ASSESSING STEEL

DECARBONISATION
PROGRESS IN THE CONTEXT
OF EXCESS CAPACITY
A STEEL INDICATOR DECARBONISATION
DASHBOARD

REPORT PREPARED BY THE OECD

FACILITATOR, 2022
2  ASSESSING STEEL DECARBONISATION PROGRESS IN THE CONTEXT OF EXCESS CAPACITY –
A STEEL DECARBONISATION INDICATOR DASHBOARD

Assessing Steel Decarbonisation Progress

in the context of Excess Capacity

A Steel Indicator Decarbonisation Dashboard

Report prepared by the OECD Facilitator

Summary: This synthesis report is the final deliverable of the 2022

decarbonisation indicators work programme, based on the list presented at the
GFSEC Working Level Meeting (February 2022) and the outcomes of the
feasibility study.
It aims to provide evidence-based trends on the progress of the steel sector
towards decarbonisation objectives, and places this in the context of excess
capacity challenges.
In this way, this report presents indicators - as well as their related analysis -
on various characteristics, including on emissions, country and company’s
net-zero targets, steel production and capacity, innovative projects, carbon
pricing. The effects of excess capacity on decarbonisation progress are
highlighted. Likewise, the potential implications of decarbonisation projects on
capacity developments are underlined.
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Table of contents

Executive Summary .............................................................................................................................. 5

1. Introduction ....................................................................................................................................... 7
2. Setting the scene: From the starting point to the end one............................................................ 10
3. Is the level of ambition of steel producing countries up to the task? .......................................... 15
4. As implementers, are steel companies aligned with net-zero? .................................................... 22
5. Beyond the pledges, is current steel production on the right track? .......................................... 26
6. Is existing steelmaking capacity fit for a low-carbon future?...................................................... 28
7. Are the next technologies ready to take over? .............................................................................. 33
8. To what extent does carbon pricing apply to the steel sector? .................................................... 39
9. Conclusion ........................................................................................................................................ 42
References ............................................................................................................................................ 44

FIGURES
Figure 1. Global steel direct CO2 emissions 10
Figure 2. Steel as a share of direct industry CO2 emissions 11
Figure 3. Global steel production and related direct CO2 intensity 11
Figure 4. Technology breakdown of global steel production 12
Figure 5. Carbon intensities of various steelmaking production routes 12
Figure 6. Share of coal in final energy demand and energy intensity of steel production 13
Figure 7. Direct CO2 emissions and intensity trajectory upon the NZE scenario 14
Figure 8. Number of steel producing countries covered by a net-zero target – Related share in global steelmaking capacity
/ production 16
Figure 9. Number of GFSEC active members covered by a net-zero target – Related share in active GFSEC members’
capacity / production 17
Figure 10. Share of global steelmaking capacity covered by a net-zero target – Level of ambition 18
Figure 11. Share of global crude steel production covered by a net-zero target – Level of ambition 18
Figure 12. Share of GFSEC active members’ steelmaking capacity covered by a net-zero target – Level of ambition 19
Figure 13. Share of GFSEC active members’ crude steel production covered by a net-zero target – Level of ambition 20
Figure 14. Steel producing companies with a net-zero target – Related share in global steelmaking capacity / production 22
Figure 15. Steel companies covered by a net-zero target – Production ranking breakdown 23
Figure 16. Steel companies covered by a net-zero target – Regional breakdown 24
Figure 17. Production compatible with near zero emission steel 27
Figure 18. Production compatible with near zero emission steel –Trajectory upon the NZE scenario 27
Figure 19. Global steelmaking capacity and related asset structure 29
Figure 20. Steelmaking capacity and related share of EAF – Regional breakdown 29
Figure 21. New steelmaking projects and related asset structure 30
Figure 22. New steelmaking projects and related asset structure – Regional breakdown 31
Figure 23. Number of innovative near zero emission steelmaking projects 34
Figure 24. Innovative near zero emission steelmaking projects – Regional breakdown 35
Figure 25. Innovative near zero emission steelmaking projects – Technology breakdown 36
Figure 26. Innovative near zero emission steelmaking projects – Industrial maturity level 37
Figure 27. Carbon price applying to the steel sector – Number of steel producing countries covered and related maximum
share of global capacity and production 40
Figure 28. Maximum share of global capacity and production covered by a carbon price – Price breakdown 41
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TABLES
Table 1. List of indicators 8

BOXES
Box 1. Across countries, various configurations calling for a tailored approach 21
Box 2. Tackling excess capacity to foster steel decarbonisation 32
Box 3. Change in production routes, change in strategic inputs 38
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Executive Summary

With global capacity expected to increase for the fourth year in a row, excess capacity
continues to be a significant challenge for the global steel industry. The structural
imbalance affects steel prices, steel companies’ profitability margins, as well as the global
playing field. Excess capacity weighs on various features needed for an efficient low-
carbon transition, such as investments, innovation, or competition. In a context of deep
transformation required for the steel industry to meet climate goals, tackling excess
capacity is crucial to foster decarbonisation.
Despite progress in a number of areas, this steel decarbonisation indicator dashboard
shows that the steel sector is not on a trajectory compatible with Paris Agreement
objectives. This underscores the scale of the challenge to reduce emissions in steel
production by 90% from 2020 levels by 2050.
With countries’ net-zero pledges booming, the steel sector should decarbonise. More
than 90% of global steelmaking capacity and production is now located in countries that
have announced a net-zero target. This trend results from an overall increase in
commitments in 2021, although uneven levels of ambition on target stringency persist. As
for the GFSEC group, its level of ambition is one-step ahead both in terms of steel capacity
coverage (more than 95%) and in terms of target type.
Similarly, steel companies - the key drivers of steel production and of steel decarbonisation
-have increasingly announced net-zero targets. However, there is a mismatch between
corporate commitments and country-level pledges. As of end-2021, companies with net-
zero targets accounted for 30% of global steel production. This share has doubled over the
last year, though more commitments would help reduce the mismatch even more.
Beyond the pledges, near zero emission steel production has not yet taken off
sufficiently. Production routes compatible with a near zero pathway account for 20% of
global output, away from the nearly 100% that would be required by 2050. Besides, this
current share stems from scrap based EAF only. Although scrap based EAF plants can
contribute to decarbonisation, reaching near zero emission needs a more structural shift that
relies on diverse production routes.
In terms of asset structure, emissions intensive plants prevail. BOF plants account for
two-thirds of global capacity. While this share is undeniably linked to past decades legacy
of the steel industry, BOF capacity also represents more than half of the newly planned
capacity. Such new projects are not compatible with decarbonisation objectives if not
equipped with CCUS. By adding carbon intensive steelmaking plants, it further highlights
the extent to which excess capacity may hinder the low-carbon transition.
The project pipeline of innovative near zero emission technologies is promising but faces
a low-level of industrial maturity. Echoing corporate and countries targets, projects
focussing on such production routes have more than doubled in the last two years. Overall,
reaching net-zero by 2050 trajectory calls for scaling up technologies significantly.
As one of the policy tools used to support emission reductions, carbon pricing
mechanisms currently cover less than 20% of global steelmaking capacity. When
considering the prices applied, they have not reached the level that would be required to
be in line with a net-zero pathway by 2050.
Finally, closing the gap observed between the level of ambition and implementation
faces multiple challenges. These include scaling-up innovative technologies, investments,
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competitiveness, ensuring a global playing field, markets for near zero emission steel,
strategic inputs, or social aspects. Envisioning a tailored approach to decarbonisation is
equally essential towards implementation, in light of regional differences in steelmaking
routes, access to resources, or the variety of company profiles.
Likewise, addressing structural issues such as global excess capacity is crucial for steel
companies to be able to sustain this transformation. Conversely, as new plants’ projects for
decarbonisation purposes further develop, the management of existing assets - especially
plant replacement strategies - will be critical in shaping the resulting net-capacity increase.
Excess capacity and steel decarbonisation are both global challenges requiring a global
response. Collaboration among countries, as well as between public and private
stakeholders, will be essential to foster synergies and accelerate progress towards a net-
zero pathway. Equally, addressing excess capacity is critical to pave the way for a
successful steel decarbonisation, ultimately meeting climate goals.
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1. Introduction

