Mr. Hansmann, how do you rate current market requirements in the steel industry in terms of decarbonization and sustainability?
Thomas Hansmann: The steel industry is about to undergo a fundamental transformation that is characterized by global factors and regional conditions, including, for example, the availability of resources and the energy costs involved. State regulations also play a crucial role, as these have a significant influence on both the pace and the direction of decarbonization efforts.
Take a look at the markets and you see clear differences. Electric steelmaking is predominant in the United States, accounting for around 70% of total steel production. The key to decarbonization lies more in the way the electricity itself is generated. What’s more, North America is seeing growing demand for direct reduced iron (DRI) facilities, as these provide the high-purity starting material, which is indispensable for producing quality steels and can also be further processed in the electric arc furnace (EAF).
In Europe, the focus is on replacing blast furnaces with DRI equipment. This is due to ambitious decarbonization targets and specific state funding programs. However, challenges such as the availability of raw materials and high energy costs are currently dampening interest in new investments. A further expansion of EAF capacities is also in sight.
India’s strategy is shaped by existing resources. Integrated steel production based on conventional blast furnaces continues to dominate, as local coal and iron ore deposits are widely available.
China is guided by political targets, such as the expansion of renewable energy, to move forward with its decarbonization goals. Industry overcapacity could act as a catalyst for decarbonization, as outdated facilities are increasingly being taken out of service. At the same time, China is investing in direct reduction plants and conducting research into solutions for the gradual decarbonization of conventional blast furnaces.
Japan, South Korea, and other Asian countries are also pursuing long-term decarbonization strategies. These countries are banking heavily on hydrogen as their main energy source in the future, in order to reduce dependence on imported coal. They are investing in innovative technologies and developing strategic partnerships to achieve their ambitious objectives.
How do you see the existing plant and equipment stock changing in view of these market requirements?
Thomas Hansmann: The global steel production landscape is facing radical change. It is expected that worldwide steel production will increase to around 2.3 billion tons per year by 2050. As a result, there is a growing need to expand sustainable production capacities. Right now, around 70% of steel is produced using blast furnaces. By 2050, we expect this figure to fall to around 30%. This means that around half of today’s 1.35 billion tons per year made by the conventional blast furnace route needs to be decarbonized.
At the same time, the share of direct reduction processes is set to increase considerably. At present, the DRI process accounts for only six percent of annual steel production. By 2050, we expect this to grow to around 25%, corresponding to around 500 million tons. The proportion of scrap-based steel production will also rise substantially. Today, scrap makes up approximately 20% of global steel production, but by 2050 this is set to rise to almost 40%.
Which factors will determine the worldwide introduction of different steel production routes?
Thomas Hansmann: The introduction of sustainable steel production processes is influenced, to a decisive degree, by the availability of raw materials and energy sources as well as by national politics. The conventional blast furnace process is based on iron ore and coal, which are available in large quantities around the world. This secures the dominance of this process, especially in countries such as India and China, which have considerable domestic resources and an established infrastructure.
The transition in Europe to sustainable scrap-based steel production using electric steelmaking requires sufficient quantities of high-grade steel scrap and green electricity. Alternatives such as hot briquetted iron (HBI) could supplement scrap, but their production would also have to be sustainable, which in turn requires scarce resources such as green hydrogen and green electricity.
Up to now, direct reduction processes have mainly used natural gas, which has limited their application to regions that are rich in natural gas, including the Middle East, North Africa, and Central America. In Europe, high natural gas prices are hampering the expansion of DRI plants and, in the past, have resulted in the ongoing use of integrated steel production routes. In particular, green hydrogen and green electricity are essential if the direct reduction process is to be introduced successfully in Europe. This will apply especially to countries with favorable conditions for renewable energies, such as Scandinavia, Spain, and Portugal. The European Union stipulates that 90% of the energy used for green hydrogen production comes from renewable sources, which poses significant challenges in countries like Germany and other Central European nations.
Another key factor is the availability of high-grade iron ore. The global trade in iron ore pellets suitable for DRI currently stands at only around 10 million tons per year, which is by no means sufficient to replace blast furnaces on a large scale. Raw materials account for around 60% of the costs of producing every ton of steel using the DRI process, which underlines the importance of a sustainable supply of raw materials and energy-efficient solutions.
How do current projects for sustainable steel production in Europe fit with the limited availability of raw materials and green energy?
