The ‘metalmorphosis’ is underway. An insight by Wood Mackenzie
The term was coined by Malan Wu, Isha Chaudhary, and Mihir Vora, from the global research and consultancy firm Wood Mackenzie, combining ‘metal’ and ‘metamorphosis.’
Metalmorphosis encapsulates the essence of the transformation occurring in the iron and steel industry due to decarbonization. Much like the transformation of a caterpillar into a butterfly, it symbolizes the profound and dynamic change that is happening within the metal industry due to the industry's transition towards sustainability and reduced carbon emissions.
This transformative shift is reshaping the iron and steel industry, paving the way for new production, processing, and trading hubs. A comprehensive article recently released by Wood Mackenzie delves into key drivers propelling this evolution, encompassing the challenges and opportunities of decarbonizing iron and steel.
Key drivers:
• Transition to electric arc furnaces (EAFs): phasing out polluting blast furnaces for EAFs, powered by renewables, emerges as a decisive step for steel producers.
• Demand for low-carbon feedstocks: growing appetite for less carbon-intensive feedstocks, with a spotlight on green direct reduced iron (DRI).
• Rise of high-grade scrap: increased utilization of high-grade scrap through recycling, fostering a shift from quantity to quality in steel production.
EAFs as a decarbonization segue:
EAFs, fueled by low-carbon metallics, emerge as a near-term pathway to greener steel. Despite challenges, progress is evident, and global steel production from EAFs is projected to increase from the current 28% to almost 50% by 2050, according to the Wood Mackenzie forecasts.
Green DRI's ascendancy:
The rise of green DRI takes center stage in the decarbonization journey, with hydrogen-based DRI expected to comprise a substantial portion by 2050. According to the text, 'DRI's share of total metallics demand will rise from 6% currently to 13% by 2050, with production growing nearly five times faster than total metallics demand.’ The study explores potential production hubs and the role of competitive green hydrogen in this paradigm shift.
Scrap's integral role:
The growing utilization of scrap through recycling, aimed at reducing the carbon footprint, highlights the need to tackle challenges associated with impurities. The article recommends technological solutions to enhance the efficiency of the scrap supply chain and elevate quality. It also anticipates that 'mature economies with the most ambitious net-zero targets will emerge as future scrap hubs.'
CBAM and policy influence:
The Carbon Border Adjustment Mechanism (CBAM), particularly in the EU, emerges as a transformative policy driver, influencing global steel trade dynamics. The analysis projects the impact of CBAM on steel imports, production, and carbon emissions. In terms of pricing, it is anticipated that ‘the delivered price of steel in the EU’ will ‘increase by a quarter by 2034, equal to an additional US$300/tonne’.
I've distilled the key highlights here, encouraging you to delve deeper into the comprehensive insights offered in this text. The metalmorphosis is well underway, propelled by advancements in technology, strategic policy interventions, and a collective industry dedication to sustainability. This transformative journey is not only reshaping global supply chains but also redefining business models, fundamentally transforming the iron and steel industry. An exploration of these changes provides precious insights into the evolving dynamics of this sector.
