What investors should know about green steel 

The transition to green steel is a major commercial opportunity. ACCR report on how steel can decarbonise and improve long-term shareholder value.
26 March 2024
Investor green steel

As global industries shift away from fossil fuel dependency and towards Paris-aligned manufacturing approaches, a new ACCR report determines that now is a critical time window for investors in the green steel space.

Today, the steel industry’s impact on the climate is colossal; according to the International Energy Agency, steel accounts for 11% of total global emissions. However, by 2030 71% of steelmaking assets worldwide will come to the end of their operating lives. For the industry to survive, investment in the relining of coal-dependent blast furnaces is required, positioning the industry at a crossroads. 

If the steel industry renews its dependency on coal, the lifespan of blast furnaces means that steelmaking will remain a polluter giant for another 20 years. This is the moment for investors and companies to pivot away from fossil fuels, not only to meet decarbonisation goals but also for long-term shareholder value. 

Insights on green steel for investors 

The ACCR report details the decarbonisation potential of iron and steelmaking technologies, enabling investors to distinguish between genuinely ‘green’ investments and those that fall short on their climate efforts. It also outlines major trends including the geographical players making the biggest impact in steelmaking. Companies in the Austrian and Swedish markets remain dominant players with strategic investments in projects likely to achieve meaningful emissions reductions. 

Analysing 20 major companies, the ACCR report turns a lens on the four iron ore companies responsible for 41% of global iron ore production as well as the 16 steelmakers collectively responsible for 27% of global steel production, providing actionable recommendations for investors to drive emissions reductions all while engaging in value-accretive capital allocation. 

Recommendations for investors

The move towards green steel offers the potential for large investor returns. As market size and demand for green steel are both forecasted to increase, ACCR point out that this is a key moment for investors to capitalise on this major commercial opportunity. Conversely, the financial implications for those failing to decarbonise are already present and set to increase, says the report, citing the EU’s Carbon Border Adjustment Mechanism, which imposes a carbon price on steel imports based on their emissions. 

Critically, ACCR recommends investors and companies reallocate capital towards green steel processes that are truly effective, helping to end coal production in steel. Around 90% of emissions from steel production come from metallurgical coal, which is used in conventional blast furnaces. 

Investors should also understand the decarbonisation potential for different ‘green’ steelmaking processes. For example, investing in regions with large renewable energy resources is critical for developing the green steel industry, green hydrogen-based processes, supported by renewable energy, are the most promising; and carbon capture utilisation and storage or offsets appear to be amongst the least cost-effective solutions. 

Funding renewable energy projects; working towards standardised, comprehensive and robust emissions disclosure across the industry; catalysing immediate action towards decarbonisation with short-term commitments that are ambitious and science-based; and ensuring the transition of iron and steelmaking to green processes is just and equitable for communities and workers, are all steps investors should work towards in the transition towards green steel. 

Read the full report here, and find out more about ACCR’s steel decarbonisation tracker, where investors can stay on top of the most recent partnerships and announcements in steel.

26 March 2024