Auto Industry Pursues Low-Carbon Steel Solutions to Curb CO2 Emissions

The steel industry takes on a range of approaches, varying from low-tech methods like utilizing more recycled steel to less established techniques such as sourcing metal from hydrogen-powered mills instead of conventional coal fired ones.

Due to its significant carbon dioxide emissions, the steel sector in North America and Europe is striving to find cleaner production methods. This endeavour is mirrored in the automotive industry, where pressure from regulators, investors, and environmentally-conscious consumers is driving a quest for cleaner steel production.

According to analysts, European car manufacturers and steel producers are at the forefront of developing and adopting lower carbon steel solutions. The European Union's Green Deal commits manufacturers and their supply chains to achieve carbon neutrality by 2050.

Recently, Mercedes-Benz, entered into an agreement with Swedish steelmaker SSAB AB's Hybrit unit to produce low-carbon steel for their vehicles starting 2023. This initiative aligns with Mercedes's goal of making their entire fleet carbon-neutral by 2039. Major automakers are setting ambitious targets for carbon neutrality, with General Motors aiming for 2040 and Toyota targeting 2050 for its global operations. These companies are also aiming to significantly reduce carbon emissions in their supply chains.

While improvements in fuel efficiency and vehicle design have reduced emissions during the usage phase, there's a growing push to address emissions stemming from the manufacturing process. The transition to lower carbon steel production faces obstacles. The steel industry's long investment cycles make a significant shift challenging, and the International Energy Agency's forecast suggests that hydrogen based steel production will only represent a small fraction of global primary steel production by 2050.

Furthermore, producing low-carbon steel is costlier. Companies like BMW have indicated that fossil-fuel-free steel could be at least 30% more expensive to produce than conventional steel and using hydrogen for steelmaking could raise production costs by double the price of vehicle . This is grave concern for auto manufacturers as they grappling with rising prices of conventional steel and other raw materials due to supply chain issues.