1. The path to net-zero emissions requires a deep transformation of the steel sector,
bringing new challenges that are likely to reshape the steel industry. To provide
insights on these challenges, and in response to the interest expressed by the Global
Forum on Steel Excess Capacity (GFSEC) Members, the Facilitator proposed a
work programme focusing on the development of indicators. The overarching
objective of these indicators is to monitor progress in reaching targets.
Furthermore, by sharing and highlighting key trends, such outcomes could also
inform policymakers regarding the low-carbon transition of the steel industry,
including on the nexus with excess capacity.
2. To this end, the Facilitator suggested building a set of evidence-based indicators
for short-term implementation (GFSEC Working Level Meeting, 16 February
2022). These indicators cover various dimensions of steel decarbonisation, such as
capacity, production, technologies, industrial projects, trade or policy aspects.
3. As a first step, this set of indicators has been subject to a feasibility study. The
overall objective was to identify relevant data and methodologies, but also to assess
which indicators could be developed in a timeframe compatible with the 2022
GFSEC Working Level Meeting (September 2022). The resulting list forms the
basis for the 2022 indicators work programme and is summarised in Table 1.
4. This synthesis report presents the final assessment of these indicators, as well as
their related analysis. It aims to provide evidence-based trends on the progress of
the steel sector towards decarbonisation objectives. In this way, it echoes the COP
27 Presidency’s call for implementation, the current decade being depicted as
critical to achieve Paris Agreement’s objectives ( (COP26, 2021[1]) (COP27,
2022[2])).
5. This report first gives an overall picture of the steel sector in terms of carbon
emissions, as well as the trajectory required to comply with Paris Agreement
objectives. Secondly, it analyses the level of commitment in emission reductions
from both steel producing countries and companies. Then, the compatibility of
current steel production and capacity with a near zero emission trajectory is
assessed. In particular, the focus on capacity aspects further highlights the extent
to which global steel excess capacity may hinder the low-carbon transition. Moving
to innovation, the characteristics of steelmaking projects based on breakthrough
technologies are discussed. Finally, the report explores to what extent carbon
pricing mechanisms apply to the steel sector.
6. It is worth noting that this set of indicators constitutes a first step in monitoring
steel decarbonisation progress. These outcomes could be a starting point to develop
policy recommendations on specific challenges related to steel industry
decarbonisation and its nexus with excess capacity.
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Table 1. List of indicators
Category Indicator Figure Topic / Question covered
Global steel CO2 emissions Figure 1
Figure 7
Steel as a share of CO2 emissions Figure 1
Steel as a share of industry CO2
Figure 2
emissions
CO2 intensity of steel production Figure 3,
Figure 7
CO2 emissions Setting the scene: From the starting point to the end one
Technology breakdown of global
Figure 4
steel production (*)1
Carbon intensities of various
Figure 5
steelmaking production routes (*)
Share of coal in final energy demand
and energy intensity of steel Figure 6
production (*)
Steel producing countries covered
by a carbon neutrality target Figure 8,
Share in global steel production Figure 9
Share in global steel capacity
Is the level of ambition of steel producing countries up to the task?
Figure 10,
Figure 11,
Related level of ambition (*)
Figure 12,
CO2 emission reduction Figure 13
targets
Steel producing companies
committed to a carbon neutrality
target Figure 14
Share in global steel production As implementers, are steel companies aligned with net-zero?
Share in global steel capacity
Production ranking breakdown (*) Figure 15
Regional breakdown (*) Figure 16
Production compatible with near
zero steel production
Figure 17
Share in total steel production
Production Beyond the pledges, is current steel production on the right track?
Technology breakdown
Trajectory upon the NZE by 2050
Figure 18
scenario (*)
Global steelmaking capacity
EAF capacity as a share of total
steelmaking capacity Figure 19
Capacity Technology breakdown of global
steelmaking capacity
Regional breakdown of global
Figure 20
steelmaking capacity
Total capacity of new steelmaking Is existing steelmaking capacity fit for a low-carbon future?
projects
Technology breakdown of new
Figure 21
New steelmaking steelmaking projects
projects Share of EAF in new steelmaking
projects
Regional breakdown of new
Figure 22
steelmaking projects

1
Indicators identified with (*) are complementary indicators added to the initial list, to support the
analysis.
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Announcements on innovative near
Figure 23
Innovative near zero zero emission steelmaking projects
emission steelmaking Technology breakdown Figure 25 Are the next technologies ready to take over?
projects Regional breakdown Figure 24
Industrial maturity level (*) Figure 26
Number of jurisdictions covered by a
carbon price applying to the steel
sector
Figure 27
Carbon pricing Maximal share of global steel To what extent does carbon pricing apply to the steel sector?
capacity / production covered by a
carbon price
Related price breakdown (*) Figure 28
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2. Setting the scene: From the starting point to the end one

Where does the steel sector stand in terms of emissions and what is the trajectory required
to comply with Paris Agreement objectives?

The steel industry is a key sector to reach climate goals…

7. With direct emissions equating 2591 Mt CO2 in 2020 (IEA, 2021[3]), the iron and
steel sector accounts for nearly 8% of global emissions from the energy sector
(Figure 1). It further ranks as the largest emitting sector in industry, representing
30% of industrial carbon emissions (Figure 2). With such a large carbon footprint,
decarbonising the steel sector is key to achieve climate goals.

Figure 1. Global steel direct CO2 emissions

3000 40%

2500
30%
2000
Mt CO2

1500 20%

1000
10%
500

0 0%
2020

Direct CO2 emissions (Mt CO2) Share in CO2 emissions from the energy sector (%)

Notes: CO2 emissions from the steel sector refer to direct emissions only (including energy and process
emissions). CO2 emissions from the energy sector include both those from the combustion of fossil fuels and
industrial process emissions.
Source: Calculations based on (IEA, 2021[3]) and (IEA, 2021[4]).
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Figure 2. Steel as a share of direct industry CO2 emissions

23%
Iron and Steel
30%
Cement

Chemicals & Petrochemicals

3%
2% Pulp and Paper

Aluminium
13%
Other industry

29%

Note: CO2 emissions refer to direct emissions only, including both those from the combustion of fossil fuels
and industrial process emissions. Source: Calculations based on (IEA, 2021[3]).

… largely dominated by highly carbon intensive production

8. Steel production and its related CO2 emission intensity form the core drivers of
carbon emissions. In 2020, global steel production reached 1878 mmt (worldsteel,
2021[5]), with an average direct carbon intensity of 1.4 tCO2/tsteel (IEA, 2021[6])
(Figure 3).
9. BOF is by far the predominant steelmaking route with 73% of total output
(worldsteel, 2021[5]) (Figure 4), outlining the dominance of the highest carbon
intensive production process (Figure 5).
10. As underlying factors shaping carbon intensity, the share of coal in final energy
demand and the energy intensity of crude steel production respectively stood at
75% and 19.4 GJ/tsteel in 2020 (IEA, 2021[7]) (Figure 6).

Figure 3. Global steel production and related direct CO2 intensity

2000 2

1500 1.5
tCO2/tsteel
mmt

1000 1

500 0.5

0 0
2020

Crude Steel Production (mmt) Direct CO2 Intensity (tCO2/tsteel)

Note: CO2 intensity from direct emissions only (including energy and process emissions).
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Source: Data from (worldsteel, 2021[5]) and (IEA, 2021[6]).

Figure 4. Technology breakdown of global steel production

Share in total crude steel production (%) 100

80

60

40

20

0
2020
BOF EAF

Source: Data from (worldsteel, 2021[5]).

Figure 5. Carbon intensities of various steelmaking production routes

2.5

1.5
tCO2/tsteel

0.5

0
BF BOF Natural Gas based DRI EAF Scrap-based EAF

Direct Indirect

Notes: Direct CO2 emissions covers energy and process emissions.

Indirect CO2 emissions include emissions from the power sector and the combustion of steel off-gases.
Source: Data from (IEA, 2020[8]).
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Figure 6. Share of coal in final energy demand and energy intensity of steel production

100% 25

80% 20

60% 15
Share %

GJ/tsteel
40% 10

20% 5

0% 0
2020

Share of coal in the sector's final energy demand (%)

Energy intensity (GJ/tsteel)

Note: Data relates to energy intensity from crude steel production. The energy accounting methodology is
detailed in (IEA, 2020[8]), and considers the energy used for BF and coke ovens, as well as energy within final
consumption.
Source: Calculations based on (IEA, 2021[7]).

A long way to go for reaching near zero emission

11. To meet the Paris Agreement objective of limiting global warming to 1.5 °C, global
CO2 emissions must decline on an unprecedented scale, reaching net-zero in 2050
(IPCC, 2022[9]).
12. To comply with this overall goal, direct emissions of the steel sector have to
decrease by 90% from 2020 levels, to reach 220 Mt CO2 in 20502 (IEA, 2021[10]).
As an intermediate target, this trajectory implies a 30% emission reduction by
2030 (Figure 7).
13. These emission reductions are underpinned by global steel production levels that
are similar (or slightly higher) than the 2020 ones (IEA, 2021[10]). Therefore,
reaching near zero emission steel production would require a sharp decrease in
carbon intensity, involving a 35% reduction by 2030, and 90% by 2050 (Figure 7).

