Big steel buyers make a request for 1M tons of green steel

Curbing carbon emissions from vehicles and buildings involves more than just ditching fossil-fuel-burning engines and boilers. It also requires cleaning up key materials such as the carbon-intensive steel used in auto body parts and construction beams.

The world’s biggest users and producers of steel are increasingly waking up to this fact. Major steel buyers are joining initiatives to signal their collective demand for products using lower-emissions manufacturing methods. In the United States and globally, giant steelmakers are developing ambitious projects to produce the high-strength metal without using coal-based furnaces.

Yet in many ways the industry remains in limbo. Buyers are reluctant to commit to paying higher prices for cleaner steel, and producers are hesitant to actually build their novel, costly facilities until customers sign on the dotted line — a dynamic underscored this month by the recent waffling over a green steel project in Ohio.

A new effort from tech giants and construction firms aims to bridge that divide.

On Tuesday, during Climate Week NYC, members of the Sustainable Steel Buyers Platform launched a competitive bidding process asking steelmakers to deliver a total of 1 million metric tons per year of ​“near-zero emissions” steel to North America by 2028. The idea is for steel companies to submit proposals to the group of buyers, then negotiate a price premium and other details in a final offtake agreement — a crucial contract that’s needed to get projects moving.

“The initiative is making sure that this corporate demand is being pulled effectively to speed up the investment” in new steel plants, said Chathu Gamage, a principal in the Climate-Aligned Industries Program at RMI. The clean-energy think tank convened the platform a year ago and has been working to finalize the request for proposal since then.

Two big steel users joined the platform this week: Amazon, which is rapidly building more warehouses and logistics hubs nationwide, and the industrial manufacturer Johnson Controls. Existing members include Microsoft — the tech titan driving much of the U.S. data center boom — as well as the U.S. real estate company Trammell Crow, solar hardware maker Nextracker, prefab-home builder Dvele, and energy developer Invenergy.

“We are excited to partner with the Sustainable Steel Buyers Platform to advance lower-emissions steel solutions,” Chris Atkins, Amazon’s director of worldwide operations sustainability, said on Tuesday in a statement. Reducing steel-related pollution is part of the e-commerce giant’s larger efforts to reach net-zero carbon dioxide emissions by 2040, he said.

The world produces almost 2 billion metric tons of steel every year. The process of making all that metal contributes up to 9 percent of human-caused CO₂ emissions every year, along with a slew of health-harming pollutants.

Blast furnaces contribute the vast majority of this dirty output. In a traditional furnace, iron ore is combined with purified coal (or ​“coke”), limestone, and scorching heat to produce molten iron. The iron then moves into a basic oxygen furnace to become steel — a sturdy, ubiquitous metal used for making solar-panel racks, wind turbines, and transmission towers as well as building beams, electronics, appliances, and much more.

Coal-based furnaces are, unsurprisingly, extremely carbon intensive, resulting in nearly 2 metric tons of CO₂ emissions for every 1 metric ton of crude steel, according to industry estimates.

The Sustainable Steel Buyers Platform is requesting that steelmakers deliver products with a dramatically smaller footprint: less than 0.4 metric tons of CO₂ per ton of steel, a threshold defined as ​“near-zero emissions” by the International Energy Agency and Responsible Steel, a nonprofit global initiative that certifies and audits steel producers.

In the United States, only two planned facilities could potentially fit that bill, and neither is close to breaking ground yet.

Earlier this year, the Biden administration announced awards of up to $500 million each for two commercial-scale projects that will demonstrate cleaner methods for making iron and steel. One of the potential recipients, SSAB, is planning to build a facility in Mississippi that will use only clean hydrogen — made from renewable electricity and water — to produce iron. The new ​“direct reduced iron” (DRI) facility will be modeled after the Hybrit pilot plant in Sweden, which is the world’s only existing ironmaking operation to run primarily on clean hydrogen.

Cleveland-Cliffs, the other potential winner, is taking a different approach. The manufacturer plans to install a new DRI facility in Ohio to replace its coal-based blast furnace. To start, however, the company intends to run the DRI plant on fossil gas, then gradually mix in clean hydrogen as supplies become available. By using only clean hydrogen, the facility could potentially curb CO₂ emissions from ironmaking by over 90 percent.

Gamage of RMI said that the Sustainable Steel Buyers Platform is hoping to attract bids from these marquee projects and that the 2028 deadline can be somewhat flexible. Cleveland-Cliffs aims to complete its $1.6 billion project by 2029, while SSAB hasn’t set a timeline for its Mississippi facility.

Recently, however, the fate of Cleveland-Cliffs’ project was thrown into question after the company’s CEO said he was considering abandoning the project — and forgoing federal support — over concerns that automakers and other major steel buyers aren’t yet willing to pay a higher price for the cleaner steel it planned to produce.

The company later reaffirmed its commitment, but the incident pointed to some of the major challenges of cleaning up the steel industry in the U.S. and internationally.

In Germany, a planned $3.3 billion hydrogen-fueled DRI plant also raised concerns after the steelmaker Thyssenkrupp flagged that costs are expected to rise. Last week, German government officials urged the company to demonstrate ​“that it wants to stick with the project,” Reuters reported.

Thyssenkrupp has signed nonbinding agreements with steel buyers representing about half of the facility’s future production capacity. But none of those agreements have prices attached to them — making it hard to know how much money Thyssenkrupp will actually fetch for its greener products, said Samuel Flückiger, the company’s head of EU climate and circular economic policy.

Flückiger was speaking during a September 18 webinar hosted by the International Council on Clean Transportation. The research organization recently released a report highlighting the tepid demand among automakers for green steel. Only four of the 17 major automakers selling vehicles in Europe and North America have committed to start using any ​“fossil-free steel” by 2030. And even those commitments represent just 2 percent of the global steel used by all the major automakers.

“We definitely see growing interest in the topic of green steel,” Flückiger said. ​“But at the moment, the willingness to pay the green premium — the extra cost of having the green product — remains fairly low.”

In North America, at least, the Sustainable Steel Buyers Platform is an attempt to turn that general interest into bankable commitments from steel consumers, Gamage said.

“We’re trying to get these folks to the table to start thinking about what the term sheets end up looking like for these projects,” she said. ​“If we combine this demand with the federal incentives, we can start accelerating the final investment decisions for these assets to start coming online.”