Government funding and policy are driving big carbon emissions reductions by steelmakers

Government investments of more than $1.3 billion to help steelmakers electrify their production facilities provide a major boost to the industry’s goal of net-zero carbon emissions by 2050, says the chief executive of the Canadian Steel Producers Association (CSPA).

Two strategic projects, by ArcelorMittal Dofasco’s Hamilton plant and Algoma Steel’s Sault Ste. Marie facility, together represent a total of $3 billion in investment, including both private and public sectors, said Catherine Cobden, president and CEO of the CSPA.

“Together, the two projects will [reduce] about 6 million tonnes of CO₂ emissions, which is a big step forward toward our aspirational goal,” she said in an interview.

That reduction amounts to more than 37 per cent of the Canadian steel manufacturing sector’s total carbon emissions of 16 million tonnes. In addition to furthering the CSPA’s goal, the investments support Canada’s climate plan and target of net-zero emissions by 2050, Cobden said.

“It wouldn’t have happened without those public policy supports to drive emissions reduction,” she said. “That has really changed the game for seeing those investments come to Canada.”

The Ontario government in February announced a contribution of up to $500 million in loan and grant support for ArcelorMittal Dofasco. The supports will allow the company to replace its coal-fed blast furnaces at its Hamilton plant with low-emission, electric arc furnaces. The furnaces could later be used to transition to hydrogen fuel, which produces no carbon emissions.

Last July, the federal government announced $400 million for the project at ArcelorMittal Dofasco’s Hamilton plant via the Strategic Innovation Fund. The company is investing approximately $900 million in the $1.8-billion project that is expected to reduce the plant’s carbon emissions by 60 per cent, or up to three million tonnes per year by 2030.

Last year, Ottawa also announced a contribution of $420 million for a similar project at Algoma Steel’s Sault Ste. Marie plant. The project received a $200-million grant from the federal Net Zero Accelerator and a $220-million loan from the Canada Infrastructure Bank.

Algoma Steel is investing $700 million to convert its flat rolled steel plant to electric arc furnaces. The Ontario government has contributed $60 million toward capital expenditures at the plant.

The project is expected to reduce carbon emissions from Algoma Steel’s facility by 70 per cent — or three million tonnes per year by 2030.

Canadian steel had the lowest or second-lowest carbon intensity, depending on the steelmaking method, of 15 countries, according to a 2019 study by the U.S.-based Global Efficiency Intelligence and supported by the BlueGreen Alliance Foundation.

Canadian governments should shift their infrastructure spending to lower-carbon options to support Canadian industries and workers, said a recent report from the Blue Green Canada coalition.

“We already produce some of the greenest steel in the world,” Cobden noted. “We want our customers to know that we want to be the green supplier of choice.”

Reducing sector’s remaining emissions will be harder

However, beyond the two large projects that have received substantial government investment, addressing the steelmaking sector’s remaining 10 million tonnes of carbon emissions will be a challenge, Cobden said.

Such large public and private sector investments are unlikely in the near future, she said. She added that more research and development will be needed to deploy emerging technologies such as the use of hydrogen in steelmaking.

“The road from here is going to take time and more investment and more support,” she said.

Canada could take several steps to incentivize innovation and protect Canada’s steel industry as it transforms to lower-carbon production, especially from countries making “dirty steel” with much higher carbon emissions, Cobden said.

These steps include:

• Ensuring that Canada’s regulatory structure supports the domestic industry as it transforms.
• Implementing a “Buy Clean” strategy with the U.S. to ensure that cleaner steel, aluminum and other materials are preferred for purchase and used in North American projects.
• Considering a carbon tariff at the border on imported steel products that have a large carbon footprint.

Certain nations have ramped up their steel production during the COVID-19 pandemic, resulting in a current global over-capacity of steel of 625 million tonnes in 2020, according to a report by the OECD Steel Committee.

This over-capacity threatens Canada’s $15-billion steel industry, which produces about 14 million tonnes per year of steel, pipe and tube and directly employs more than 123,000 people, the CSPA said.

Foreign steel imports increased to 59 per cent of Canada’s steel market in 2021, according to the Canadian industry association.

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