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A promising path toward carbon neutrality for Canadian steelmakers

Decarbonization expected to be key to sustainability and competitiveness
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Steel is one of the most important materials in our lives. It’s the world’s second-largest commodity chain and is nearly ever-present – just look around you. But the steel industry is also among the primary industrial producers of carbon dioxide emissions, globally.
For Canadian steel producers, this presents a growing challenge as the country moves toward carbon neutrality under the 2015 Paris Agreement.
However there is a clear and positive path forward for steel producers -- one that addresses the environment and the bottom line. 
This path is decarbonization, and for the steel industry, it is being driven by three main developments:

  • The rising regulated cost of carbon as prescribed by many countries globally, including Canada; 
  • the demand for carbon-friendly steel products by manufacturers, builders and other steel consumers who seek to reduce carbon emissions from their value chain, including automotive manufacturers, amongst others;
  • and, the growing number of investors prioritizing sustainability.  

Technology is the pathway to decarbonization for Canadian steel producers

Technology is the key to decarbonizing steel production. While hydrogen steelmaking remains in its infancy, the primary solution today is the electrification of  steelmaking through the use of electric arc technology.
If you’re not familiar with electric arc steelmaking, an electric arc furnace (EAF) melts scrap steel, converting it to liquid steel that is then refined to make a new product. If the source of electricity is low in carbon, this process eliminates the use of fossil fuels such as coal, and results in reduced  greenhouse gases, or “GHG’s”. 
With steel being the most recycled material worldwide, electric arc steelmaking is the foundation of the “circular economy” (an economic system aimed at the continual use of resources and the elimination of waste).
EAF technology is readily available. These “mini-mills” operate at a lower cost than integrated mills, while creating more production flexibility that allows them to respond quickly to the cyclicality of North American steel markets.
In contrast, integrated mills are impacted by variables such as the fluctuating price of iron ore, the cost to transport a wide array of raw materials and the increasing cost of carbon.

EAF technology and decarbonization improves environmental and financial sustainability

Over the last quarter-century, EAF “mini mill” producers have captured half the North American steel market. With a growing number of steel producers using EAF technology, lower cost mini mills tend to be the price setters in the market . 

There is a strong case for EAF, not only to de-risk steelmakers from a carbon and climate change perspective but also from a competitive perspective.   

Canadian steelmakers are at an inflexion point

This mix of environmental and economic advantage has also become attractive to investors. Today, the investment decisions of some of the largest financial institutions are being driven by environmental, social and governance factors (ESG). More manufacturers are aiming to eliminate carbon emissions and are looking to their supply chains to push these initiatives forward. There is growing demand for ‘greener’ steel and the risk of escalating regulatory costs of carbon will only accelerate this trend. The pursuit of decarbonization represents an opportunity for steel companies to capitalize on these factors and be part of the climate change solution.