Scotland-based energy research and consultancy company Wood Mackenzie has stated in its latest report that the steel industry’s decarbonization will redefine supply chains by 2050 with the right levels of investment and policy support.
The report said that electric arc furnace technology, increased use of green feedstock, and evolving carbon policies will play a crucial role in this transformation. Low-carbon intensive electric arc furnace-based production, which accounts for 28 percent of global steel output, is projected to rise to 50 percent by 2050. An investment of $130 billion will be required to achieve this goal.
The shift towards less carbon-intensive steel will drive the demand for greener feedstocks such as direct reduced iron (DRI) and high-grade scrap. Wood Mackenzie predicts that the share of these feedstocks in total metals demand will increase from 36 percent to 54 percent by 2050, leading to new production, processing, and trading hubs for low-carbon iron and scrap.
Saying that the rise in DRI production and trade will create investment and revenue generation opportunities across the value chain, Wood Mackenzie has forecast a doubling of DRI capacity within 30 years, requiring an estimated $80 billion investment.
The energy research and consultancy company indicated that the Middle East and Australia are well-positioned to be new green DRI centers due to their increased number of low-carbon hydrogen production projects.
According to the report, quality will take precedence over quantity as the cost of lower-carbon steel rises. In markets with high carbon prices, importing green DRI to manufacture low-carbon steel using electric arc furnaces will become more favorable than importing finished steel from emissions-intensive producers like China and India.