2
Based on the IEA’s Net-Zero Emissions scenario (NZE). This scenario highlights the trajectory and levels
of CO2 emissions required to comply with the global target of net-zero CO2 emissions from the energy sector
by 2050. This scenario is consistent with the Paris Agreement objective to limit the temperature increase to
1.5 °C.
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Figure 7. Direct CO2 emissions and intensity trajectory upon the NZE scenario
3000 2

2500

1.5

2000

tCO2/tsteel
Mt CO2

1500 1

1000

0.5

500

0 0
2020 2030 - NZE scenario 2050 - NZE scenario

Direct CO2 Emissions (Mt CO2) Direct CO2 Intensity (tCO2/tsteel)

Notes: CO2 emissions refer to direct emissions only (including energy and process emissions).
NZE : IEA Net Zero Emissions by 2050 scenario.
Source: (IEA, 2021[3]), (IEA, 2021[6]), (IEA, 2021[10]).

14. The long way to go for reaching near zero emission highlights to what extent a
carbon neutrality target is a game changer for the steel industry. It calls for a deep
transformation of the sector, relying on a combination of mitigation options. It
necessitates improved performances (through energy efficiency or processes
optimisation), fuel switching or breakthrough technologies (including hydrogen
and CCUS) for production. On the demand side, material efficiency and circular
economy are key drivers contributing to emission reduction. From a broader
perspective, such a deep transformation calls for a sound business environment,
not compatible with the adverse effects of excess capacity.
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3. Is the level of ambition of steel producing countries up to the task?

Given the massive emission reduction required for the steel sector by 2050, is the level of
commitment of steel producing countries consistent with the scale of the challenge?

With net-zero pledges booming, the steel sector has to decarbonise

15. As of end of 2021, 38 steel producing countries3 covering more than 90% of
global steelmaking capacity and crude steel production had announced a net-zero
target (Figure 8). This represents a sharp increase compared to 2020, both in terms
of number of countries (18 countries in 2020, namely more than a doubling), and
level of capacity and production covered (respectively about 70% and 75% in
2020, namely a third increase).
16. This trend is equally visible for GFSEC active members4. While in 2020 around
65% of their capacity and production was covered by a net-zero target, this share
increased to more than 95% in 2021 (Figure 9).
17. Given these pledges, the global steel industry is bound to follow a net-zero
pathway5.

3
The European Union and its Member States are accounted for 1 entity.
4
India has not participated in the GFSEC since early 2020, thus not accounted in the total of “active
GFSEC members”.
5
While net-zero pledges are not directed to the steel sector itself (but to the whole economy), such
targets imply reaching near zero emission steel production (as depicted in Figure 7). In this chapter,
capacity/production ‘subject to a net-zero target’ or ‘covered by a net-zero target’ refers to
capacity/production ‘located in countries covered by a net-zero target’.
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Figure 8. Number of steel producing countries covered by a net-zero target – Related share in
global steelmaking capacity / production
50 100%

40
Number of steel producing countries

75%

30

Share (%)
50%

20

25%
10

0 0%
as of end 2020 as of end 2021

Number of steelmaking countries covered by a net-zero target

Share in global steelmaking capacity
Share in global crude steel production

Note: The indicator considers steel producing countries that have announced a net-zero target for 2050 or
beyond, regardless of the status (target enshrined in law, in policy document or political pledge).
The European Union and its Member States are accounted for 1 entity.
Source: Calculations based on (World Resources Institute, 2020[11]), (Climate Action Tracker, 2022[12]),
(Global Energy Monitor, Caitlin Swalec, Christine Shearer, 2021[13]), (worldsteel, 2022[14]), (OECD, 2022[15]).
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Figure 9. Number of GFSEC active members covered by a net-zero target – Related share in active
GFSEC members’ capacity / production
20 100%

Number of active GFSEC members

15 75%

Share (%)
10 50%

5 25%

0 0%
as of end 2020 as of end 2021

Number of active GFSEC members covered by a net-zero target

Share in GFSEC active members' steelmaking capacity
Share in GFSEC active members' crude steel production

Note: The indicator considers steel producing countries that have announced a net-zero target for 2050 or
beyond, regardless of the status (target enshrined in law, in policy document or political pledge).
The European Union and its Member States are accounted for 1 entity.
Source: Calculations based on (World Resources Institute, 2020[11]), (Climate Action Tracker, 2022[12]),
(Global Energy Monitor, Caitlin Swalec, Christine Shearer, 2021[13]), (worldsteel, 2022[14]), (OECD, 2022[15]).

Despite encouraging progress, uneven levels of ambition nuance such high

scores
18. Analysing the nature of announced targets provides a more balanced perspective,
as they are classified upon three levels of ambition: target ‘in law’, ‘in policy
document’ or ‘in political pledge’ (World Resources Institute, 2020[11]).
19. As of end 2021, only 18% of global steelmaking capacity and production was
located in countries with a net-zero target enshrined ‘in law’, about 60% related
to a ‘policy document’ status, and 18% upon a ‘political pledge’ Figure 10 and
Figure 11).
20. However, the comparison with 2020 levels reveals some encouraging signs. The
2021 growth in net-zero capacity and production coverage has been combined with
a significant change in target types (Figure 10 and Figure 11).
21. In 2020, 50-60% of global steelmaking capacity and production was subject to a
net-zero target upon a ‘political pledge’ status (namely with the lowest level of
policy commitment), and almost none was covered by a target ‘in law’. There has
been thus an overall increasing level of ambition, with most of the capacity covered
by a ‘political pledge’ in 2020 shifting to ‘in policy document’ in 2021 (driven by
China). Equally, major steel producers (including the European Union, Japan or
Korea) raised their level of ambition, from a net-zero target ‘in policy document’
to an ‘in law’ status.
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Figure 10. Share of global steelmaking capacity covered by a net-zero target – Level of ambition
Share in global steelmaking capacity (%) 100%

75%

50%

25%

0%
as of end 2020 as of end 2021
Share of global steelmaking capacity covered by a carbon neutrality target in political pledge
in policy document
in law

Source: Calculations based on (World Resources Institute, 2020[11]), (Climate Action Tracker, 2022[12]),
(Global Energy Monitor, Caitlin Swalec, Christine Shearer, 2021 [13]), (OECD, 2022[15]).

Figure 11. Share of global crude steel production covered by a net-zero target – Level of ambition
100%
Share in global crude steel production (%)

75%

50%

25%

0%
as of end 2020 as of end 2021

Share of global crude steel production covered by a carbon neutrality target in political pledge
in policy document
in law

Source: Calculations based on (World Resources Institute, 2020[11]), (Climate Action Tracker, 2022[12]),
(Global Energy Monitor, Caitlin Swalec, Christine Shearer, 2021 [13]), (worldsteel, 2022[14]), (EUROFER,
2021[16]).
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When looking at the targets type, the GFSEC group is one step ahead
22. Among countries having pledged for net-zero, the group of GFSEC active
members appears to be more ambitious in terms of targets type. As of end 2021,
most of the GFSEC active members’ capacity and production subject to a net-zero
target had an "in law" status (Figure 12 and Figure 13), while the "in a policy
document" status prevailed for the other steel producing countries (Figure 10 and
Figure 11).
23. In 2020, only 5% of GFSEC active members’ steelmaking capacity and production
was located in countries with a net-zero target ‘in law’, but this share grew sharply
to 55% in 2021. This echoes the change in the target type trend observed at the
global level (Figure 10 and Figure 11), most of the GFSEC capacity covered by a
target in ‘policy document’ shifting to an ‘in law’ status in 2021. By contributing
to almost all of the steelmaking capacity and production subject to a net-zero target
‘in law’ worldwide, the GFSEC group comprises the pioneering countries of
climate action.

Figure 12. Share of GFSEC active members’ steelmaking capacity covered by a net-zero target –
Level of ambition
100%
Share in GFSEC active members' steelmaking capacity (%)

75%

50%

25%

0%
as of end 2020 as of end 2021

Share of GFSEC active members' steelmaking capacity covered by a carbon neutrality target in political pledge
in policy document
in law

Source: Calculations based on (World Resources Institute, 2020[11]), (Climate Action Tracker, 2022[12]),
(Global Energy Monitor, Caitlin Swalec, Christine Shearer, 2021[13]), (OECD, 2022[15]).
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Figure 13. Share of GFSEC active members’ crude steel production covered by a net-zero target –
Level of ambition
100%
Share in GFSEC active members' crude steel production (%)

75%

50%

25%

0%
as of end 2020 as of end 2021
Share in GFSEC active members' crude steel production covered by a carbon neutrality target in political pledge
in policy document
in law

Note: The indicator considers steel producing countries that have announced a net-zero target for 2050 or
beyond, regardless of the status (target enshrined in law, in policy document or political pledge).
Source: Calculations based on (World Resources Institute, 2020[11]), (Climate Action Tracker, 2022[12]),
(Global Energy Monitor, Caitlin Swalec, Christine Shearer, 2021 [13]), (worldsteel, 2022[14]), (EUROFER,
2021[16]).

