The making of Green Steel

Steel is one of the most used materials world-wide, a vital structural component of buildings, cars, infrastructure, and consumer durables. According to the International Energy Agency (IEA), steel production currently accounts for around 7% of annual global energy sector CO2 emissions, around 2.6 Gt CO2 per year. Global steel demand is expected to grow by 40% into 2050; whilst simultaneously, emissions should
decrease by 95%.

Today, primary steel production is dominated by the Blast Furnace – Basic Oxygen Furnace (BF-BOF) process (with the lowest cost of production- Figure 1). Globally, the BF-BOF process currently accounts for 90% of primary steel production. However, pilot projects for steel production technologies such as H2-DRI-EAF and CCS are becoming operational and scaled up, especially in Europe. These pilot projects are expected to provide key learning opportunities for re/insurers as to how businesses will manage transition risks before decarbonisation accelerates and extends to other parts of the globe.

Technologies, such as DRI-EAF, are not new; their risks are already well documented and understood. However, the pace of transition and the scale at which it must happen could exacerbate existing exposures. Rapid and massive infrastructure growth to support emerging supply chains will be an area of new risk and opportunity for re/insurers.

Risk management around hydrogen distribution, transport and its use in direct reduction reactors will have to be built and developed. The same process will need to happen with carbon capture, utilisation, and storage. Re/insurers can use this opportunity to bring expertise from refineries, petrochemical industries and other smelting industries to guide steel clients.