The steel industry faces an impending overhaul as efforts to reduce carbon emissions intensify, according to Wood Mackenzie's latest Horizons report. The study, titled "Metalmorphosis: how decarbonisation is transforming the iron and steel industry," sheds light on the evolution of steel production methods and global trade networks.
Central to this transformation are advances in electric-arc furnace (EAF) technology, greater utilisation of green feedstock, and changing carbon policies. Presently, EAF production, which is less carbon-intensive, contributes to 28% of global steel output. This share is forecast to escalate to 50% by 2050, necessitating an investment of US$130 billion.
The transition to greener production methods will fuel demand for alternative feedstocks like Direct Reduced Iron (DRI) and high-grade scrap. Wood Mackenzie anticipates that the proportion of these greener feedstocks in the metals market will surge from 36% to 54% by 2050. This shift will generate new centres for low-carbon iron and scrap production, requiring a further estimated investment of US$80 billion in DRI capacity over three decades.
The report underscores that the siting of new green DRI production facilities will be strategically linked to low-carbon hydrogen availability. Both the Middle East and Australia emerge as strong contenders for hosting these projects.
In markets burdened by elevated carbon costs, the preference will shift towards importing green DRI over finished steel from high-emission producers such as China and India.
The decarbonisation of the steel industry—a sector responsible for roughly 8% of global carbon emissions—may be ambitious but is attainable. Adequate investment and policy alignment could radically alter existing trade patterns and value chains.