The steel industry, responsible for about 7% of global energy-related CO2 emissions, is at a pivotal point. As the demand for decarbonization grows, the market for metallurgical coal—the traditional feedstock for steel production—is undergoing a significant transformation. Once considered essential, metallurgical coal now faces existential threats from emerging green technologies.
A recent Australian government forecast indicates that the long-term prospects for metallurgical coal are weakening. The world trade for metallurgical coal is expected to decline from 349 million tonnes in 2023 to 333 million tonnes by 2029, with Australian exports peaking in the next two years before entering a downward trend. This is particularly noteworthy given that Australia is the world’s largest exporter of metallurgical coal.
The Australian government’s March 2024 Resources and Energy Quarterly report acknowledges the favorable fundamentals of metallurgical coal but cautions of “risks to navigate,” specifically pointing to “higher electric arc furnace (EAF) and green steel production may harm the demand for metallurgical coal from steel mills using blast furnaces.”
The industry’s narrative, however, often paints a rosier picture. Glencore’s CEO Gary Nagle recently stated, “We don’t see demand erosion or demand destruction in material shape or form in the short, medium or longer term to be quite honest.” Yet, the forecasts tell a different story. Wood Mackenzie’s forecast sees a mere 4Mt increase in seaborne hard coking coal supply by 2033, which is less than a 2% rise, and by 2033 Australian supply is expected to be virtually unchanged, while North American supply is projected to drop by 21%.
Efforts to conflate metallurgical coal demand with the renewables transition are also in play, as companies and politicians alike suggest that steel from metallurgical coal is essential for building renewable energy infrastructure. Nevertheless, the tide is turning towards alternative steelmaking methods that reduce or eliminate the need for coal.
The Nature Communications study further emphasizes this shift, projecting the competitiveness of green hydrogen-based steel production in areas with high-quality renewable energy and iron ore deposits. If coking coal prices remain high, fossil-free steel could reach cost-competitiveness as early as 2030, particularly in regions with strong solar and supplementary wind resources. This shift is magnified by the potential rise in EAF steel production, which is estimated to account for up to 50% of steel demand by 2050.
In India, despite ambitious growth plans in coal production, the push towards self-reliance could paradoxically align with the need for cleaner energy alternatives. India’s steel industry, poised to double its capacity by 2030, could find green hydrogen-based steel production more economically viable if coking coal prices remain steep, possibly driving an earlier-than-expected pivot towards renewable energy technology in steelmaking.
Relevant articles:
– Don’t believe the spin: coal is no longer essential to produce steel
– Global green hydrogen-based steel opportunities surrounding high quality renewable energy and iron ore deposits, Nature.com, Thu, 04 May 2023 07:00:00 GMT
– India’s Coal Sector Bucking The Trend, World Coal, Wed, 13 Dec 2023 08:00:00 GMT
– 3 Coal Stocks to Watch From the Challenging Industry, Yahoo Finance, Mon, 11 Dec 2023 08:00:00 GMT