Improving the environment and cutting emissions may continue to be a focus for metals and mining industries as economies recover from COVID-19, with greater scrap metal use, new technologies and lower coal usage likely to be the key trends.
The pressure on governments and companies after global industrial activity plunged and budgets were slashed on COVID-19 may threaten new projects or delay existing ones.
Leading a recovery from the crisis, a focus on renewable energy and new industrial technologies may find wider support, which the steel industry needs to meet its future obligations and targets to remold around new fossil fuel-free projects, such as HYBRIT, after industry costs rose and steel margins narrowed.
The European Steel Association Eurofer said May 26 that it favored the EU Recovery Plan, and wanted a Green Deal on Steel and matching support measures for the steel industry and its value chains, such as automotive, construction and mechanical engineering sectors.
This approach may help take care of the scope 3 emissions in the value chain, which are increasingly central to the economic, social and governance targets for metals and mining companies.
The steel industry accounts for close to 10% of global carbon emissions via direct use of fossil fuels, with further impact from mining, processing, heating and power generation in transportation and plants.
Eurofer said in a statement that it welcomes the focus on the green transition and digital transformation as essential parts of the Recovery Plan for a "climate-neutral, digitalized and resilient EU economy."
Many sustainability-related projects in metals and mining may be pushed harder if there are less growth projects due to market uncertainty from COVID-19, said BMO Capital Markets head of commodities research Colin Hamilton.
"When uncertainty happens, growth-related capex will be cut or deferred, and in many cases spot prices are not at levels to incentivize projects," he said in an interview with S&P Global Platts.
The metals and mining industry had come into 2020 with relatively good balance sheets compared with previous downturns, and some of the sustainability-related project costs will come down as there will be less pressure on engineering and less on R&D in a downturn, said Hamilton.
"Actually I see an opportunity for some of the sustainability projects pushed forward while there are less pressures in other areas," he said.
The process of reducing iron with coal remains the largest source of CO2 emissions for the steel industry.
A combination of lower steel and pig iron output and greater scrap usage may contribute the most to lowering emissions, he said.
Eurofer said with the right approach and with a recovery from COVID-19, the European steel industry may reduce its direct and indirect carbon emissions by up to 30% by 2030, with further cuts by at least 80% to 95% by 2050, with support from hydrogen fuel for direct iron reduction.
The EU saw pig iron output fall almost 11% in the first four months of 2020, which led to lower emissions.
This is ahead of further clarity around European carbon permit allocations in the next phase of the Emission Trading Scheme for steel and other large industries.
As the recovery from the coronavirus takes hold, returning steel operations to higher levels may see emissions per ton of steel fall on a number of factors, with coke replaced more by lower priced natural gas, and incentives to use higher-grade raw materials and scrap.
BMO's Hamilton expects more pressure on primary steel and metals production, in general.
The automotive industry, the construction industry and key metals end-users will put pressure back on the metals and mining industry to help reduce scope 3 emissions, said Hamilton.
"The quickest and easiest way to get the carbon footprint down is to use more secondary material," he said, referring to ferrous and non-ferrous scrap.