- Targeting 25% global carbon-emissions
reduction by 2030 -
Estimated cost of
c. $10 billion -
Europe 2030 target increased to 35%
- ArcelorMittal
Sestao to become world’s first full-scale
zero carbon-emissions plant- New
collaboration announced with Science Based Targets
initiative-
Targets to be linked to executive remuneration
29 July 2021,
07:00
CET
ArcelorMittal (‘the Company’) has today published its second
group climate action report, following the first group report
published in May 2019 and the European climate action report
published in May 2020.
In the new report, ArcelorMittal has for the first time
announced a 2030 global carbon emissions intensity reduction target
of 25%. It has also increased its European 2030 carbon emissions
intensity reduction target to 35% from 30% previously announced.
All targets are on a scope 1 and 2 basis. The Company had
previously announced a net zero by 2050 ambition in September
2020.
The Company’s targets are underpinned by a set of
assumptions:
- The cost of green hydrogen will
become increasingly competitive over the next decade but will still
require government support.
- Carbon capture, utilisation and
storage (CCUS) infrastructure will take time to be built at scale.
While Europe is expected to take the lead, CCUS infrastructure has
the potential to expand quickly in the US and Canada – providing
some potential upside to our assumptions.
- Different regions of the world
will continue to move at very different paces and the level of
climate ambition will differ between jurisdictions at any given
time.
- The introduction of
climate-friendly policies in other regions will be 5–10 years
behind Europe.
Reflecting these assumptions, each region in which the Company
operates is designated as either ‘Accelerate’ (supported by the
introduction of more ambitious climate change policy) or ‘Move’
(reflecting a policy environment not yet providing any meaningful
support to accelerate steel industry decarbonization and where
accelerating without supportive policy will render the asset
uncompetitive versus national/regional competition).
2030 target breakdown and capex
The new climate action report provides a roadmap that
illustrates the Company’s current thinking on the journey to net
zero steelmaking. Five key levers are identified as the
stepping-stones to achieve net zero by 2050. These are:
A – Steelmaking transformation: In the course of the coming
decades the steel industry will undergo a transformation of the
assets used to make steel on a scale not seen for over 100 years.
This includes in a first phase the transition from coal (in the
blast furnace) to natural gas (in a DRI plant) as a precursor to
green hydrogen DRI.
B – Energy transformation: The energy used to make steel in
future years will undergo a further and more radical transition,
from high-emitting fossil fuel-based energy to low and zero-carbon
emissions forms of energy. This includes green hydrogen, circular
forms of carbon and CCUS technologies.
C – Increased use of scrap: As well as using scrap in the EAF,
we will increase the use of scrap in blast furnace-basic oxygen
furnace (BF-BOF) steelmaking.
D – Sourcing clean electricity: We will focus on increasing the
amount of low and zero-carbon emissions electricity we consume. We
plan to do this by purchasing renewable energy certificates and by
direct power purchase agreements (PPA) with suppliers from
renewable projects.
E – Offsetting residual emissions: There are likely to remain
residual emissions for which either there is no feasible
technological solution or the solution involves excessively high
economic or social costs. For these emissions ArcelorMittal will
buy high-quality offsets or launch projects to generate
high-quality carbon credits.
Further specific detail for the 2030 target is provided aligning
with these five levers, as follows:
1 – Announced projects Innovative
DRI-EAF: -7.5% A,
C
2 – Announced projects Smart Carbon and gas injection
-1.6%
B
3 – Further projects in development in
Europe -5.1% A,
B, C
4 – Project in NAFTA to be announced
-1.5%
A, B, C
4 – Further projects in development ex-Europe
-7.4% A, B, C
5 – Sourcing clean electricity
-2.1%
D
To achieve this reduction the Company has estimated it will
require a gross investment of c. $10 billion of capital
expenditure. The Company expects to deploy approximately 35% of
this c. $10 billion investment by 2025 with the remainder in the
second part of this decade.
