Energy-intensive steel industry looks to push consumption, reduce emissions

Around a month ago, the managing director of Tata Steel, India’s leading private steel manufacturer, said that there was not enough scrap and gas available to produce cleaner steel in India. Now, India, the second-largest steel-producing country, is showcasing its steel industry in Dubai where it is hosting a ‘Steel Week’ at the ongoing EXPO2020. These two facts underline two fundamental aspects of the Indian steel sector – on one hand, India is keen on increasing its per capita steel consumption, a sign of prosperity, as well as increasing its steel export and luring foreign investment. On the other hand, the production of clean steel, made using processes with low carbon footprint, remains a concern. 

As the second-largest steel producing country, India produced 118.1 million tonnes (MT) of steel in 2021 from January to December. Other major steel-producing countries are China with 1,032.8 MT, Japan (96.3 MT), the USA (86 MT), and Russia (76 MT). 

The Indian steel industry is poised to see tremendous growth in the coming year. A report published by the International Energy Agency (IEA) in 2020 predicts that India is one of the few regions – and the only one among today’s large producers – that undergoes a strong growth trajectory in the Sustainable Development Scenario. Crude steel production will increase from 111 Mt in 2019 to 180 Mt in 2030 and 350 Mt in 2050, it predicts.

However, when there is a global race to reduce carbon emissions and limit global warming, the Indian steel industry is facing its biggest hurdle in the form of its high carbon footprint. Additional Secretary Rasika Chaube had admitted the fact while speaking at a webinar organised by FICCI in 2021. 

The crisis became visible when Managing Director of Tata Steel TV Narendran got vocal and said that there is a lack of scrap and gas in India. So, the industry is dependent on iron ore and coal as steel feedstocks. Tata Steel is one of the top metal producers, globally. 

However, an associate professor at School of Public Policy and Administration at Carleton University, Canada, Alexandra Mallett gives a new perspective to the crisis. “There is not enough demand for ‘green steel’ in India,” she says while responding to questions asked by Mongabay-India. Green steel refers to the metal used with the lowest carbon footprint currently possible. Using maximum gas or renewable energy along with scrap helps in producing ‘green steel’.   

Steel industry is a major carbon emitter

In its Iron and Steel Technology Road Map report published in 2020, the International Energy Agency (IEA) said that the iron and steel sector is responsible for around one-fifth of industrial energy consumption in India, with coal accounting for 85% of its roughly 70 million tonnes of oil equivalent (Mtoe) total energy consumption. 

The steel sector in India is highly emissions-intensive and contributes almost a third of direct industrial CO2 emissions, it says. 

Responding to questions asked by Mongabay-India, Alexandra Mallett explains the challenging features of the steel industry in India. She says, “One of the key challenges for India versus other countries that produce steel is India’s heavy reliance on coal throughout various steelmaking processes. This includes steel produced through the Blast Furnace-Basic Oxygen Furnace (BF-BOF), where there aren’t really many alternatives to coal. Another way of steel production is through sponge iron (Direct Reduced Iron) and through the Electric Arc Furnace (EAF) or Induction Furnace (IF). These processes in India use more primary iron ore versus scrap steel in terms of ratios as inputs compared to other countries.”

Along with Prosanto Pal from The Energy and Resources Institute (TERI), Alexandra Mallett published a policy brief last December which states, steel production in India consists of BF-BOF (45%), EAF (29%), and IF (26%). 

Other than its dependence on coal, there are other characteristics of the Indian steel industry which have added to the woes. The sector itself is heterogeneous and uses a wide range of equipment with some rather dated and inefficient technology. Many other firms recently installed new blast furnaces so aren’t likely to change in near future. Another characteristic of the Indian steel industry is that there are numerous players from small to medium steel mills that are often less efficient and more polluting, the policy brief highlights. 

Another worrying aspect of the Indian steel sector is that there is a very low proportion of scrap used as input. 

Responding to questions in Parliament in February, the Minister of Steel Ram Chandra Prasad Singh said that over the years the Indian steel industry has reduced its energy consumption and carbon emissions substantially. The average CO2 emission intensity of the Indian steel industry has reduced from around 3.1 Tonne/tonne of crude steel (T/tcs) in 2005 to around 2.6 T/tcs by 2020.

The Minister informed that the steel industry has been able to achieve the total targeted energy saving from PAT Cycles from 2012 to 2020. The Perform, Achieve and Trade (PAT) is a flagship scheme under National Mission for Enhanced Energy Efficiency (NMEEE). 

