Green steel attracts investment. But clean electricity remains the key.

In January, ArcelorMittal, a multinational steel producer headquartered in Luxembourg, announced that it had invested $36 million in Boston Metal, helping the green steel company raise $120 million in a third private investment round. The Woburn, Massachusetts-based company previously raised $50 million in 2021 from investors that included the Brazilian multinational mining giant Vale S.A., to scale up its molten oxide electrolysis (MOE) technology.

MOE reduces iron ore with the use of electricity, enabling a steel production process that eliminates CO2 emissions. It’s part of an effort among steel producers around the world to reduce their carbon footprints for both environmental and economic reasons. Besides international mandates like the Paris Agreement, the steel industry also faces “growing demand for carbon-friendly steel products” and “growing investor and public interest in sustainability,” according to a McKinsey report. The steel industry is among the biggest industrial producers of carbon dioxide globally, accounting for about 8% of emissions.

XCarb Innovation Fund

ArcelorMittal’s XCarb Innovation Fund, launched in March 2021, targets technologies that could play a role in decarbonization. The Boston Metal transaction is the fund’s largest single initial investment to date. ArcelorMittal is also retrofitting some of its operations, such as the Dofasco plant in Hamilton, Ontario, with a $1.3 billion investment to transition that plant to direct reduced iron-electric arc furnace (DRI-EAF) steelmaking, which will lower its carbon footprint by removing coal from the ironmaking process.

Boston Metal’s MOE method offers an alternative to low-carbon steel production techniques that use scrap or direct-reduced iron, both of which have supply limitations. “If you have scrap available, that’s unbeatable, and that’s the best way to do it,” said Tadeu Carneiro, Boston Metal’s CEO. But the low supply of scrap and high-quality iron ores limit the scalability of scrap-based and DRI steelmaking.

Scrap-based steelmaking accounted for about 30% of the total global steel production in 2021, a proportion expected to reach only 40% by 2050. Relying on iron to produce steel requires access to higher-grade ores, which are not in abundant supply; MOE, by contrast, can use lower-quality iron ore for steelmaking.

Since MOE uses electricity to manufacture steel, access to clean electricity is essential to eliminating CO2 emissions from the process. The transportation, building, and infrastructure sectors are all moving in that direction, noted Carneiro. Quebec, Scandinavia, Australia, and Brazil, he added, are among the regions where MOE could be readily implemented with renewable electricity.

Last October, ArcelorMittal broke ground on the DRI-EAF project in Canada, in partnership with the governments of Canada and Ontario, which together kicked in half the costs, in a project that is targeting a reduction in the plant’s carbon intensity by 25% in 2030. The new 2.5 million-ton capacity DRI furnace, initially to operate on natural gas, will be constructed to be hydrogen ready so it can make the transition to that zero-carbon fuel when supplies become available.

The project will “lay strong foundations for near-zero steelmaking,” said Lakshmi Mittal, ArcelorMittal’s chairman. Project construction will be complete in 2026 and the transition to DRI-EAF will be by 2028.