The greening of steel14 March 2022


Has the UK blown its chance to be a main player in the ‘green steel’ economy? As Europe forges ahead, the government’s £250m Clean Steel Fund is still ‘on hold’ – with no clear future strategy emerging. By Brian Wall

Not long ago, Liberty Steel was hailed as a symbol of hope in the global race towards ‘green steel’ and decarbonisation. That promise was seriously dented with the collapse of its key financial backer Greensill Capital. To add to its woes, metals magnate Sanjeev Gupta controls Liberty Steel through GFG Alliance, a global group of companies that employs around 3,000 people in UK steel, and the UK’s Serious Fraud Office is now investigating “suspected fraud, fraudulent trading and money laundering” in relation to both GFG and Greensill.

So, where does all this leave the UK in any attempt to be a main player in the ‘green steel’ economy? Has it been too slow in the uptake, left behind by countries such as Sweden and Germany where numerous initiatives are being scaled up, using ‘green hydrogen’ to produce primary steel?

Hopes of a greener UK future were boosted when the government released its UK Industrial Decarbonisation Strategy last year, which envisions a nearly fully decarbonised steel sector by 2035, based on recommendations from the UK’s Committee on Climate Change. To fund this decarbonisation, the government created a £250m Clean Steel Fund in 2019. However, the fund has been put on hold until 2023, due to uncertainties over what direction should be taken.


Meanwhile, steel production continues to be a highly carbon- and energy-intensive process. Globally, for each tonne of steel produced, an average of 1.85 tonnes of CO2 is emitted, according to a 2020 McKinsey report ‘Decarbonization challenge for steel’ ( With the world’s annual consumption of steel standing at 1.8 billion tonnes and projected to increase each year, this amounts to over three billion tonnes of CO2 each year, an estimated 8% of the global total. In 2019, the UK steel industry sector emitted about 12 million tonnes of CO2e (including indirect emissions from power production), which constitute 11.5% of UK industrial emissions and 2.7% of all UK GHG emission in 2019.

Steel producers need to assess, evaluate and decide on a technologically- and economically-viable way to decrease their carbon footprint. At present, the majority of steel is produced in two ways: using an integrated blast furnace or an electric arc furnace. Blast furnaces produce steel from iron ore and need coal as a reductant. Electric arc sites, pictured left and diagrammed right, use steel scrap or sponge iron (produced by reducing iron ore into iron, also known as ‘direct reduced iron’) as their main inputs.

More than 80% of UK-made steel is manufactured in blast furnaces at the country’s two remaining primary steelmaking sites, in Port Talbot in Wales and Scunthorpe in Yorkshire, which are responsible for more than 90% of UK steel emissions. Conversely, most of Sheffield’s steel plants focus on the production of speciality or recycled steels, made via electric arc furnaces.


There are two ways to use green hydrogen in steelmaking. First, it can be injected into conventional blast furnaces as an additional reductant; however, this only cuts carbon emissions by 20%, since the furnaces still require coal, too. Secondly, hydrogen can be used as an alternative reductant to coal or natural gas in the production of sponge iron, which can then be used in an electric arc furnace to produce emissions-free primary steel. This would suggest that both of the primary steelmaking sites in the UK might be ripe for conversion to this new approach.

Yet while the injection of (green) hydrogen into blast furnaces can reduce carbon emissions by up to 20%, this does not offer carbon-neutral steel production, because regular coking coal is still a necessary reductant agent in the blast furnace, as McKinsey & Co point out.

However, hydrogen can be used as an alternative reductant to produce direct reduced iron (DRI) that can be further processed into steel using an electric arc furnace. This DRI/EAF route is a proven production process currently applied using natural gas as a reductant – for example, by players in the Middle East with access to a cheap natural gas supply. However, the direct reduction process can also be performed with hydrogen. Based on the use of green hydrogen, as well as renewable electricity from wind, solar or water, a DRI/EAF set-up enables nearly carbon-neutral steel production, claim the report’s authors.

With the government’s Clean Steel Fund on hold until next year, what prospects are there for the UK to compete in this changing world? Despite the alleged fraud investigations mentioned earlier, metals magnate Sanjeev Gupta’s GFG Alliance continues to pursue a green steel agenda. It has established a partnership with the University of Sheffield Advanced Manufacturing Research Centre (AMRC), Green Alliance and Bright Blue, in which they will work together to highlight the role steelmaking and products made from steel can play in the drive to net zero. “Steel can be at the heart of our collective transition to a net-zero world,” insists GFG Alliance executive chairman Sanjeev Gupta. “To achieve this the industry must change how steel is made. The case for decarbonised technologies – electric arc furnaces and in time hydrogen – is overwhelming.”

Adds Wilf Lytton, an associate fellow at independent think tank Bright Blue: “Green steel is an indispensable building block of the net-zero future we are heading towards, and the UK’s steelmakers can play a leading role in producing it.”


Meanwhile, the EU has 20-plus projects either planned or underway that use green hydrogen to produce primary steel, reports the Energy & Climate Intelligence Unit. Underpinning some of the most forward-thinking hydrogen steel projects is Germany’s recently released hydrogen strategy, backed by €9bn in funding. It is not alone. Of the 45 clean steel projects identified in a recent global clean steel tracker from the Stockholm Environment Institute, two-thirds are in Europe.

When compared to action now underway on the continent, the UK picture appears increasingly bleak. “The UK is very much in danger of falling behind and losing any potential advantage from being an early adopter,” says Roz Bulleid, deputy policy director, Green Alliance. “Worse still, it could be shut out of some markets altogether, if initiatives such as the recent EU-US agreement to work together towards a low-carbon trade regime lock out UK steelmakers that haven’t managed to adapt.” Besides a clear goal and funding for innovation, decarbonising the steel sector and industry more generally will also require a raft of supporting policies, she adds.

Brian Wall

Related Companies
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McKinsey & Co

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