Cleveland-Cliffs, a major U.S. iron and steel maker, has announced that they will be implementing additional charges on their steel made from gas-fired hot-briquetted iron (HBI). However, what sets them apart is their plan to use hydrogen in order to make their entire operation more environmentally friendly.
HBI is a type of reduced iron that is commonly used in steel production. Traditionally, the process of producing HBI involves the use of coal to separate oxygen from iron ore, which contributes to the carbon-intensive nature of the industry. The steel industry is currently the largest emitting sector, responsible for approximately 7% of all man-made emissions. Most crude steel production relies heavily on blast furnaces that are primarily fueled by coal. Despite efforts to decarbonize steelmaking, the emissions per ton of steel have continued to increase in recent years.
According to the International Energy Agency (IEA), 70% of global steel production still relies on traditional coal-powered blast furnaces. The remaining 30% is produced through electric arc furnaces (EAFs), which emit fewer CO2 emissions compared to blast furnaces. However, the situation is different in the United States, where 70% of steel is produced using EAFs that rely on high-current electric arcs to heat metals. The North American steel industry has committed to reducing carbon emissions by increasing the use of EAFs and transitioning to cleaner power sources such as wind and solar energy.
Cleveland-Cliffs currently uses natural gas to produce hot-briquetted iron at its Ohio site, resulting in lower carbon emissions compared to the traditional coal-based process. The company has introduced a surcharge called “Cliffs H” on their clients’ invoices, which amounts to $40 per short ton of steel made with HBI. The CEO of Cleveland-Cliffs, Lourenco Goncalves, justified the surcharge by stating that their steel products deserve recognition for their unique characteristics, particularly when compared to other major suppliers in the automotive industry. Goncalves also mentioned that passing on this cost to end consumers would have minimal impact, increasing the retail price of a car by only about 0.1%.
In addition to reducing CO2 emissions by using natural gas instead of coal, Cleveland-Cliffs has also been able to lower production costs. With the current price of natural gas, the company is able to produce HBI for less than $200 per metric ton. However, reducing energy emissions alone is not enough to make steelmaking a low-carbon process. Producers must also focus on decreasing the carbon intensity of raw materials.
Electric arc furnaces, like the ones used by Cleveland-Cliffs, do not process raw iron ore. Instead, they process scrap steel, pig iron, and direct reduced iron (DRI). Among these materials, pig iron made with coal emits the most CO2, while DRI made with hydrogen has the lowest emissions. Data from S&P Global shows that greenhouse gas emissions from both iron ore and coal production sites have increased in most regions, with North America having the highest emissions.
Currently, steel made from DRI and produced in EAFs is considered the most technologically advanced method of green steel production. The use of hydrogen instead of natural gas in the production of DRI is the most carbon-neutral approach. However, according to the IEA, only a small portion of global steel production in 2021 used hydrogen-based DRI via electric arc furnaces, with the majority opting for DRI powered by either coal or natural gas. The main obstacle to using hydrogen in steelmaking is the cost, as hydrogen is approximately 10 times more expensive than natural gas. Goncalves believes that as the cost of hydrogen decreases, Cleveland-Cliffs can further decarbonize their operations.
The full adoption of hydrogen in steelmaking will depend on the economic availability of the gas itself. Currently, hydrogen production is limited, with demand in 2021 reaching only 94 million metric tons according to the IEA. However, the IEA estimates that demand for hydrogen will nearly double to 180 million metric tons by 2030. Recent developments, such as a Denver-based startup raising $91 million for natural hydrogen production and a German multinational company receiving approval for state subsidies for its hydrogen-powered DRI plant, indicate a growing interest in hydrogen as a sustainable energy source for steel production.
In conclusion, Cleveland-Cliffs’ decision to implement a surcharge on steel made from HBI and their plans to use hydrogen in their operations demonstrate their commitment to reducing carbon emissions and embracing sustainable practices. While the adoption of hydrogen in steelmaking still faces challenges, advancements in technology and increasing demand for hydrogen suggest that it may play a significant role in the future of the steel industry.