While being an essential step, pledging is not enough

24. Setting a net-zero target is a first crucial step, but does not guarantee that emission
reductions will actually be achieved. Assessment of current and announced
decarbonisation policies indeed suggests that they are not sufficient to deliver the
level of emission reduction required to be consistent with the announced net-zero
targets ( (IEA, 2021[4]), (IPCC, 2022[9])). Such targets should be seen as a
commitment to take ambitious actions to curb emissions, thus the starting point for
developing decarbonisation strategies.
25. When moving to implementation, a major pitfall lies in the fact that net-zero
pledges are not sector specific but cover the whole economy. By providing a
focused objective, setting sectoral targets could allow for the development of tailor-
made strategies and policies, taking into account sectoral specificities. Such an
approach is more likely be impactful in terms of implementation.
26. This challenge clearly applies to the steel sector, with the need to set long-term and
intermediate emission reduction objectives, as well as decarbonisation roadmaps
consistently. As with the low-carbon transition as a whole, acknowledging that
there is no ‘one-size-fits all approach’ calls for defining tailored approaches, in
particular taking into account country’s specificities (Box 1).
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Box 1. Across countries, various configurations calling for a tailored approach

Beyond country’s relative weight in emissions, the differences in carbon intensities
underline the diversity of starting points to achieve near zero emission steel production
(Hasanbeigi, 2022[17]). Multiple factors underpin these disparities in carbon intensity,
notably the structure of the assets (BOF vs EAF), the fuel mix and inputs for
production, the carbon intensity of electricity, or plant energy efficiency (Hasanbeigi,
2022[17]).
Generally, countries with a high share of EAF tend to have a lower carbon intensity of
steel production. However, this should be balanced with the type of inputs used for
production. For instance, coal based DRI production results in a carbon intensity ranked
among the highest, despite it pertains to an EAF route. Similarly, for electricity,
countries relying on a high share of decarbonised electricity will compare better with
countries relying heavily on coal-based power generation, ceteris paribus.
These different factors shape the carbon footprint of a country's steel production.
Therefore, selecting the most relevant decarbonisation options from a country
perspective (both in terms of carbon emission reduction and economically) closely
depends on the existing configuration and specificities of its steel industry.
Adopting a tailored approach is thus essential when defining a steel decarbonisation
roadmap. Such an approach is even more crucial given other broader countries
characteristics impacting such a strategy, including its energy mix, access to natural
resources and raw materials, or existing low-carbon infrastructure.
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4. As implementers, are steel companies aligned with net-zero?

Besides countries’ pledges, how do steel producing companies – the implementers –

respond to the Paris Agreement objectives?

A mismatch between countries and corporate pledges

27. Companies being the drivers of steel production, they are key implementers of
decarbonisation. To follow a net-zero pathway, it is therefore essential that
countries’ pledges are mirrored by steel producers.
28. As of end 2021, steel producing companies which have pledged for net-zero
emissions6 represented 30% of global crude steel production and steelmaking
capacity (Figure 14).
29. Similarly to countries’ pledges, global production and capacity covered by
corporate net-zero targets have significantly increased compared to 2020 levels.
This coverage doubling is mainly due to announcements from several top 10 steel
producers in 2021 (Baowu, HBIS and Nippon Steel).

Figure 14. Steel producing companies with a net-zero target – Related share in global steelmaking
capacity / production

50%

40%

30%

20%

10%

0%
as of end 2020 as of end 2021

Share in global steelmaking capacity

Share in global crude steel production

Source: Calculations based on companies websites, (Global Energy Monitor, Caitlin Swalec, Christine Shearer,
2021[13]), (Vogl, 2021[18]), (worldsteel, 2021[5]), (worldsteel, 2022[19]), (worldsteel, 2022[14]), (Global Energy
Monitor, 2022[20]), (OECD, 2022[15]).

6
Objective to reach carbon neutrality (or similar) by 2050 or before, depending on the companies.
 ASSESSING STEEL DECARBONISATION PROGRESS IN THE CONTEXT OF EXCESS CAPACITY –
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30. Overall, the share of steel production and capacity covered by corporate net-zero
targets (30%) is well short of the one related to steelmaking countries’ pledges
(more than 90% coverage, Section 3. ). This reveals a clear implementation gap,
which could be explained by several factors.
31. Firstly, there may be a time lag between companies’ responses and the pledge
announcements of the country in which they operate. For instance, the emergence
of net-zero target announcements from Chinese steel companies in 2021 follows
the country’s pledge in 2020. On this specific point, monitoring 2022 corporate
pledges will be particularly informative to confirm the dynamic (for instance,
following India’s net-zero pledge end of 2021).
32. In addition, and referring to Section 3. , it is worth noting that net-zero countries’
pledges refer to their whole economy, but are not written from a sectoral
perspective. But also, steel decarbonisation related challenges (whether on
investments, technologies, competitiveness) may hinder companies’ ambition to
commit to such targets.

Given the variety of company and country profiles, a tailored approach is

warranted
33. In terms of a company’s profile, an increasing number of the world’s top 10
producers have pledged for net-zero over the last year. As of end 2021, this
category represented a quarter of the total number of listed companies (Figure 15).
As mentioned previously, this trend drove the growth in steel production and
capacity coverage observed in 2021 (Figure 14). However, in terms of the number
of companies, the category of smaller companies is still the predominant one
(companies below rank 45 of steel producers, ie with annual production <10 mmt).

Figure 15. Steel companies covered by a net-zero target – Production ranking breakdown
200%
Number of steel producing companies Index (2020 = 100)

150%

100%

50%

0%
as of end 2020 as of end 2021

Among the Top 10 steel producers (Annual Production > 30 mmt)

Between Rank 11 and 45 (Annual Production between 30-10 mmt)
Beyond Rank 45 (Annual Production < 10 mmt)

Note: Companies breakdown according to the ranking defined in (worldsteel, 2022[19]).

Source: Calculations based on companies websites, (Global Energy Monitor, Caitlin Swalec, Christine Shearer,
2021[13]), (Vogl, 2021[18]), (worldsteel, 2022[19]).
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34. From a regional perspective, Europe accounts for the majority of companies with
net-zero targets (more than 40% of the total number of listed companies)
(Figure 16). Looking at their characteristics, almost all of these companies’ targets
had already been set by 2020 (or even before), reflecting Europe’s early
commitment in emission reductions. Most of these companies are below rank 45
of steel producers (and even below rank 100).
35. Whereas steel companies’ pledges have increased in various regions worldwide,
the Asian region and China have especially experienced a significant growth
(Figure 16). They now represent the second regional pool, followed by North
America. Almost all of the Chinese companies having committed to net-zero are
among the world’s top 10 producers, and their related targets are set by 2050,
namely 10 years in advance compared to the national objective.
36. As for GFSEC, more than 80% of the total number of listed companies are
companies related to GFSEC members. This underlines GFSEC members’ leading
position towards decarbonisation ambition, as depicted in Section 3.
37. In practice, most of these companies are currently developing strategies or
projects to reduce their carbon footprint. Depending on the company, the level of
impact and engagement varies, ranging from new plants, plant replacement,
process adaptation of existing plants, focusing on reducing indirect emissions to
developing technology and R&D programs (see Section 7. for the analysis of
innovative near zero emission steelmaking projects).

Figure 16. Steel companies covered by a net-zero target – Regional breakdown

Number of steel producing companies Index

200% 100%

Share of GFSEC active members

150% 75%
(2020 = 100)

100% 50%

50% 25%

0% 0%
as of end 2020 as of end 2021

Europe China Asia (without China)

North America CIS Oceania
Share of GFSEC active members

Note: Classification of regional breakdown based on companies HQ location, consistently with (worldsteel,
2022[19]).
Source: Calculations based on companies websites, (Global Energy Monitor, Caitlin Swalec, Christine Shearer,
2021[13]), (Vogl, 2021[18]).
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38. Overall, the diversity of companies committed to net-zero adds to the countries
specificities raised previously (Box 1). Typically, the EAF or BOF share ranges
from 0% to 100% depending on the company (Global Energy Monitor, 2022[20]).
Equally, the age and location of the assets, as well as their technological leadership
(especially with respect to breakthrough technologies) are other characteristics
shaping each company’s decarbonisation roadmap. The size of the firm and its
investment capacity are key features driving decarbonisation implementation.
Analysing the yearly producing companies ranking from worldsteel (worldsteel,
2022[19]), only less of 30% of global steel production comes from the top 10
producing companies. It underscores the crucial role of intermediate and small
producers in reaching global steel decarbonisation objectives. When combining all
of these aspects, low-carbon business strategies and related investments are likely
to be specific to each company, and even project based. This further reinforces
the imperative of a tailor-made approach to ensure a successful sectoral
decarbonisation.
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5. Beyond the pledges, is current steel production on the right track?

