As the UK progresses towards its net-zero commitments, the steel industry, which is the biggest industrial greenhouse gas contributor – accounting for 26% of the sector’s emissions will have to evolve . As it stands, the industry is entrenched with the use of coking coal, with some players in the sector arguing that its use will be required for the viability of the industry. However, this analysis will demonstrate how the UK will be able to host a high-quality steel industry in the future without requiring coking coal, while highlighting that the increasing share of renewables in electricity, carbon price, and policy support will play a determining role in enabling this transition.
Scrap-based Electric Arc Furnace
Currently, around 79.8% of UK steel is produced using the traditional integrated Blast Furnace – Basic Oxygen Furnace (BF-BOF) method . This method utilizes coking coal to produce coke, which serves as the energy source and reducing agent to convert iron ore into pig iron for steel production.
Direct Reduced Iron (DRI) is a viable alternative process to BF-BOF and has currently been implemented in 28 countries . This method abates requiring coking coal as it uses reducing gases to convert iron ore into sponge iron for steel production instead. However, most DRI still uses fossil fuel-derived feedstock like natural gas or grey hydrogen sourced from steam methane reformation –.
Therefore, to decarbonize UK’s steel industry and reduce its reliance on coking coal, scrap-based Electric Arc Furnace (scarp-EAF) process, which is around three times more energy efficient than producing steel from iron ore , will likely be required to replace the role of integrated BF-BOF. In this process, ferrous scraps are recycled by melting them in an arc furnace using progressively cleaner electricity to produce secondary steel. This secondary method abates the requirement of mining new iron ore and using unsustainable coking coal, thereby reducing the carbon intensity of the steel making process.
However, despite the high steel recycling rate of 85% in the UK , scrap-EAF only accounts for 21.2% of UK steel production . In fact, only 1.7 million tonnes of the UK’s domestic ferrous scrap is used to produce steel via this process, thereby leaving the UK to net export 8.3 million tonnes of ferrous scrap annually . This means that the UK has a good growth opportunity for this form of coking coal-free production as it is well endowed with scrap resources. Assuming the current UK ferrous scrap-to-steel conversion rate of 94.1% remains constant , a calculation demonstrated in figure 1 concludes that the UK has potential to produce 10.4 million tonnes of steel if it fully utilizes its domestic scrap for EAF steel making process instead of using them to supplement its BF-BOF production or exporting them. This dwarfs current UK annual steel production of 7.3 million tonnes , showing that this scrap-based solutions can maintain the production volume of the UK’s steel industry without needing coking coal.
Economic Benefits and Commercial Viabilityv
Additionally, figure 1 also shows that wider adoption of the scrap-EAF steel making process could increase UK’s steel self-sufficiency, reducing its steel import dependency from 32.4% to 3.7%, which would significantly reduce its current annual steel related trade deficit of around £1.5 billion . These savings can then be used to supplement the industries’ transition towards scrap-EAF and to expand scrap collection coverage. Although critics have argued that the capacity of scrap-EAF steel making is contingent to the availability of ferrous scrap, Griffin and Hammond’s analysis has shown that the availability of scrap for UK steel making is expected to increase significantly over the next 30 years due to increasing European infrastructure turnover . As such, the increasing availability of scrap and its recycling would enable the UK to approximately produce enough domestic steel to meet its growing demand which is projected to plateau at 11 million tonnes by 2030 .
Critics have argued that producing high-quality steel via the scrap-EAF route can be more expensive than using the conventional BF-BOF method  – which can diminish the UK’s steel competitiveness in the international market. These increased costs can mainly be attributed to requiring additional expenditure to sort scrap and avoid copper contaminants that reduce the quality of the steel produced . Nonetheless, Daehn et al., suggests that if the current recycled quantity continue to increase due to increased steel retirement rates, in conjunction with increasing
scrap-EAF domestic production, then economies of scale can be achieved . This would enable notable reductions in per-unit sorting costs, thereby increasing UK’s cost competitiveness in producing high quality steel without coking coal .
On average, EAF has an electricity consumption rate of 400 kWh/tonnesteel . Hence, to support a UK steel industry with an annual production of 11 million tonnes via the scrap-EAF route, around 4.4 TWh/year of electricity is required. This energy requirement amounts to only 3.69% of UK’s renewable electricity generation in 2019 . As such, the increasing capacity of renewables in the UK has potential to power the steel industry with 100% clean energy as it moves away from BF-BOF, especially since the industrial clusters are located near the coastal area where progressively cheaper and mature offshore wind and marine energy is abundant –.
As for financials, research on the European steel industry has found the total life-cycle production cost of steel via the scrap-EAF route is £320/tonnesteel, compared to £253/tonnesteel via the BF-BOF route . However, cost parity can be achieved as UK’s carbon price increases and electricity price decreases with higher renewable penetration. Both direct and indirect emissions are minimal for EAF powered by 100% renewable electricity which contrasts BF-BOF’s 2 tonnesCO2/tonnessteel emissions . Using these input values for calculation, cost parity would be achieved if a carbon price of £33.5/ tonnesCO2 is implemented. Although the cost competitiveness of coking coal-free steel making process is not immediately realized, appropriate government policy support, such as the “Public procurement and Buying British” policy introduced after the 2015 – 2016 steel industry crisis  could guarantee a domestic market for the local steel industry, which currently operates at a low margin . This can incentivize UK iron and steel industry to transition away from coking coal and adopt a low-carbon alternative.
The UK is well-endowed with ferrous scrap for producing secondary steel. As the technology to transition the steel industry away from coking coal is currently available, the UK will be able to host a steel industry with greater production than its current state, especially if governmental policy instruments and financial incentives are introduced. This transition would allow the UK to become more self-sufficient for its steel, reducing its historical steel trade deficit and further providing opportunities for the UK to develop cleaner methods of steel production.
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