PAT is a market-based mechanism for enhancing energy efficiency. And, the government sets energy saving targets and companies have to achieve them. In return, achievers get Energy Saving Certificates (ESCerts). 

NMEEE is one of the eight missions of the National Action Plan for Climate Change (NAPCC). 

Pushing economic growth while reducing carbon emissions

Since the liberalisation in the 90s, the Indian economy has seen significant growth. Similar is the story of steel consumed in India. It plays a crucial role with other raw materials needed to construct a development story. In 1991-92, India’s total steel consumption was merely 14.83 MT. It witnessed a seven-fold increase and reached 100.17 in 2019-20. In the same period, the Indian economy grew nine-fold, exhibiting the link between economic growth and steel consumption. 

Despite this growth, India’s per capita steel consumption remains a concern. In 2019-20, India’s per capita steel consumption was 74.7 kg. Compared to the world’s per capita steel consumption of 230 kg in 2020, it is quite low. 

The gap is even starker when compared to rural and urban India. In 2020-21, per capita consumption of steel in rural areas was just 21.5 kg while the same in urban areas was 176 kg.

This is a peculiar situation for policymakers in India. On one hand, the country is trying hard to increase its per capita steel consumption, and on the other, it is trying to reduce carbon emissions from the sector. 

The Minister of Steel stated these details in Lok Sabha in December. He said that his ministry is working with the Ministry of Rural Development and the Ministry of Agriculture to increase the awareness regarding usage of steel in rural areas. The Centre has also constituted a Joint Working Group (JWG) for developing standardised design and layouts of housing configurations with steel structures. Public sector steel companies like Steel Authority of India Limited (SAIL) and Rastriya Ispat Nigam Limited (RINL) are trying to engage with rural masses and explain the advantages of using steel to them. 

Meanwhile, the government has also been making several policy interventions to meet global challenges like climate change. 

A decade ago, the erstwhile Planning Commission set up an expert group to suggest low carbon pathways consistent with inclusive growth. In the chairmanship of Dr. Kirit Parikh, the group submitted its final report in 2014 where the steel sector received significant attention. 

Subsequent to it, the National Steel Policy-2017 was released. It envisages that India’s steel production capacity will reach 300 MT by 2030. It also aspires to increase per capita consumption of steel to 160 kgs, and reduce average CO2 emission intensity to around 2.4 t/tcs by 2030-31.

In 2019, the government notified the Steel Scrap Recycling Policy which provides a framework to facilitate and promote the establishment of metal scrapping centres in India. The aim is to increase scrap as raw materials for finished steel products. 

However, when two parliamentarians Jayant Sinha and Kesineni Srinivas asked about achievements made under this policy in Lok Sabha in July 2021, the Minister just stated, “The decision to set up scrap centres is of entrepreneurs based on commercial considerations.”

Now, the government recently brought Green Hydrogen Mission for promoting the utilisation of green hydrogen in the country. The iron and steel sector is a big stakeholder in it. Globally, there is a huge focus on green hydrogen to produce steel for the purpose of reducing emissions.

After the prime minister’s announcement of achieving net zero target at the COP 26, the Steel Association of India (SAI), recently prepared a list of policy enablers which can push green steel in the country. It includes preferential public procurement of green steel, introduction of standards for green steel and more. 

As the growth of domestic steel production is a ‘given’, it is highlighted in the 2017 National Steel Policy as well. It makes sense for a growing country because steel production tends to happen close to where the demand is. But if the government is really serious about decarbonizing and making growth more sustainable, then concurrent high-level attention regarding how to do so is needed, said Alexandra Mallett. 

She underlines another possible challenge of the coming future – the social implication of energy transition. In India, steel production is concentrated in certain parts of the country, primarily in India’s steel belt, which includes states of Odisha, West Bengal, Jharkhand and Chattisgarh. The region has evolved due to iron ore and to a lesser extent coal deposits as well as seaports where certain required products such as coking coal [imported due to being of higher quality] come into the country and some steel exports leave the country from. So, any transitions away from conventional steel-making processes in India will have implications for jobs, current supply chains, production patterns, etc.

Ironically, these are the Indian states lagging in adding renewable capacity and have poor energy access. 

Banner image: The steel sector in India is highly emissions-intensive and contributes almost a third of direct industrial CO2 emissions, a report says. Photo by Jean Beaufort/Publicdomainpictures.net.