While carbon neutrality commitments are growing both from steelmaking countries and
companies, how is current steel production compatible with a near zero emission
trajectory?

Near zero emission steel production relies on various routes…

39. ‘Near zero emission steel production’ refers to crude steel production whose
emission intensity is compatible with a global net zero pathway by 2050. In
order to identify the steelmaking routes complying with this requirement, the
thresholds of emission intensity defined in (IEA, 2022[21]) are leveraged.
40. In this way, compatible routes include various pathways, whether based on BF-
BOF, EAF or other production modes. They include the scrap-based EAF
secondary route, primary routes (ie BF-BOF or DRI EAF) based on CCUS,
electrolytic hydrogen based DRI EAF, or iron ore electrolysis (IEA, 2022[21]).
41. It is worth noting that this list of technologies should be only considered as a proxy
to assess the trend, thus labelled as ‘compatible with a near zero emission steel
production’. Indeed, it is the precise value of emission intensity of crude steel
production (depending on the plant for instance) which should ultimately be
compared to the threshold7. This aspect underlines that measuring, certifying and
tracing carbon content of crude steel production will be essential to support such
a definition. This is even more crucial as it may constitute a basis for setting various
carbon content-based criteria (standards, criteria for trade agreement or investment
compliance…).

… but the current picture portrays more of a ‘business as usual’ approach

42. Based on the previous considerations, production levels compatible with near zero
emission steel production amounted to 376 mmt in 2020, namely 20% of global
crude steel production (Figure 17).
43. The related technology breakdown outlines that scrap based EAF is the only
contributing route (Figure 17). In this way, this 20% share does not relate to a
structural shift in production methods for decarbonisation purposes. Rather, it
results from a well-established route, thus referring to a ‘business as usual’
steelmaking approach.
44. Regardless of the type of production route, such a share is far from the levels that
would be required to be compliant with the Net-Zero Emissions scenario8 (33% in
2030 and almost 100 % of steel production in 2050, Figure 18). The lack of
diversified near zero emission steel production routes observed (Figure 17) hinders
the ability to significantly increase this share in the short-term. Scaling-up

7
For instance, depending on the indirect emissions, scrap based EAF production may be or not
compliant with ‘near zero emission steel production’.
8
NZE from (IEA, 2021[10]), and referring to Figure 7
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breakthrough technologies is crucial to unlock this potential, as well as addressing
the challenges faced by steel companies to switch to such innovative routes.

Figure 17. Production compatible with near zero emission steel

500 100%

400 80%

Share (%)
300 60%
mmt

200 40%

100 20%

0 0%
2020

Primary route: CCS equiped (mmt) Primary route: hydrogen based (mmt)
Primary route: direct iron ore electrolysis (mmt) Secondary route: scrap-based EAF (mmt)
Share of global production compatible with NZ (%)

Notes: Steel production routes compatible with near zero emission steel production include scrap-based EAF
secondary route, CCS-equipped primary routes, electrolytic H2 DRI EAF primary route, iron ore electrolysis.
This list of technologies should be only considered as a proxy to assess the indicator, thus labelled as
‘compatible with a near zero emission steel production’.
Source: Data and calculations based on (worldsteel, 2021[5]) and (IEA, 2021[22]).

Figure 18. Production compatible with near zero emission steel –Trajectory upon the NZE scenario

100%
Share of global production compatible with

80%

60%
NZE

40%

20%

0%
2020 2030 - NZE scenario 2050 - NZE scenario

Notes: Steel production routes compatible with near zero emission steel production include scrap-based EAF
secondary route, CCS-equipped primary routes, electrolytic H2 DRI EAF primary route, iron ore electrolysis.
This list of technologies should be only considered as a proxy to assess the indicator, thus labelled as
‘compatible with a near zero emission steel production’. NZE: IEA Net Zero Emissions by 2050 scenario.
Source: Data and calculations based on (IEA, 2021[22]), (IEA, 2021[10]), (IEA, 2021[7]).
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6. Is existing steelmaking capacity fit for a low-carbon future?

Deepening previous outcomes on production, is the structure of global steelmaking

capacity compatible with a near zero emission pathway? From a mid-term perspective,
how do planned commercial projects fit into such a trajectory?

Using the steel asset structure for trend assessment

45. Achieving Paris Agreement objectives implies an increasing share of near zero
emission routes by 2050, as depicted in various net-zero scenarios ( (IPCC,
2022[9]), (IEA, 2021[10]), (E3G, 2021[23]), (MPP, 2021[24]), (Net Zero Steel,
2021[25])).
46. As for EAF, available capacity data does not make the distinction between ‘scrap-
based EAF’ secondary route and ‘DRI-EAF’ primary route. Whereas the scrap-
based EAF secondary route could be considered as compatible with a near zero
emission pathway (subject to the emission intensity level, (IEA, 2022[21])), this is
not necessarily the case for the DRI-EAF primary route (if using fossil fuels as
inputs, and without CCUS). In addition, an EAF plant may not be strictly
associated to one type of feedstock (scrap or DRI), as it could be feed by both.
47. The share of EAF in global steelmaking capacity should not be thus considered as
a ‘near zero emission steel capacity’. It should be viewed as a proxy to assess the
compliance of steelmaking capacity with a net-zero pathway.
48. In addition, the BF-BOF route could be considered as compatible with a near zero
emission pathway if equipped with CCUS (IEA, 2022[21]). Therefore, BF-BOF
CCUS based route is equally taken into account when assessing the compliance of
steelmaking capacity with climate goals.

Carbon emissions intensive assets prevail, with regional disparities

49. As of end 2021, EAF represented about 30% of global steelmaking capacity. BOF
assets clearly dominates the global landscape, accounting for around two-thirds of
total capacity (Figure 19). Since the BF-BOF production routes are not equipped
with CCUS, the current structure of assets is not yet aligned with a net-zero
pathway.
50. The regional picture reveals strong disparities in the asset structure, for instance
with EAF shares ranging from less than 15% to more than 80% (Figure 20). As
for GFSEC active members, their EAF share reaches 45%, well above the global
average. Overall, this variety of configurations points to the need for tailored
decarbonisation strategies, as discussed in Box 1.
51. The share of EAF or BOF alone is not sufficient to identify the regions with the
most challenging asset structure. When combined with the regional levels of
capacity, Asia stands as a critical one. Accounting for nearly 70% of global
capacity, its EAF share is around 20%, and BF-BOF routes are not equipped with
CCUS. This structure is highly driven by China, the latter representing nearly 50%
of global capacity, and with an EAF share below 15%.
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Figure 19. Global steelmaking capacity and related asset structure

2021 Total capacity (mmt) 2500 100%

2000 80%

EAF Share (%)

1500 60%

1000 40%

500 20%

0 0%

EAF (mmt) BOF (mmt) Others (mmt) EAF share (%)

Notes: 2020 levels are not reported in this graph, as they are equivalent to 2021.
The share of EAF should not be considered as a ‘near zero emission steel capacity’. Rather, it should be viewed
as a proxy to assess the compliance of steelmaking capacity with a net-zero pathway, alongside capacity based
on BF-BOF with CCUS.
Source: OECD Steel Capacity Database.

Figure 20. Steelmaking capacity and related share of EAF – Regional breakdown

2500 100%
Capacity (mmt)

2000 80%

1500 60% EAF share (%)

1000 40%

500 20%

0 0%

Notes: 2020 levels are not reported in this graph, as they are equivalent to 2021.
The share of EAF should not be considered as a ‘near zero emission steel capacity’. Rather, it should be viewed
as a proxy to assess the compliance of steelmaking capacity with a net-zero pathway, alongside capacity based
on BF-BOF with CCUS.
Source: OECD Steel Capacity Database.

New projects are not going in the right direction…

52. Findings in the previous sections are even more pronounced when looking at future
steelmaking projects, especially when linking with excess capacity considerations.
As of end 2021, there were about 160 mmt of new capacity projects underway or
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planned over the next three years (2022-24). Most of the capacity relates to BOF
projects (55%), and EAF accounts for about 40% of future capacity (Figure 21).
53. From a regional perspective, more than half of the capacity planned is located in
Asia, driven by India and China (Figure 22). Crucially, 90% of planned capacity
in Asia are BF-BOF projects without CCUS.
54. By adding new carbon intensive steelmaking plants, it further highlights the extent
to which excess capacity may hinder the low-carbon transition.

