9/12/2014 Climate and the Steel Industry | GreenBiz

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February, 2006

The Big Picture

The United States historically has been one of thelargest steel producers in the world, onceproducing nearly 13% of total world production.There are more than 1,200 firms operating in theU.S., although the absolute number of integratedmills (producing steel in basic oxygen furnaces) isabout 20. The U.S. demand for steel productsplays a major role in automobile manufacturingand in construction. Due to worldwideovercapacity, steel imports now account for about

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Climate and the Steel Industry

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a fifth to a quarter of all steel used annually in theUnited States. Global steel production in 2005 wasup 6.1% over the year before, sustained by Chinawhere production increased by 25.5% and Indiawhich increased by 16.6%.

Material use, energy use, and carbon emissions bythe steel industry depend on production rates.Increased production rates tend not only toincrease input requirements and emissions but areaccompanied by higher capacity and profits andthe potential for capital investments in newtechnologies and shifts in the mix of technology,for instance from basic oxygen furnaces (BOF) toelectric arc furnaces (EAF). In terms ofenvironmental sustainability, scrap steel is one ofthe most recyclable and recycled materials inNorth America, with an overall recycling rate ofabout 68%.

Steel is a key element of any domestic emissionsreduction scenario because the steel industry(including iron production) is among the largestenergy consumers in the manufacturing sector.The manufacture of steel involves many energyintensive processes that consume raw or recycledmaterials, such as iron ore and scrap metal, fromaround the world. Raw materials with intrinsiccarbon contents (e.g., iron carbide, carbonelectrodes, charge carbon, or limestone), theprimary resources for steel production, can havematerial significance in the calculation of climateimpacts. Virtually all of the greenhouse gasemissions associated with steel production,however, consist of the carbon dioxide emissionsrelated to energy consumption; the primary focusof climate related impacts in the steel industry arethose associated with carbon­related energysources. Energy consumption in steel productionrepresents about 2.5% of domestic energy use andabout 8% of all U.S. manufacturing energy use.About half of the steel industry's energy is derivedfrom coal and a large portion of this is consumedduring the reduction of iron ore to pig iron.

Finally, the steel industry is a major consumer ofelectricity, used to power its substantialproduction processes. Although there are no directemissions of carbon dioxide associated with theconsumption of electricity, coal and gas firedenergy sources are standard factors in the

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reporting protocols for greenhouse gases andrepresent a significant component of steel­industryenergy usage. All mature industries, includingsteel producers, can be expected to measure directand indirect climate­related impacts through theuse of recognized, reliable, consistent, andtransparent calculation and reporting ofgreenhouse gases for internal company use and forreporting to the public, as well as to specificaudiences such as governments and specialinterest groups.

Key Players

Companies in the steel industry. Steelmanufacturers are also searching for waysto reduce their environmental impact whilemaximizing profits:

Mittal Steel Company N.V., headquarteredin Rotterdam, is the world's largestconsolidated steel company with shipmentsof 42.1 million tons and revenues of over$22 billion in 2004. Mittal Steel USAclaims to be one of the largest steelproducers in the United States, formed fromthe combination of Mittal Steel's existingU.S. business, Ispat Inland, with the assetsof International Steel Group.

United States Steel Corporation,headquartered in Pittsburgh, Pa.,manufactures a wide variety of steel sheet,tubular and tin products; coke, and taconitepellets; and has a worldwide annual rawsteel capability of 26.8 million net tons.Largely due to Chinese demand for steel,which boosted prices around the globe, U.S.Steel swung from a loss in 2003 to a $1.1billion profit in 2004.

Nucor Corporation, which also claims to bethe largest steel producer in the UnitedStates, had net sales of $11.3 billion in2004. Nucor is the nation's largest recycler.In 2004, Nucor recycled approximately 17million tons of scrap steel, with 5 million ofthose tons being automobiles.

Trade associations. Representingindividual companies are trade

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organizations which, among other functions,have the power to negotiate withgovernment agencies on voluntaryenvironmental initiatives.U.S. Environmental Protection Agencyand other government agencies. The EPAhas worked with the steel industry todevelop and maintain a voluntarygreenhouse gas emission reduction program.Non­governmental organizations. Theglobal challenge presented by climatechange and growing energy demands havegained the attention of civil societyorganizations around the world and havegiven rise to the WRI/WBCSD GHGReporting Protocol and the GlobalReporting Initiative. Additionally, sociallyresponsible investors and shareholders areactively seeking corporate commitments toenergy and emissions management. Civilsociety organizations and non­governingorganizations are now on par with manygovernments as among the recognizedarbiters of legitimacy in corporate socialresponsibility management and reporting.