Thomas Hansmann: The initial wave of investment in DRI facilities was often guided by the classical minimill model, with the integration of direct reduction and electric steelmaking plants to replace blast furnaces. These projects had significant backing in the form of substantial state support, particularly in Germany. Nevertheless, important questions regarding the availability of raw materials and energy costs still need to be answered. In addition, DRI plants have so far not been operated entirely with hydrogen. The first projects in Sweden and Germany are pursuing this goal, but they must also meet the challenge of scarce resources, including high-quality iron ore and green electricity. One of the consequences of this is a noticeable slowdown in European investment in DRI plants. Steel producers are closely following the results of ongoing projects, in particular the transition to hydrogen-based processes. The financial market is also hesitant, as investors evaluate the performance and outcomes of current projects. Open bath furnaces (OBF) and submerged arc furnaces can help provide a solution here, as these, unlike EAFs, can process larger slag volumes. This allows the use of conventional blast furnace ores, thus reducing operating costs and enabling downstream facilities, such as the converter shop, to be retained.
How is SMS group prepared to handle such a wide range of different scenarios?
Thomas Hansmann: SMS group has a comprehensive technological portfolio covering all areas of sustainable steel production. We are setting standards in blast furnace engineering with our range of Paul Wurth technologies. An excellent example is the Paul Wurth EASyMelt, which is currently being implemented in cooperation with Tata Steel in Jamshedpur in India as part of a pilot project. With the Paul Wurth EASyMelt, existing blast furnaces can be gradually decarbonized in a step-by-step process. Syngas is injected as a reduction gas into the blast furnace shaft to facilitate the direct reduction of iron ore. Syngas is also injected at the tuyere level, allowing hydrogen to be introduced that reduces the iron ore at high temperatures. Tuyere-level plasma torches heat the syngas up to 2,200 °C and electrify the process.
In the field of melting technology, we maintain a leading market position, particularly with OBFs. These are based on submerged arc furnace technology, installed in a large number of references thanks to our Metix brand. The focus is on the reduction of low-grade iron ores in combination with the melting process, in order to produce crude iron that can be used in downstream steelmaking processes, such as blast furnace iron.
We have also made great progress with regard to electric arc furnace technology. To safeguard and expand our market position, we are continuously innovating: AllCharge is an electric arc furnace that is constantly charged without the need for preheating. It features flat-bath operation, made possible by side wall charging, which helps to cut nitrogen oxide emissions and relieves the load on the power grid. This is complemented by our X-Pact® AURA technology. It was designed to ensure efficient and stable power control for DC EAFs in all network configurations, including weak networks. In the field of digitalization, too, we are setting industry standards with innovative process and energy management solutions.
Going forward, hydrogen will play an important role with EAFs. We have developed the first burner technology for the application of hydrogen in the EAF melting process. Supported by a European Union research fund, we aim to revolutionize steel production by integrating hydrogen as the main fuel source in EAFs. Our innovative multi-fuel burner is capable of switching from natural gas to full hydrogen use. The initial tests are yielding promising results.
Will that be enough to fully decarbonize the metals industry?
Thomas Hansmann: Decarbonizing the metals industry is a decades-long project that will require considerable investment. The installed base is too large to transform it in one go, and global demand cannot be met solely by scrap and hydrogen-based production routes.
CCUS (carbon capture, utilization, and storage) technologies will be crucial to reaching global climate targets. The market for CCUS is huge, but many existing approaches focus on end-of-pipe solutions that capture emissions at the end of the production cycle. We integrate CCUS directly into our processes. Here, too, our Paul Wurth EASyMelt is an outstanding example. Our carbon separation solution enables us to replace conventional syngas reforming with natural gas, which means that no natural gas is required during the process. This increases efficiency and reduces emissions by around 70%.
How do the processes downstream of iron and steel production contribute to CO2 emissions, and what technologies does SMS group offer to decarbonize these processes?
Thomas Hansmann: Our strategy for decarbonizing downstream process stages is based on four pillars: energy recovery, electrification, fuel switch, and digitalization. The CSP® Nexus casting and rolling technology, for example, brings together all these areas of action. The integrated casting and rolling process does away with energy-intensive slab reheating. Furthermore, the process-related disconnection of the roughing stand and the finishing mill means that the various process stages can be optimized without having to consider the process as a whole. By using induction furnaces, we are replacing natural-gas operated systems, such as the tunnel furnace, with electrical technologies.
Generally, automation and digitalization have a major influence on the efficiency and sustainability of downstream process stages. Our aim is to enable the autonomous operation of our plants and equipment through self-optimizing processes. Human interventions are thus kept to a minimum. By integrating data from all automation and digital systems, comprehensive insights are gained into the condition of the plants, quality management, production planning, and energy consumption. Predictive solutions enable contradictory KPIs to be harmonized and the value chain as a whole to be optimized.
Our solutions open up significant opportunities for modernizing existing infrastructures and developing innovative service solutions. At the same time, they strengthen partnerships with our customers, as they support their sustainability goals in a far-reaching, efficient way.