Figure 21. New steelmaking projects and related asset structure

200 100%

150 75%
Total capacity (mmt)

EAF Share (%)

100 50%

50 25%

0 0%

EAF (mmt) BOF (mmt) Others (mmt) EAF share (%)

Notes: The capacity data contains both underway and planned projects over the next three years (2022-24), as
of end of 2021. It does not take into account closures that may occur during the period.
The share of EAF should not be considered as a ‘near zero emission steel capacity’. Rather, it should be viewed
as a proxy to assess the compliance of steelmaking capacity with a net-zero pathway, alongside capacity based
on BF-BOF with CCUS.
Source: Calculations based on (OECD, 2022[15]).
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Figure 22. New steelmaking projects and related asset structure – Regional breakdown

Notes: The capacity data contains both underway and planned projects over the next three years (2022-24), as
of end of 2021. It does not take into account closures that may occur during the period.
The share of EAF should not be considered as a ‘near zero emission steel capacity’. Rather, it should be viewed
as a proxy to assess the compliance of steelmaking capacity with a net-zero pathway, alongside capacity based
on BF-BOF with CCUS.
Source: Figure from (OECD, 2022[15]).

…increasing the risk of stranded assets

55. In countries having pledged for net-zero emissions, carbon intensive plants risk to
become stranded assets, as not compatible with such a pathway. The high share
of carbon intensive assets in planned projects, not equipped with CCUS, would
contribute to locked-in emissions for decades. The Asian region appears to be
highly exposed to this risk, given both the regional outlook described previously
and its relatively young assets9.
56. This risk does not only arise from a domestic perspective, but also from an
international one. Carbon intensive assets are unlikely to be able to compete in
future low-carbon markets, as trade agreements or measures based on carbon
content criteria emerge. For those steel mills whose production is primarily export-
oriented, this shift in global markets would contribute to their position as stranded
assets.
57. Complying with emission reduction objectives and mitigating the risk of stranded
assets would imply massive retrofits or early retirements. In addition to increasing
the cost of the low-carbon transition, this equally involves high social impacts on
workers and communities. In view of the current structure of assets, it is therefore
critical to develop specific strategies for the management of existing assets.

9
Blast furnaces are on average 12 years in China or 15 years in India (IEA, 2020[8]).
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Box 2. Tackling excess capacity to foster steel decarbonisation

Steel industry decarbonisation requires a deep transformation, along with the
combination of multiple options. This industrial paradigm implies a long-term strategy
calling for a sound business environment, not compatible with excess capacity.
Indeed, the persisting structural imbalance weighs on various features and conditions
required for a successful transition, including on investments, technologies,
competitiveness, trade.
First, excess capacity hinders the shift towards near zero emission technologies.
Innovative processes in steelmaking routes and retrofits of existing assets involve
significant costs (IEA, 2020[8]). In a context of excess capacity affecting the profitability
of companies, the latter are not in a favourable position to bear such investments or
increase in production costs.
Moreover, excess capacity fuels stranded assets doomed to fail in a low-carbon era.
Ensuring a trajectory compatible with the Paris Agreement objectives entails a limited
increase in global steel demand, as well as a shift towards low-carbon emission steel
production ( (IPCC, 2022[9]), (IEA, 2021[10]), (E3G, 2021[23]), (MPP, 2021[24]), (Net Zero
Steel, 2021[25])). Hence, the very nature of excess capacity runs counter to this demand
trend. Besides, by fuelling carbon intensive facilities (OECD, 2022[15]), excess capacity
hampers the low-carbon transition. In fine, excess capacity leads to a harder and more
costly transition.
Likewise, excess capacity worsens competition in low-carbon markets. The bleak
financial health fuelled by excess capacity is likely to strengthen the barriers to entry, in
a context of low-carbon transformation and related high investments. This could not
only harm market competition, but also innovation (a key ingredient for steel
decarbonisation). Furthermore, effects of excess capacity on business competitiveness
may feed trade tensions related to the low-carbon transition, ultimately impeding market
openness and efficiency.
In developing countries, excess capacity threatens steel industry decarbonisation
in the hardest way. Developing economies are associated with the largest cumulative
investments required between by 2050 for steel decarbonisation (IEA, 2020[8]). Thus,
they are even more exposed to the effects of excess capacity on their investment
potential. As depicted previously, the predominance of carbon intensive facilities
increases the risk of stranded assets. Excess capacity further strengthens this risk, as
companies may not be in a way to bear the costs of retrofitting their plants. Finally, by
fuelling stranded assets, excess capacity undermines the steel export potential of these
countries.
All in all, such aspects underline how tackling excess capacity is key for a successful
decarbonisation of the global steel industry.
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7. Are the next technologies ready to take over?

Previous assessment underscored the mismatch between the current structure of assets and
its compatibility with a net-zero pathway. To what extent are steelmaking projects based
on breakthrough technologies ready to reverse this trend ?

Projects implying innovative routes keep on growing

58. Achieving near zero emission steel production strongly relies on the uptake of
innovative routes. More than 60% of total emission reductions required between
2020 and 2050 are indeed expected to result from technologies that are not mature
at the commercial scale ( (IEA, 2020[8]), (IEA, 2021[6])).
59. As of mid-2022, there were around 40 innovative near zero emission steelmaking
projects worldwide (Figure 23). This project pipeline covers announced projects
involving a facility plant based on an innovative near zero emission production
route (hydrogen-based DRI EAF, CCUS, or others such as direct iron ore
electrolysis (IEA, 2022[21])).
60. The number of such projects has grown steadily in recent years, more than
doubling between 2020 and mid-2022. This trend is consistent with the increasing
announcements in terms of emission reductions, both from governments and steel
companies (Sections 3. , 4. ).
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Figure 23. Number of innovative near zero emission steelmaking projects
50 100%

40
75%
Number of Projects

30

Share (%)
50%

20

25%
10

0 0%
as of end 2020 as of end 2021 as of mid 2022

Number of innovative near zero emission steelmaking projects

Share in total low-carbon emission steelmaking projects (%)

Note: ‘Innovative near zero emission steelmaking projects’ refer to announced projects involving a facility
plant based on an innovative near zero emission production route (e.g hydrogen-based DRI EAF, CCUS, iron
ore electrolysis).
‘Low-carbon emission steelmaking projects’ cover innovative near zero emission projects, as well as innovative
routes for interim emission reduction measures, and transformation site towards EAF.
Source: Calculations based on various sources of information (Metal Expert, Kallanish, Platts, media,
companies and regional steel associations websites).

61. When considering a broader range of steel decarbonisation projects (including

innovative routes for interim emission reduction measures - such as hydrogen fuel
blending in BF-, or plant replacement towards EAF), innovative near zero
technologies represented nearly 70% of the portfolio (Figure 23). This share has
decreased over the last two years (85% in 2020), mainly due to the increasing
number of projects related to process adaptation for existing plants (such
adaptations are indeed not based on near zero emission routes). Although providing
moderate emission reductions, these adaptations measures (typically BF with
hydrogen blending) are key enablers to achieve intermediate carbon emission
reduction targets in the short term.
62. It is worth noting that most of the projects rely on partnerships between steel
producers and other companies, enabling risk mitigation from both a financial and
technical perspective. These partnerships are also intended to leverage synergies
for industrial hubs or shared infrastructure (e.g. for hydrogen). Most of these
partnerships entail energy companies, highlighting the crucial interaction between
the latter and the steel sector. Upstream in the value chain, iron ore mining
companies are other recurring partnering stakeholders. In both cases, steel
companies are actively seeking to secure access to strategic inputs for near zero
emission steel production (such as low-carbon electricity, hydrogen, or high grades
of iron ores, see Box 3).
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The vast majority of projects is located in Europe, but first initiatives in China
are emerging
63. Europe stands at the forefront of innovative near zero emission steelmaking
projects since 2020, driving the global project pipeline growth. As of mid-2022,
Europe accounted for about 65% of the project portfolio (Figure 24), with
Germany and Sweden as the leading countries. This trend reflects the EU early
commitment in climate action, coupled with ambitious targets (carbon neutrality
by 2050, and at least 55% emissions reduction by 2030). Furthermore, its relatively
high share of BOF route in total steel capacity (about 50% (OECD, 2022[15]))
pushes for adopting such breakthrough technologies.
64. China accounted for almost 15% of the projects, and North America for 8%.
Alongside the pledge of carbon neutrality by 2060 and target of emission peaking
by 2030, major Chinese steel producers have launched significant initiatives, such
as the Baowu’s Global Low-Carbon Metallurgical Innovation Alliance (GLCMI)
(Baowu, 2021[26]). In terms of innovative projects, there is an increasing trend on
hydrogen based DRI route, as evidenced by HBIS or Baowu announcements.
65. Regarding active GFSEC members, their overall share was about 80% of total
innovative near zero projects, as of mid-2022.