Over time, and with the deployment of appropriate technologies,
it is expected that low-carbon steel-making technologies will
become more competitive than higher-carbon steel-making
technologies. However, this is not the case today and therefore
companies will need support through well-designed policy to help
moderate the initial capital costs, which will not yield a
reasonable EBITDA return in the short-to-medium term, as well as
the higher opex costs in the transition period that could otherwise
render them uncompetitive. ArcelorMittal believes support of
approximately 50% of total costs will be needed to enable companies
to remain competitive regionally and globally through the
transition period.
In terms of our investment decision-making, each major capex
project proposal is required to demonstrate its CO2 impact to our
Investment Allocation Committee (IAC). The IAC considers both the
potential future carbon cost as well as the capital cost of
decarbonization, to maximize our chances of achieving our targets
while ensuring each project is economically justifiable and earns
its cost of capital.
The announced Innovative DRI-EAF projects include:
- Reducing emissions in Spain by 50% by constructing a 2.3
million tonne hydrogen-powered DRI unit at Gijon, as well as a new
hybrid EAF. The construction of these units will transition the
Gijon plant away from BF-BOF steelmaking to DRI-EAF
production.
- Transforming ArcelorMittal Sestao to be the world’s first
full-scale zero carbon-emissions steel plant by 2025. 1 million
tonnes of DRI will be transported by rail from Gijon to Sestao to
be used as feedstock for its two EAFs. Sestao will also change its
metallic input; power all steelmaking assets with renewable
electricity; introduce new emerging technologies that will replace
the remaining use of fossil fuels in the steelmaking process with
carbon-neutral energy inputs.
- Plans to build a large-scale industrial plant for DRI and
EAF-based steelmaking in Bremen, as well as an innovative DRI plant
and EAF in Eisenhuttenstadt. CO2 savings of up to more than 5
million tonnes could be possible depending on the availability of
green hydrogen.
- The construction of a DRI plant in Dunkirk to produce 2 million
tonnes per year of hot metal, reducing CO2 emissions by 2.85
million tonnes by 2030.
- Testing of hydrogen injection at our DRI facility in Quebec.
The test will start with a limited injection of 5% within the
energy mix and further phases are planned in the future. Renewable
sources – specifically hydroelectric – provide 99% of Quebec’s
energy.
The announced Smart Carbon projects include:
- Torero and Carbalyst – two technologies to enable the use of
circular carbon, which does not add carbon to the biosphere. Torero
is a torrefaction process to make steel-specific bioenergy from
waste wood and waste plastic. Carbalyst allows us to use
steelmaking waste gases to produce basic chemicals such as
bio-ethanol, which are the key building blocks of plastics.
- In Gent, we are constructing an industrial-scale demonstration
plant that converts waste wood into bio-coal through torrefaction.
Two reactors will each produce 40,000 tonnes of bio-coal annually
that can be used in the blast furnace as a substitute for coal.
Reactor 1 is expected to start production in 2022 and reactor 2 in
2024.
- In Gent we are also constructing an industrial scale Steelanol
demonstration plant to capture carbon off-gases from the blast
furnace and convert them into bioethanol using microbes. The plant
is expected to be completed in 2022 and will produce 80 million
litres of bioethanol annually.
ArcelorMittal continues to believe that both technology pathways
(Innovative DRI and Smart Carbon) have an important role to play in
helping the steel industry, and the global economy, achieve net
zero by 2050. Furthermore, the Company continues to develop a third
route, direct electrolysis, which is still in the research and
development phase. Which specific routes will ultimately be adopted
is likely to differ from region to region and depend on policy
choices and the availability of government funding. The Company has
been able to accelerate plans for the world’s first zero
carbon-emission steel plant in Spain for example because of
government policy to accelerate the availability of green
hydrogen.
Policy
The Company has also outlined in the report the combination of
policy instruments it believes will be required to address not just
the significant capital expenditure to transition to the new zero
carbon-emissions technologies, but also the considerably higher
operating costs associated with these technologies at least in the
short-medium term until low and zero carbon-emission technologies
become competitive. Policy instruments such as contracts for
difference, used so effectively in enabling the renewable energy
industry to become competitive, will play an important role in
ensuring a level playing field during the transition period.
