Green steel receives a $50m boost from Australian government

Liberty steel reaches an agreement with the Australian governemnt for new electric arc furnace

Green Steel Deal

The London based company Liberty Steel has come to an agreement with the Australian government to facilitate a transition to an electric arc furnace at its Whyalla plant in South Australia.  

The 160-tonne electric arc furnace will replace the polluting coal-based factory, and help to decarbonise steel production at the factory. 

It is expected that the new furnace will result in a 90% reduction in direct CO2 emissions from steelmaking by 2025 compared to traditional coking ovens and blast furnace manufacturing.  

Liberty Steel has signed a $485 million contract with international equipment company Danieli for the construction of a new electric arc furnace, which the Australian government will contribute $50 million towards.    

Liberty’s executive chairman, Sanjeev Gupta, stated, “Today marks the beginning of a new era placing Whyalla at the heart of a global revolution in the steel industry, moving it from being the most polluting of all industries to among the cleanest and greenest.” 

South Australia Premier Peter Malinauskas stated that if the electric furnace could be powered by renewable energy, it would enable Whyalla to produce iron and steel without any carbon emissions. He said, “Because producing steel makes so much carbon, it’s a massive contributor to global carbon emissions so it’s hardly surprising that the Whyalla steelworks is our biggest emitter as a state. By decarbonising that, using hydrogen we set up the state to export green iron or green steel.” 

Why is there a need for Green Steel

The steel industry is responsible for 7% of the world’s greenhouse gas emissions, according to the International Energy Agency (IEA). In the UK, the sector accounts for 14% of industrial emissions and 2.7% of all greenhouse gas emissions. 

It is widely acknowledged that traditional steel production, which relies on coal to produce iron, is not compatible with the UK’s legally binding commitment to massively reduce CO2 emissions in the coming decades. 

There are two main options for producing low-carbon or “green steel”. A plant in Sweden is already making iron using hydrogen instead of coal. However, to achieve this in the UK would require a substantial investment in green hydrogen to ensure supplies of the gas from renewable sources. 

A more likely option for the UK’s two plants is a switch to electric arc furnaces. These furnaces could recycle the significant amount of scrap steel that the UK produces and could be powered by electricity from renewable sources. 

Both options would mean that the future of British steel would not involve coal. 

The Port Talbot steelworks in the UK is a major contributor to greenhouse gas emissions, with two tonnes of carbon dioxide emitted into the atmosphere for every tonne of steel produced, making it the country’s largest single carbon emitter. 

Labour MP Stephen Kinnock, who represents the Aberavon constituency that includes Tata’s Port Talbot steelworks and chairs the All-Party Parliamentary Group on Steel, believes that the UK has the potential to lead the new Green Industrial Revolution. However, he emphasizes that the government must support green steel with a policy framework and investment levels that are comparable to those enjoyed by competitors in other developed nations. 

International competition

Supporters of the UK’s steel sector are optimistic that the recent agreement with Liberty Steel will demonstrate to government officials how companies and governments can collaborate to protect steelmaking while transitioning to eco-friendly manufacturing.  

Last month, Rishi Sunak emphasized his desire for a thriving steel industry in the UK, and he added that the British Industry Supercharger Fund, recently announced by the government, could enhance the competitiveness of the country’s key energy-intensive industries.  

Under this scheme, ministers claim that 300 companies will benefit from targeted measures to ensure that energy costs for significant UK industries are comparable to those in other major economies around the world. 

However, according to Chris McDonald, the Chief Executive of the Materials Processing Institute, the UK is still lagging behind in green steel circles.  

The UK only has one planned green steel project, while the EU has 38, as revealed in the most recent Energy Climate and Intelligence Unit report. In fact, ten plants on the continent have already begun producing green steel.  

The data show the situation has barely improved since 2021, when the matter was last investigated, when the UK had no planned projects compared to the EU’s 23.  

The one UK planned project is part of the Zero Carbon Humber initiative and will take place at British Steel’s Scunthorpe plant. The plant will utilize blue hydrogen, produced from gas via steam methane reforming, combined with carbon capture and storage to capture some, but not all, of the resulting carbon emissions. 

In the past two years, the number of planned green hydrogen steel projects in the EU has doubled, with ten clean steel plants planned in Germany, nine of which are based on green hydrogen. 

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