Figure 24. Innovative near zero emission steelmaking projects – Regional breakdown
100%

80%

60%
Share (%)

40%

20%

0%
as of end 2020 as of end 2021 as of mid 2022

Europe North America China Oceania Others Active GFSEC members

Note: ‘Innovative near zero emission steelmaking projects’ refer to announced projects involving a facility
plant based on an innovative near zero emission production route (e.g hydrogen-based DRI EAF, CCUS, iron
ore electrolysis).
Source: Calculations based on various sources of information (Metal Expert, Kallanish, Platts, media,
companies and regional steel associations websites).
36  ASSESSING STEEL DECARBONISATION PROGRESS IN THE CONTEXT OF EXCESS CAPACITY –
A STEEL DECARBONISATION INDICATOR DASHBOARD
DRI technology is the cornerstone of innovative projects
66. DRI technology is by far the major route, representing nearly 75% of the near
zero emission project pipeline as of mid-2022 (Figure 25). While DRI-based
projects accounted for half of the pipeline project in 2020, they have more than
doubled in 2021, now driving the overall global project pipeline growth. Such
projects are predominantly located in Europe, and involve either a DRI plant only
or a DRI coupled with an EAF plant.
67. In terms of feedstock, the DRI strategy consists in either using exclusively green
hydrogen, or considering a gradual switch from natural gas to green hydrogen.
Besides innovation challenges, the impetus for hydrogen based DRI route brings
new strategic inputs, for which securing access becomes at stake (Box 3).
68. The remaining projects involved CCUS based technologies (nearly 20% of the
project portfolio), and less advanced routes in terms of technology readiness, such
as direct iron ore electrolysis.

Figure 25. Innovative near zero emission steelmaking projects – Technology breakdown
100%
Share in total innovative near zero emission

80%
steelmaking projects (%)

60%

40%

20%

0%
as of end 2020 as of end 2021 as of mid 2022

DRI based routes CCUS based routes Others

Note: ‘Innovative near zero emission steelmaking projects’ refer to announced projects involving a facility
plant based on an innovative near zero emission production route (e.g hydrogen-based DRI EAF, CCUS, iron
ore electrolysis).
Source: Calculations based on various sources of information (Metal Expert, Kallanish, Platts, media,
companies and regional steel associations websites).
 ASSESSING STEEL DECARBONISATION PROGRESS IN THE CONTEXT OF EXCESS CAPACITY –
A STEEL DECARBONISATION INDICATOR DASHBOARD  37

A low-level of industrial maturity calling for a massive technology scale-up

69. More than 60% of the innovative near zero emission steelmaking projects are
designed to run on an industrial scale, but are not yet in operation (Figure 26).
Project announcements for industrial scale plants have more than tripled in the last
two years, underlining both advances in technology readiness and the growing
engagement of steel companies towards decarbonisation (Section 4. ). Early
industrial stage projects represent a further third, implying pilot or demonstration
scale facilities. Only a few projects are actually operating at an industrial scale.
The first established one operates using CCS since 2016 in the UAE (ADNOC,
2022[27]), whose captured CO2 is used for Enhanced Oil Recovery purposes (and
thus not driven by steel decarbonisation purposes).
70. Overall, the low-industrial maturity level observed for the project pipeline
highlights the mismatch with a net-zero by 2050 trajectory. Indeed, the current
deployment rate of innovative production routes is well behind the pace required,
which would imply for instance, ‘more than two new 1 Mt steel plants based on
full hydrogen reduction being installed every month on average through to 2050’
(IEA, 2020[28]). Such a gap reveals the crucial need to scale-up breakthrough
technologies, and the central role of innovation in the low-carbon transition.

Figure 26. Innovative near zero emission steelmaking projects – Industrial maturity level

100%
Share in total innovative near zero
emission steelmaking projects (%)

80%

60%

40%

20%

0%
as of end 2020 as of end 2021 as of mid 2022

Early industrial stage Industrial scale - Not yet in operation

Industrial scale - In operation

Note: ‘Innovative near zero emission steelmaking projects’ refer to announced projects involving a facility
plant based on an innovative near zero emission production route (e.g hydrogen-based DRI EAF, CCUS, iron
ore electrolysis).
Source: Calculations based on various sources of information (Metal Expert, Kallanish, Platts, media,
companies and regional steel associations websites).

Towards a risk of increased capacity?

71. The low level of industrial maturity observed (Figure 26) inherently limits the
impact of such projects on steelmaking capacity increase. However, this trend
could be challenged by the upscaling of innovative technologies, fostering the
deployment of near zero emission steel plants at commercial scale.
38  ASSESSING STEEL DECARBONISATION PROGRESS IN THE CONTEXT OF EXCESS CAPACITY –
A STEEL DECARBONISATION INDICATOR DASHBOARD
72. Equally, as innovative technologies disseminate worldwide, such projects are
likely to intensify in some regions, or expand in new ones.
73. Therefore, the development of new plants’ projects for decarbonisation purposes
could be a ground for capacity increase. The management of existing assets -
especially plant replacement strategies - will be critical in shaping the potential
resulting net-capacity increase.

Box 3. Change in production routes, change in strategic inputs

Beyond technological aspects, the shift towards near zero emission steel production
equally entails a shift in terms of strategic inputs. As highlighted in various net-zero
scenarios, the uptake of EAF is a key component to achieve deep emission reductions
( (IEA, 2021[10]), (E3G, 2021[23]), (Net Zero Steel, 2021[25]), (MPP, 2021[24]), (IPCC,
2022[9])). Hence, low-carbon electricity is crucial for steel decarbonisation, and even
more central when considering electrolytic hydrogen-based steelmaking. Scrap is an
other strategic input, given the significant contribution of the secondary route in
emission reductions. In addition, high grades of iron ores and hydrogen are essential
inputs for near zero emission primary steel production.
Availability and affordability of such strategic inputs are at stake, not only to ensure
a resilient steel value chain, but also to support an effective decarbonisation of the sector.
Security of supply covers various dimensions, from sufficient quantities to suitable
quality (for scrap and iron ore), as well the required infrastructure for inputs access
(scrap collection, hydrogen transport, grids...). Ensuring trade openness is also critical
to address potential regional imbalances and avoid market tensions. Affordability of
strategic inputs is equally of major importance, given that raw material and energy
inputs are key drivers of steel production costs (60-80%, (IEA, 2020[8])).
The specific case of green hydrogen-based DRI EAF illustrates how a shift in strategic
inputs may reshape the global steel value chain, and possibly implying new
configurations and trade routes. For instance, regions combining abundant and
affordable renewable electricity for green hydrogen production, as well as high grades
of iron ores, could produce direct reduced iron and export HBI. Alternatively, well
positioned countries for green hydrogen production could export such a feedstock for
DRI production. This configuration could be particularly disruptive in terms of supply
chains location. Indeed, some regions with high potential for green hydrogen production
are not necessarily currently part of the upstream steel value chain (in particular when
considering Africa) (IRENA, 2022[29]). Therefore, this could result in new trade routes
for the upstream steel supply chain.
As the move towards decarbonisation is growing, various steel companies seek to
secure access to such strategic inputs. Recent announcements include ArcelorMittal
acquiring scrap facilities (ArcelorMittal, 2022[30]) or partnering for DRI production
(ArcelorMittal, 2022[31]). H2GS partnerships with energy companies are other
examples, both for low-carbon electricity (Statkraft, 2022[32]) and green hydrogen
production (Iberdrola, 2021[33]).
 ASSESSING STEEL DECARBONISATION PROGRESS IN THE CONTEXT OF EXCESS CAPACITY –
A STEEL DECARBONISATION INDICATOR DASHBOARD  39

8. To what extent does carbon pricing apply to the steel sector?

Addressing implementation gaps (including for scaling-up innovative technologies)

especially relies on an enabling policy framework. Carbon pricing mechanisms being one
of the policy tools used to support emission reductions, how does it apply to the steel sector?