ArcelorMittal intends to actively and directly engage with
policymakers and organisations that advocate for the policies and
conditions that will enable steel to accelerate and achieve its
net-zero transition globally while remaining competitive.
Science based targets
The Company has also announced a new collaboration with the
Science Based Target initiative (SBTi) and a commitment to publish
a science-based target within the next two years. The collaboration
will support the SBTi to develop a new science-based methodology
for the steel sector.
As part of the Net Zero Steel Pathway Methodology Project
(NZSPMP), ArcelorMittal has, with other steelmakers, been working
on a set of principles by which it believes the steel industry’s
alignment with a net zero by 2050 outcome should be measured. These
principles were published on 27 July.
Just transition
ArcelorMittal is aware of key stakeholder concerns around a just
transition. We are seeking to employ best practice principles to
understand the social impact of our decarbonization strategy and
support engagement with our key stakeholders and collaborate with
policy makers in addressing this issue.
TCFD and Climate Action 100+ Net Zero Benchmark
Alignment
The Company has followed the TCFD guidelines and the Climate
Action 100 Net Zero benchmark. While we have not yet achieved full
disclosure according to either the TCFD or CA100 Net Zero
benchmark, we believe this report marks a meaningful step forward,
thereby demonstrating to stakeholders our commitment to adopting a
leadership position in the decarbonization of the steel industry in
terms of target-setting, performance and disclosure.
Executive remuneration
The Company now intends to link these targets to executive
remuneration. Details will be published in due course.
Commenting, Aditya Mittal, CEO ArcelorMittal
said:
“As the world’s most prolific material, steel
can make a huge contribution to the decarbonization of the global
economy. Steel is already the material of choice due to its
lower carbon footprint and high recyclability. But we can and must
go further as zero carbon-emissions steel has the potential to be
the backbone of the buildings, infrastructure, industry and
machinery, and transport systems that will enable governments,
customers and investors to meet their net-zero commitments.
“ArcelorMittal has been working hard to be at the forefront of
our sector in the net-zero transition, as we believe not only will
this help decarbonize the global economy but will also generate
opportunities in multiple aspects of our business.
“This is reflected in the new targets we have announced today.
We have for the first time published a group target for 2030,
alongside a more ambitious target for our European
business. These targets we believe are aligned with our net
zero 2050 ambition and we have also announced today a new
collaboration with the Science Based Target initiative.
“These targets reflect the uneven pace of change that is the
reality of the world’s decarbonization journey. In regions of the
world like Europe, where we are observing an ‘Accelerate’ policy
scenario, we can be more ambitious – with plans to reduce emissions
by 35% within the next decade. In other markets we face a situation
where being a first mover will result in us being uncompetitive in
that market. For our target setting today we assume progress in
other regions of the world will be at least five years behind
Europe.
“With COP26 focused on addressing the acceleration that is
critical in the next decade if the world is to reach its 2050
target, it may be that we will see a swifter evolution of this
policy environment than is currently envisaged. Policymaking
has a catalytic role to play. ArcelorMittal intends to step up our
advocacy for policies that support the acceleration of this
transition, addressing the fact that both capex and opex costs will
be significantly higher, at least in the short to medium term.
“Ultimately the goal is to ensure that the technologies that
will decarbonize the steel-making process are competitive. The
good news is that we already have two technology routes -
Innovative DRI and Smart Carbon - which can enable the
decarbonization of the industry with a third, direct electrolysis,
looking encouraging. Given our global profile we believe it is
sensible to continue to develop both these technology routes which
essentially encompass the clean energy routes of both green
hydrogen and also bio-energy with carbon capture utilization and
storage.
“In Europe our strategy is largely focused on the Innovative DRI
pathway. This reflects the commitment in Europe to prioritize the
availability of green hydrogen at competitive prices. Spain’s plan
to accelerate the availability of renewable energy and green
hydrogen underpins our recent announcement that ArcelorMittal
Sestao will become the world’s first full-scale zero
carbon-emissions steel plant.
