Steel and metals will need in future to be produced near sources of renewable, cheap power if decarbonization goals are to be met, a leading metals markets analyst told the Qatar Economic Forum on June 22.

This may lead to a natural “offshoring” of metals production away from where most consumers are located, said Richard Horrocks-Taylor, global head of metals and mining, Standard Chartered Bank.

During a panel on maximizing environmental, social and governance criteria in extractive industries, Horrocks-Taylor said he expected “a radical transition” would occur over the next 10-15 years as to where steel and metals will be produced and processed. This will increasingly be dictated by proximity to sources of generation of hydropower, nuclear and green hydrogen production, he said.

“There is potential for a number of regions close to very cheap renewable power sources becoming hubs for the production of metallics, potentially using green hydrogen and renewable power to produce iron, steel and aluminium,” Horrocks-Taylor said. Opening up some regions could bring the emergence of “some very significant metals-producing hubs….away from the current locations which are nearer the customers.”

Western Australia, the Middle East, parts of China and Africa may be top of the list for establishment of this kind of hub, according to Horrocks-Taylor. One of the differentiators for China is that it is continuing to expand its nuclear power industry which could be “part of the solution” in production of green hydrogen and of lower carbon or potentially zero-carbon steel, he said. Africa has significant potential for both solar and hydro power development, he said.

The steel industry can make some significant strides towards decarbonization via shifting production to scrap-based electric arc furnaces away from blast furnace-based production – a shift now being seen particularly in Europe, Horrocks-Taylor said. However, green hydrogen will need to be available for decarbonization goals to be fully met, for instance the EU’s net carbon-zero 2050 target, he said. The analyst noted that China’s Baowu Steel, the world’s largest steelmaker, has also adopted a 2050 net carbon-zero goal, ahead of the 2060 target for China as a whole.

Hydrogen economy ‘to take off’ in 2030

Julian Kettle, senior vice president and vice chair of metals and mining at consultancy Wood Mac, echoed that it’s only by greening energy supplies and using green hydrogen that steel and metals can fully decarbonize.

“Producers can only go so far down the decarbonization route by using scrap and carbon capture and storage, which is an interim solution,” Kettle said. “Decarbonization all depends on green energy … which in turn will require a huge amount of green metals, creating a new circularity.”

There are two phases to energy transition: firstly using gas instead of coal and focusing on battery raw materials and the battery economy, and secondly, from 2030, the hydrogen economy will take off and “we will end up with the choice between batteries and hydrogen,” according to Kettle.

Horrocks-Taylor added that significant backwards integration could also be expected to be seen in the metals space, including by end-users moving into battery metals mining. For instance, South Korean steelmaker Posco is now transitioning to battery materials, taking stakes in nickel producers to secure supply and build supply chains to create battery materials hubs, he said.
Source: Platts