use as much recycled scrap as possible (steel recovered from end-of-life products that are then reintroduced as raw material for new production) to make steel in a circular vs. extractive fashion. Nucor’s steel typically includes 70%+ recycled content.

2. Use only electric arc furnaces (furnaces that melt materials with electricity rather than fossil fuel combustion)

This isn’t all that complicated. The dramatically lower emissions footprint of Nucor’s steel isn’t inherently a product of splashy, newfangled technologies and techniques; using recycled scrap in electric arc furnaces isn't super "fancy." But it's the process innovation that actually negates the carbon dioxide from chemical reactions we identified as part of the reason why many people still view steel as a hard to abate sector in the first place. In the traditional blast furnace (BF-BOF) process, CO2 is generated as a byproduct of the chemical reduction of iron ore using coke: 

• Blast Furnace - Reduction of Iron Ore: Fe2O3 + 3C→ 2 Fe + 3CO2

• Basic Oxygen Furnace - Coke Combustion: C+O2→CO2

Using electric arc furnaces meanwhile involves melting scrap metal, which bypasses the same chemical reactions. Thus, using scrap metal significantly reduces the direct process emissions. The fact that Nucor is much a recycling company as a net new production company helps a lot. By weight, Nucor recycles and processes approximately 20 million tons of ferrous scrap annually to make new steel, making it the largest recycler of any material in the Western Hemisphere.

Nucor already produces 100% of its steel in this fashion. As a result, the steel it produces isn't just greener than most steel produced globally. It's well ahead of the Paris Climate Agreement's most aggressive 2030 GHG intensity targets for the steel sector. Nucor is 20 years ahead of the Paris Agreement's 1.5°C scenario, something I doubt many, if any, other large companies with a sizable emissions footprint elsewhere can claim.

The net-net

So much has also been made about the fact that the U.S. has lost its industrial base over the past few decades and that it needs to rebuild it. This is undoubtedly true. At the same time, companies like Nucor that still make steel domestically and have pioneered significantly more sustainable production techniques have done so quietly. We don’t talk about their work enough.

Today, we were introduced to another seminal example of a decarbonization area where a U.S. company offers clear leadership. The Nucor story tells us that:

1. You can produce much ‘greener’ steel.

2. There's demand for it (Nucor’s sales were up 64% in 2023 from 2013).

3. You can still make a profit (Nucor generates $4B+ in net income annually).

Plus, to end by broadening the scope of our analysis, producing ‘greener’ steel isn’t just good for decarbonization or the American economy. It’s good for a whole host of other dynamics and stakeholders, including local communities, who have historically been exposed to terrible air quality and pollutants ranging from chromium to nickel and lead.

Thanks for reading. More on all this and more about Nucor in next week’s newsletter. 

Learn more about how Nucor is a leader in decarbonizing the steel industry here:

Thanks for reading,

— Nick