Only a small fraction of global steelmaking capacity is subject to carbon

pricing…
74. Aiming to incentivise the shift towards lower emitting technologies, carbon pricing
is one of the policy tools used to support emission reductions. As of end of 2021,
66 carbon pricing mechanisms were implemented worldwide ( (The World Bank,
2022[34]), (ICAP, 2022[35])). These initiatives cover both carbon taxes and
Emissions Trading Systems (ETS), and are applied at the (inter)national or/and
subnational level. All in all, they covered 2110 different countries.
75. However, not all of them are relevant when focusing on steel decarbonisation. For
instance, some of them do not relate to a steel producing country, do not apply to
the steel sector, or are implemented only at a pilot stage.
76. As of end of 2021, 17 steel producing countries11 have implemented carbon
pricing mechanisms at full scale, applying to the steel sector. 1112 out of these 17
countries are active GFSEC members (Figure 27).
77. Furthermore, when applied to the steel sector, carbon pricing often includes
exemptions. This may involve free allocations, thresholds on plant capacity, or
minimal thresholds on carbon emissions. Thus, even if a carbon pricing mechanism
is in force for the steel sector in one specific jurisdiction, the total steel production
and capacity of this jurisdiction may not fall under the category ‘covered by a
carbon price’.
78. To evaluate an order of magnitude of the carbon pricing coverage for the steel
sector, the total steel capacity and production of each jurisdiction accounted in
Figure 27 is considered. In this way, this could be defined as the ‘maximum share
of global steel capacity/production covered by a carbon price’, namely without
prejudging of the level of capacity/production subject to exemptions.
79. Without accounting for potential exemptions, carbon pricing covered around 20%
of global steelmaking capacity and production in 2020 and 2021 (Figure 27). Given
that it constitutes a maximum share, this relatively low order of magnitude
underlines the current limited contribution of carbon pricing as a tool to foster
steel industry decarbonisation.

10
The European Union and its Member States are accounted for 1 entity.
11
The European Union and its Member States are accounted for 1 entity.
12
The European Union and its Member States are accounted for 1 entity.
40  ASSESSING STEEL DECARBONISATION PROGRESS IN THE CONTEXT OF EXCESS CAPACITY –
A STEEL DECARBONISATION INDICATOR DASHBOARD
Figure 27. Carbon price applying to the steel sector – Number of steel producing countries covered
and related maximum share of global capacity and production
20 100%
Number of steel producing countries covered by a carbon price

15 75%
applying to the steel sector

Share (%)
10 50%

5 25%

0 0%
as of end 2020 as of end 2021

Number of steel producing countries covered by a carbon price applying to the steel sector
Of which active GFSEC members
Maximum share of global steelmaking capacity covered by a carbon price (%)
Maximum share of global crude steel production covered by a carbon price (%)

Note: Steel producing countries accounted involve carbon taxes or Emissions Trading Systems (ETS) that are
implemented at full scale (not pilot stage).
The European Union and its Member States are accounted for 1 entity.
When carbon prices are not applied at the national level but at the subnational level, only the capacity of the
related subnational jurisdiction is accounted.
Level of capacity/production subject to carbon price exemptions is not taken into account (maximum share).
Source: Calculations based on (The World Bank, 2022[34]), (ICAP, 2022[35]), (worldsteel, 2022[14]),
(EUROFER, 2021[16]), (OECD, 2022[15]).

…with prices not in line with a net-zero ambition

80. This trend is further reinforced when considering the level of price applied (Figure
28). In particular, none of the carbon prices accounted above reached the threshold
of USD 120 per tonne of CO2. This threshold is the level of carbon price which
would be required in 2030 to be in line with a net-zero pathway by 2050, should
carbon pricing play a major role in the overall decarbonisation effort (OECD,
2021[36]). Even by selecting a threshold of USD 60 per tonne of CO2 (which would
be consistent with a net-zero pathway by 2060 (OECD, 2021[36])), it is still less
than 10% of global steelmaking capacity and production that is subject to such a
price level.
 ASSESSING STEEL DECARBONISATION PROGRESS IN THE CONTEXT OF EXCESS CAPACITY –
A STEEL DECARBONISATION INDICATOR DASHBOARD  41

Figure 28. Maximum share of global capacity and production covered by a carbon price –
Price breakdown
25%

20%

15%

10%

5%

0%
Maximum share of global steelmaking capacity Maximum share of global crude steel production
covered by a carbon price, 2021 (%) covered by a carbon price, 2021 (%)
less than 30 USD/tCO2 [30-60] USD/tCO2 [60-120] USD/tCO2 above 120 USD/tCO2

Note: Level of capacity/production subject to carbon price exemptions is not taken into account (maximum
share).
Thresholds of 30, 60 and 120 USD/tCO2 reflect the alignment with various decarbonisation scenarios, see
(OECD, 2021[36]).
Source: Calculations based on (The World Bank, 2022[34]), (ICAP, 2022[35]), (worldsteel, 2022[14]),
(EUROFER, 2021[16]), (OECD, 2022[15]).

81. The risk of loss of competitiveness on global markets, as well as carbon leakage
concerns, are some reasons underpinning carbon price exemptions observed for the
steel sector. It thus highlights the central role of international cooperation in
enhancing the global level playing field, as one of the means to ensure an efficient
low-carbon transition.
42  ASSESSING STEEL DECARBONISATION PROGRESS IN THE CONTEXT OF EXCESS CAPACITY –
A STEEL DECARBONISATION INDICATOR DASHBOARD

9. Conclusion

82. With global capacity expected to increase for the fourth year in a row, excess
capacity continues to be a significant challenge for the global steel industry.
The structural imbalance affects steel prices, steel companies’ profitability
margins, as well as the global playing field. Excess capacity weighs on various
features needed for an efficient low-carbon transition, such as investments,
innovation, or competition. In a context of deep transformation required for the
steel industry to meet climate goals, tackling excess capacity is crucial to foster
decarbonisation.
83. Despite progress in a number of areas, this steel decarbonisation indicator
dashboard shows that the steel sector is not on a trajectory compatible with Paris
Agreement objectives. So far, the response is not commensurate with the scale of
the challenge, requiring a 90% of emission reduction in steel production from
2020 levels by 2050.
84. Countries’ net-zero pledges are booming, with more than 90% of global
steelmaking capacity and production located in jurisdictions that have announced
such targets. Similarly, steel companies - the key drivers of steel production and of
steel decarbonisation - have increasingly announced net-zero targets.
85. However, there is a mismatch between countries and corporate commitments.
As of end 2021, 30% of global steel production was subject to net-zero targets at
the company level. This share has doubled over the last year, though more
commitments would help reduce the mismatch even more.
86. Beyond the pledges, near zero emission steel production has not yet taken off
sufficiently. Production routes compatible with a near zero pathway account for
20% of global output, away from the nearly 100% that would be required by 2050.
Besides, this current share stems from scrap based EAF only. Although scrap
based EAF plants can contribute to decarbonisation, reaching near zero emission
needs a more structural shift that relies on diverse production routes.
87. In terms of asset structure, BOF plants account for two-thirds of global capacity.
While this share is undeniably linked to past decades legacy of the steel industry,
BOF capacity also represents more than half of the newly planned capacity. Such
projects are not compatible with decarbonisation objectives if not equipped with
CCUS. By adding new carbon intensive steelmaking plants, it further highlights
the extent to which excess capacity may hinder the low-carbon transition.
88. The project pipeline of innovative near zero emission technologies is promising
but faces a low-level of industrial maturity. Echoing corporate and countries
targets, projects focussing on such production routes have more than doubled in
the last two years. Overall, reaching net-zero by 2050 trajectory calls for scaling
up technologies significantly.
89. As one of the policy tools used to support emission reductions, carbon pricing
mechanisms currently cover less than 20% of global steelmaking capacity. When
considering the prices applied, none of them have reached the level that would be
required to be in line with a net-zero pathway by 2050.
90. Finally, closing the gap observed between the level of ambition and
implementation faces multiple challenges. These include scaling-up innovative
ASSESSING STEEL DECARBONISATION PROGRESS IN THE CONTEXT OF EXCESS CAPACITY –
A STEEL DECARBONISATION INDICATOR DASHBOARD  43
technologies, investments, competitiveness, ensuring a global playing field,
markets for near zero emission steel, strategic inputs, or social aspects. Envisioning
a tailored approach to decarbonisation is equally essential towards implementation,
in light of regional differences in steelmaking routes, access to resources, or the
variety of company profiles.
91. Likewise, addressing structural issues such as global excess capacity is crucial for
steel companies to be able to sustain this transformation.
92. Excess capacity and steel decarbonisation are both global challenges requiring a
global response. Collaboration among countries, as well as between public and
private stakeholders, will be essential to foster synergies and accelerate progress
towards a net-zero pathway. Equally, addressing excess capacity is critical to pave
the way for a successful steel decarbonisation, ultimately meeting climate goals.
44  ASSESSING STEEL DECARBONISATION PROGRESS IN THE CONTEXT OF EXCESS CAPACITY –
A STEEL DECARBONISATION INDICATOR DASHBOARD

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