Electric arc furnace-based steel production is witnessing a global rise

Global industry of electric arc furnaces was valued at $800 million in 2022, projected to increase to $1.3 billion by 2031

The global share of steelmaking through electric arc furnaces had been around 25 per cent until 2012 for almost a decade, after which it started to increase further. In 2017, it saw a growth of 7.5 per cent year over year. This went up to 12.3 per cent in 2018, which meant its share of production reached 29 per cent (almost 404 million tonnes out of 1.8 billion tonnes of steel produced globally).

The share of electric arc furnace (EAF)-based steel production accounted for 30 per cent (around 560 million tonnes) of the global steel output in 2021, according to World Steel Association. This required an input of 60 million tonnes of hot metal from blast furnaces (BF), 120 million tonnes of direct reduced iron (DRI) and 450 million tonnes of steel scrap.

A March 2022 analysis showed the proportion of planned EAF capacity matched (33 per cent) the existing share (32 per cent) of EAF capacity, according to the 2023 Global Energy Monitor report.

However, as of March 2023, the plans have changed drastically and now 43 per cent of the planned capacity is through EAF, while only 57 per cent is through the coal-based BF-basic oxygen furnace (BOF) route.

International Energy Agency (IEA)’s Net Zero by 2050 scenario indicated that 53 per cent of steelmaking capacity needs to use EAF technology by 2050 and 42 per cent of primary steelmaking alone needs to use EAFs with hydrogen-based DRI to meet the goal. The current capacity plans will leave only 32 per cent of the total capacity as EAF by 2050, it stated.

Different market researches also estimate a significant rise in the market size of EAF.

A Transparency Market Research report states the global industry of electric arc furnaces was valued at $800 million in 2022 and this would increase to $1.3 billion by 2031, with an estimated compound annual growth rate (CAGR) of 5.7 per cent from 2023 to 2031.

A more recent market study by Fatpos Global suggested the market size could rise to $2.45 billion by 2034, with an expected CAGR of 9.2 per cent between 2024 and 2034.

EAF replacing BF-BOF

Earlier this year, Tata Steel formally announced its plan to shut down its two blast furnaces at its Port Talbot plant in the United Kingdom. It plans to replace them with a 3-million-tonne, state-of-the-art, scrap-based EAF.

Port Talbot is one of the largest steel manufacturing facilities in the UK, with a capacity to produce around 5 million metric tonnes of crude steel as of 2023.

In September 2023, the Tata group reached an agreement with the UK government for funding of 1.6 billion dollars under the programme to decarbonise Port Talbot, of which 635 million US dollars will be borne by the government and the rest by Tata. 

Tata stated that this shutdown would impact 2,800 jobs, with the first 2,500 to be affected within 18 months. The decision saw a sizeable number of protests by worker unions in the UK highlighting the issue of job loss due to this shutdown. Tata Steel states that this transformation will lead to a reduction of 5 million tonnes of carbon dioxide (CO2) emissions, i.e. 1.5 per cent of the UK’s country emissions.

In early November 2023, British Steel — now owned by a Chinese group — also announced the replacement of its blast furnaces with electric arc furnaces, stating that they could start operating by 2025. This includes two of its blast furnaces at the Scunthorpe steelworks in the UK. British Steel plans to replace these two coke blast furnaces with an electric arc furnace at this facility and another in Teesside. The unions here also claim up to 2,000 job losses.

Last year in November, the President of JFE Steel, Japan’s second-largest steelmaker, announced that it aims to build a large-scale electric arc furnace to replace its blast furnace at Kurashiki plant in western Japan by 2027 to cut its CO2 emissions.

Similarly, Kobe Steel, Japan’s third-largest steel producer, said a few days ago that they are considering building a large electric arc furnace to replace one of its two blast furnaces in Kakogawa, western Japan, to accelerate its decarbonisation efforts.

Advantages of EAF over BF-BOF

Electric arc furnaces may have a lower share of overall steel production but have many advantages over the traditional BF-BOF route. Some of these advantages are:

  • Flexibility in terms of production as per the changing market demand
  • Flexibility in terms of the variety and quantity of raw materials/charge they accept
  • They are considered more efficient compared to blast furnaces
  • They can produce steel with a much lower level of greenhouse gas emissions compared to the blast furnace route. They can take 100 per cent steel scrap as raw material and also have the possibility to use green hydrogen-based sponge iron as raw material, which are the two cleanest steel-producing routes worldwide.
  • Capable of producing a whole range of steel products
  • Have a low capital cost compared to BF-BOF

However, countries or companies that plan to increase their steel production many folds in the coming years may prefer the BF-BOF route as its scale of production is much larger than through the EAF route.

EAF in China and India

Three-quarters of the upcoming global steel capacity is in Asia, with 55 per cent from China and India, according to 2023 Global Energy Monitor report. In terms of the BF-BOF route, 99 per cent of the new developments are in Asia, with China and India holding the majority of these developments (79 per cent).

While China holds 49 per cent of the operating BF-BOF capacity, India holds only 5 per cent, the report noted. However, looking at the share of upcoming BF-BOF capacity, India holds a share of 40 per cent, surpassing China, which holds a share of 39 per cent. Both top steel-producing countries have also seen some positive developments in terms of deploying EAF.

China has already set a goal of increasing its EAF-based steel production share from less than 10 per cent as of 2022 to 15 per cent by 2025 and a proposal has already been prepared to reach a 20 per cent share by 2030 (which was earlier the goal for 2025).

In the case of India, almost 28 per cent of steel is produced through electric arc furnaces, but the majority of them depend on coal-based sponge iron and partially on steel scrap, which has limited availability. There are a few large steel players like JSW Steel, Jindal Steel and Power and ArcelorMittal Nippon Steel (AM/NS) who have set up electric arc and conarc furnaces in India. 

Although JSW and AM/NS have been largely dependent on natural gas to produce DRI, they face issues of increasing prices and availability. JSW and AM/NS are already planning to increase scrap usage in their plants to reduce their dependence on DRI. To this end, they have been planning to set up scrap processing centres across the country.

Players like JSPL are relying on coal gasification to produce DRI for one of their electric arc furnaces and have deployed a carbon capture facility to capture the CO2 emissions from gasification, although an economically feasible utilisation model for captured CO2 is still a question in India.

Tata Steel India has also announced an electric arc furnace to be set up in Ludhiana, Punjab, which would mainly use steel scrap as raw material. This is one of the first initiatives in India by a large steel player to develop a scrap-based electric arc furnace. They plan to set up similar furnaces in other parts of the country as well. They have already set up a scrap processing centre in Rohtak, Haryana, which will supply steel scrap to the Ludhiana plant.

Although India’s National Steel Policy 2017 clearly mentions a share of 35 to 40 per cent of steel production capacity through the EAF/induction furnace route by 2030, the challenge is how much of this capacity can be based on gas/green hydrogen based DRI and steel scrap.

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