Deel 2:
Transition opportunities
- European steel companies have begun to develop the low-carbon innovations required to significantly reduce the sector's emissions and align with net zero pathways. More innovative companies will begin commercialising these technologies in the next decade, but significant investment will be required.
- Six companies are developing low-carbon steelmaking technologies considered to be "transformative" within their European operations. 34% of companies' top 10 innovations are assessed as being transformative whilst 66% are radical.
- Five companies are developing hydrogen based DRI-EAF (HDR-EAF) production routes, potentially reducing emissions to near zero. SSAB's HBYRIT project will reduce emissions by 98% compared to the traditional BF-BOF route, whilst ArcelorMittal has announced multiple investments to transform BF-BOF plants to HDR-EAF.
- Five companies are investing in CCUS-related innovations, many of which produce fuel and chemicals sector inputs, such as ArcelorMittal's Carbalyst® technology and ThyssenKrupp's Carbon2Chem partnership.
- Six companies have secured public funding for projects to support developing and scaling early-stage technologies, covering on average 44% of project costs. Public sector support will be key to the deployment of alternative low-carbon steelmaking.
- Seven companies are involved in projects developing "blue" or "green" hydrogen production, indicating that companies are seeking to secure the volumes of hydrogen required to scale up hydrogen based steelmaking.
- At 0.5%, research and development spend as a percentage of net sales is relatively low for a sector that needs to invest in low-carbon innovation.
- Demand for low-carbon steel is set to be led by the automotive industry, with increasing demand from construction and renewable energy sectors. Voestalpine, Tata Steel, ThyssenKrupp and Severstal have the highest exposure to these markets.
Climate governance and strategy
- Most companies have strong enough ambitions with six, SSAB, ArcelorMittal, Salzgitter, ThyssenKrupp, Voestalpine, and Tata Steel, all aiming for net-zero or near-zero emissions by 2050.
- SSAB stands alone as the most ambitions company by steeply reducing emissions after 2032 and reaching net zero emissions in 2045.
- Eight companies have publicly disclosed emissions reduction targets - ArcelorMittal, Voestalpine, Tata Steel Europe and Salzgitter have all made commitments to become net zero, climate neutral, or carbon neutral by 2050.
- Companies have advanced in their scenario planning, with seven companies conducting scenario analysis to assess climate impacts on business models whilst more advanced companies use these to inform decarbonisation strategies and guide low-carbon investment.
- While six companies have been regulated for their Scope 1 emissions from European facilities within the ETS, free allowances have significantly diminished incentives to make deep emission reductions.
- Six companies use an internal carbon price as part of their decision making processes. ArcelorMittal, SSAB, Voestalpine and ThyssenKrupp all use carbon prices that are aligned with EU ETS allowances, which have doubled since 2019.
- Companies based in the CIS region such as Severstal and Evraz and Erdemir in Turkey lag behind their European counterparts in governance metrics such as scenario planning, target setting and climate related remuneration.
- Six companies disclose some form of climate related remuneration, but this is not well developed and no companies show any evidence of long term climate related remuneration incentives.
Emissions from Primary Steel in Europe (MtCO2)
ArcelorMittal - 88.5, 22 BFs
Evraz - 23.6, 5 BFs
Severstal - 22.3, 5 BFs
Tata Steel - 19.3, 4 BFs
Erdemir - 17.5, 6 BFs
Metinvest - 15.9, 11 BFs
ThyssenKrupp - 14.2, 6 BFs
Voestalpine - 11.2, 5 BFs
SSAB - 9.1, 5 BFs
Salzgitter - 10.4, 4 BFs
Industry Tracker was launched by the Investor Watch Group in 2021 whose founders created the Carbon Tracker and Planet Tracker Initiatives alongside Carole Ferguson who moved over from CDP where she led the award winning Investor Research Team. Industry Tracker was created to address a gap in the market for independent in-depth research and analysis on industrial sectors that are critical to economies and that will be a key component of the pathway to achieving net zero emissions. Industry Tracker is not an investment advisor and makes no representation regarding the advisability of investing in any particular company or investment fund or other vehicle.