“In many respects the challenges confronting steelmaking today
resemble those faced by renewable energy over a decade ago. The
importance of solar and wind was widely acknowledged yet the
technology remained economically prohibitive. Targeted, reliable
and thoughtful policies supported innovation and investment that
enabled both companies and their financing partners to make
long-term planning decisions.
“We are optimistic that the same will happen in steel. It is too
critical a material on so many levels for that not to be the case.
And as developing economies continue to grow, the world will need
more steel, not less, to give a better quality of life to billions
of people.
“Over this past year, we have engaged with our stakeholders on
climate more than ever before. I hope this report demonstrates how
seriously we take your input, how closely we have listened to your
questions, and how committed we are to providing solutions.”
ENDS
Forward-Looking Statements
This document contains forward-looking
information and statements about ArcelorMittal and its
subsidiaries. These statements include financial projections and
estimates and their underlying assumptions, statements regarding
plans, objectives and expectations with respect to future
operations, products and services, and statements regarding future
performance, as well as statements regarding ArcelorMittal’s plans,
intentions, aims, ambitions and expectations, including with
respect to ArcelorMittal’s carbon emissions. Forward-looking
statements may be identified by the words “believe”, “expect”,
“anticipate”, “target”, “accelerate”, “ambition”, “estimate”,
“likely”, “may”, “outlook”, “plan”, “strategy”, “will” and similar
expressions. Forward-looking statements include all statements
other than statements of historical fact. Although ArcelorMittal’s
management believes that the expectations reflected in such
forward-looking statements are reasonable, investors and holders of
ArcelorMittal’s securities are cautioned that forward-looking
information and statements are subject to numerous risks and
uncertainties, many of which are difficult to predict and generally
beyond the control of ArcelorMittal, that could cause actual
results and developments to differ materially and adversely from
those expressed in, or implied or projected by, the forward-looking
information and statements. These risks and uncertainties include
those discussed or identified in the filings with the Luxembourg
Stock Market Authority for the Financial Markets (Commission de
Surveillance du Secteur Financier) and the United States Securities
and Exchange Commission (the “SEC”) made or to be made by
ArcelorMittal, including ArcelorMittal’s latest Annual Report on
Form 20-F on file with the SEC. In particular, ArcelorMittal’s
carbon emissions targets are based on current assumptions with
respect to the costs of implementing its targets (including the
costs of green hydrogen and their evolution over time), government
and societal support for the reduction of carbon emissions in
particular regions and the advancement of technology and
infrastructure related to the reduction of carbon emissions over
time, which may not correspond in the future to ArcelorMittal’s
current assumptions. For example, the Company could face
significant financial impacts in Europe if it is unable to make the
necessary investments to decarbonise and reach its 35% target by
2030 due to the design of European policy. ArcelorMittal undertakes
no obligation to publicly update its forward-looking statements,
whether as a result of new information, future events, or
otherwise.
About ArcelorMittal
ArcelorMittal is the world's leading steel and
mining company, with a presence in 60 countries and primary
steelmaking facilities in 17 countries. In 2020, ArcelorMittal had
revenues of $53.3 billion and crude steel production of 71.5
million metric tonnes, while iron ore production reached 58.0
million metric tonnes.
Our goal is to help build a better world with
smarter steels. Steels made using innovative processes which use
less energy, emit significantly less carbon and reduce costs.
Steels that are cleaner, stronger and reusable. Steels for electric
vehicles and renewable energy infrastructure that will support
societies as they transform through this century. With steel at our
core, our inventive people and an entrepreneurial culture at heart,
we will support the world in making that change. This is what we
believe it takes to be the steel company of the future.
ArcelorMittal is listed on the stock exchanges
of New York (MT), Amsterdam (MT), Paris (MT), Luxembourg (MT) and
on the Spanish stock exchanges of Barcelona, Bilbao, Madrid and
Valencia (MTS).
For more information about ArcelorMittal please
visit: http://corporate.arcelormittal.com/
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