China's largest steelmaker Baowu eyes 50% scrap usage as green agenda gains momentum

In line with China Baowu Group recently unveiling a timeline for its carbon emissions reduction plans, the conglomerate has also revealed a stepped-up scrap usage agenda. The Baowu Group, the world's largest steel manufacturer, recently said its electric arc furnace (EAF) steel output accounted for only 6.5% of its total crude steel output of 115 million tonnes (mn t) in CY'20, a key reason why decarbonising its blast furnaces and converter routes was so crucial to it. The group aims to eventually boost scrap consumption to 50% in its converters, as per a report. Scrap is the most important input material for EAF-steel-making, usually hovering at around 80% of the charge mix. However, it can be raised to 100%, depending on the furnace technology.

How will China Baowu Group increase scrap usage?

• Baowu has been working on hydrogen-rich blast furnace and pure hydrogen furnace technologies that will boost scrap consumption in its converters to 50%. "To realise carbon neutrality, Baowu will strive to reach optimal energy efficiency, resort to hydrogen-enriched decarbonised coal gas in blast furnaces, hydrogen-based shaft furnace, near-net-shape manufacturing (a process that aims to make the initial fabrication of a component close in shape and size to the finished product), recycling of metallurgical resources and carbon collection," a source from China informed SteelMint.
  
  
• From CY'19, Baowu has been vehemently pushing for technology that can notably elevate scrap usage in its basic oxygen furnaces (BOF), the source in China further informed. "In its Echeng steel mills, the hot metal consumption per tonne of steel reached 720kg and the highest steel scrap consumption per tonne of steel can reach 300kg. If performance can be improved in electric heating, pre-heating, temperature retaining and temperature control technologies, it is possible to have steel scrap and hot metal in the ratio of 1:1 ratio," the source revealed.
  
  
• Further, the source informed, Oylianjin, the platform under Baowu set up to integrate the ferrous scrap resources of all its steel mills, is a leading company in China for establishing the network of steel scrap collection and processing and which is also venturing out globally.
  
  
• Baowu has given up plans to build the fourth and fifth blast furnaces at its Zhanjiang steelworks in southern China's Guangdong province. Instead, it will build its first hydrogen furnace, with an EAF as the downstream steelmaking process, at Zhanjiang, using natural gas, wind and solar power to generate green hydrogen.
  
  
• The steel giant is also planning to build an EAF mill along with a solar power plant in western China's Xinjiang.
  
  

China's determination to go green

China's steel industry accounts for 15-20% of the national carbon emissions annually. EAFs currently account for only 15% of the country's total steel-making capacity. Consequently, going forward, owning green-sourced (wind, solar) power plants will be the key to survival, Baosteel, a Baowu unit, recently said.

China aims to become carbon neutral by CY'60, and hit its peak carbon emissions by CY'30. To achieve such goals, it is imperative for large energy-intensive industries to evolve their carbon control measures.

Further, as captive green power becomes the watchword, regions within China, like western and coastal, where wind and solar energy is abundantly available, will become favourable locations for setting up of EAF mills.

Outlook

To achieve carbon neutrality by the entire steel industry, larger mills would still focus on blast furnace and converter routes, while smaller mills, especially long steel makers, would likely shift to the EAF route through capacity swaps, it is understood.

Also, despite mills reducing their emissions, they would still need to buy carbon credits which would increase the prices of steel. For instance, Baowu recently said if the carbon prices in China increase to $71/t (Euro60/t), production costs of hot rolled coils would shoot up by 40%. On 1 Dec'21, the EU carbon emission allowance was raised to around Euro76 ($87/t).