Thread by @LukasHermwille

The Ukraine war is a nightmare for the people in the country and far beyond. It will also have major ripple effects on global decarbonization. A 🧵 on the implications on global steel decarbonization... 1/

Both 🇺🇦 and 🇷🇺 are major steel producers producing 21Mt and 76Mt respectively. Together this is ~5% of global steel production according to @worldsteel
worldsteel.org/steel-by-topic… 2/

But even if those capacities would be completely withdrawn from the market this would only leave a dent in global overcapacity which was at 625Mt in 2020 according to OECD. oecd.org/industry/ind/l… 3/

Both 🇺🇦 and 🇷🇺 are also major producers of iron ore with 79Mt and 100Mt respectively accounting for 7.2% of global supply according to the @USGS pubs.usgs.gov/periodicals/mc… 4/

Russia is also a major exporter of metallurgical coal mostly supplying to Asian markets. Only 15% of its met coal exports go to Europe according to @IEA iea.blob.core.windows.net/assets/f1d724d… /5

My non-trade expert intuition tells me that this will have effects on steel trade flows, but not disruptive ones. What is much more relevant is the effects of sky-high prices for coal and natural gas. /6

A key emerging strategy for primary steel decarbonization is to build direct reduction furnaces (DRI) and first run them on the basis of NGs and convert to green H2 as soon as it becomes available at scale. This project by @SalzgitterAG is an example: salcos.salzgitter-ag.com/en/mydral.html /7

So sky-high NG prices make this first step much more expensive especially in Europe were most of the green steel projects have been announced so far. industrytransition.org/green-steel-tr… /8

Paradoxically, the second step, converting to green H2, may become more attainable as high NG prices also shift the economies of the different shades of H2 and may make green H2 the most economic source. @Sustainable2050 discusses this in a great thread

https://twitter.com/Sustainable2050/status/1498669566867746818

/9

Alternatively, Europe might revert to importing green primary iron from places with higher RE potential and nearby iron ore supply. @HiltonTrollip @bataille_chris & @BryceMcCall4 make a great case for South Africa in @Climate_Policy doi.org/10.1080/146930… /10

This primary iron could then be used in existing steel plant across Europe significantly reducing overall emissions. But obviously this would require new value chains and massive investments abroad. /11

Overall, the Ukraine war creates tremendous new uncertainties for industry decarbonization. A sectoral #steel #climateclub, e.g. initiated in the context of the 🇩🇪 @AuswaertigesAmt @G7 presidency could address some of those uncertainties. /end