The Upside

Companies can save money byimplementing energy efficienciesthroughout the lifecycle of steel products.

The market for recycled steel products isgrowing and consumers are demandingenvironmental responsible products.Recycling and reuse activities are valued asthe key to sustainability and represent andimportant environmental service.Efficiency and content certification schemesallow companies to gain recognition fortheir activities.

Reality Check

Serious questions remain about the role ofmajor materials suppliers in responding toclimate change. Both industries havedeveloped voluntary energy and emissionsreduction initiatives in cooperation with theU.S. Department of Energy and the U.S.

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Environmental Protection Agency.However, most voluntary programs harnessthe possibility for reducing the intensity ofenvironmental impact per ton of productproduced rather than calling for actualreductions.

Companies that engage in emissionsreduction and energy efficiency programsmust compete in a global marketplace thatincludes highly polluting inefficientproduction activities. The environmentalimpacts of steel production worldwide aremore widespread than any one company,and cannot be solved without cooperationamong companies, governments and NGOs.

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Action Plan

Assess your footprint. Determine what themajor emissions of greenhouse gases are foryour company. These include the supply­chain sources of carbon as well as emissionsfrom direct energy usage and electricitypurchases.

Make a measurable and verifiablecommitment to energy efficiency. One ofthe best ways for steel companies to reducetheir climate change footprint and realizesignificant cost savings, is to increase theenergy efficiency of their processes,including manufacturing and transportation.Increase transportation efficiencythroughout the supply chain. The oceanand ground freight industry is nowrecognized as a critical link in the supplychain of all industries. Initiatives such asEPA's SmartWay Tranport Partners aredesigned to increase energy efficiency whilesignificantly reducing greenhouse gases andair pollution. Corporate commitments toclimate management now include trackingand establishing a more efficienttransportation future by adopting fuel­saving strategies that increase profits andreduce emissions.Demonstrate your commitment through a

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voluntary emissions­reduction program.The steel industry has developed voluntaryenergy and emissions reduction initiatives incooperation with the U.S. Department ofEnergy and the U.S. EnvironmentalProtection Agency. Most voluntaryprograms harness the possibility forreducing the intensity of environmentalimpact per ton of product produced ratherthan calling for actual reductions.Adopt specific policies for responsibleprocurement to ensure purchasingdecisions are aligned with environmentallysustainable principles.Commit to the use of biofuels and otherrenewables to power industrial processes.Sustainable supplies of biofuels are thoughtto be climate neutral, that is, carbon is beingrecycled with no net additions to the system.As such, it is an attractive source of "greenand clean" energy that is receiving seriousattention in energy markets, especially thosemarkets with easy access to biomasssupplies.Certify recycling content andmanagement practices with an establishedorganization. One of the most significantroles that the steel industry can play interms of environmental sustainability andcorporate climate management is one ofcontinued leadership and innovation withregard to recycling.Begin planning energy and technologyoptions for next generation of production.Greenhouse gas targets and commitmentsfor post­2012 should include energy supply­­ and demand ­­ related milestones,including targets for green power; greenheat and advanced biofuels; carbon dioxidecapture, transport and sequestration; andenergy efficiency and conservation.

Leads

The U.S. EPA Climate Leaders programencourages companies to develop long­term,comprehensive strategies for reducing greenhousegas emissions.The American Iron and Steel Institute plays a

strong role in promoting environmental

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Topics: Materials

responsibility within the integrated steel industry.The World Business Council for Sustainable

Development's Greenhouse Gas ProtocolInitiative works to design, disseminate, andpromote the use of an international protocol formeasuring and reporting emissions.Steel Industry of the Future is a U.S.

Department of Energy program focusing focuseson the development and commercialization of newor improved materials to enhance productivity,product quality, and energy efficiency in the steelindustry.The U.S. EPA released the protocol Direct

Emissions from Iron and Steel Production in2003 to help companies in the iron and steelindustries meet the greenhouse inventoryrequirements of its Climate Leaders program.

The Bottom Line

Steel companies have many opportunities toimprove their management practices and respondeffectively to the challenges of climate change.Many leaders in the steel industry, as well as inother sectors, are beginning to adapt theirpractices to reduce greenhouse gas emissions andminimize overall climate impact. They have, forexample, launched voluntary emission reductionprograms and participate in emissions tradingmarkets. With the onset of the Kyoto Protocol theindustry will be expected to calculate and manageactual reductions in greenhouse gas emissions, asopposed to improvements in emissions intensitylevels that occur normally over time. Purchasingand producing renewable energy, investing in low­carbon technologies, working to improve energyefficiency, and offering new products and servicesaimed at reducing emissions are all meaningfulstrategies for the steel industry to undertake.

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