Key findings

Electrification is projected to be a major theme at COP31, requiring the steel industry to evaluate opportunities to reduce emissions while strengthening long-term cost-effectiveness and energy security. While much of the focus has been on decarbonising primary steelmaking, significant potential exists in secondary steelmaking and the electrification of heat across the value chain. Flexibility is a key advantage, allowing steelmakers to reduce energy consumption during peak periods and shift production to periods of low-cost, low-emissions electricity. Although hydrogen is essential for iron ore reduction, direct electrification is often a more efficient alternative for heat generation.

Energy and electricity use across the steel value chain

In 2024, global crude steel production reached 1,885 million tonnes (Mt), consuming approximately 39.5 exajoules (EJ) of energy and generating about 4.1 gigatonnes (Gt) of CO2e in greenhouse gas emissions. Directly sourced electricity accounts for approximately 11.6% of the sector’s total energy consumption, though some sources report up to 14%. Coal remains the dominant energy source at 68.37%, followed by electricity at 11.56% and gas at 8.83%.

Electrification solutions

Electrification opportunities are grouped into three major areas: iron and scrap melting, process heat and thermal energy, and iron ore reduction. The blast furnace–basic oxygen furnace (BF–BOF) pathway relies heavily on coal and has limited flexibility to increase its electricity share. In contrast, the scrap-based electric arc furnace (EAF) pathway is already highly electrified, with electricity accounting for 50–70% of energy use according to World Steel Association (WSA) data. Emerging technologies such as H2–DRI–EAF and electrochemical ironmaking offer potential for nearly 100% electrification.

Process heat electrification

Many processes in the steel value chain require temperatures above 1,000°C, which is beyond the range of conventional industrial heat pumps. Almost 70% of the sector’s total energy consumption is used for process heat at these temperatures. The European Union (EU) iron and steel sector consumed 460TWh of process heating energy in 2019, with 85% of this demand for processes above 500°C. Technology providers such as Kanthal, Coolbrook, and Paul Wurth are developing high-temperature solutions including shockwave heating and plasma torches.

Indirect electrification with hydrogen

Hydrogen enables indirect electrification by replacing fossil fuels as a reducing agent in direct reduced iron (DRI) production. While hydrogen can generate process heat, its relatively low efficiency and high cost compared with direct electricity make it less attractive for heating. The overall efficiency of converting electricity into heat through hydrogen is approximately 55% after accounting for combustion, transportation, and storage. The Swedish steelmaker Ovako became the world’s first to operate a hydrogen-fired reheating furnace for rolling operations in 2024.

Electrochemical ironmaking

Electrochemical ironmaking involves stripping oxygen from iron oxides to produce metallic iron. Although these technologies have been overlooked for decades, they remain at an early stage of development. Electricity consumption is broadly comparable with other low-emissions pathways at approximately 4MWh per tonne of iron. However, these technologies face significant scaleability challenges and are likely to play a niche role in the coming decades.

Flash ironmaking

Flash ironmaking can rapidly reduce fine iron ore concentrate particles at high temperatures to produce molten iron in seconds. This technology has the potential to substantially reduce carbon emissions from primary iron production when powered by renewable electricity. Fortescue is collaborating with the Chinese steelmaker Baowu to establish an industrial pilot plant with an annual production capacity of 5,000 tonnes of hot metal.

Downstream processes

Reheating furnaces account for 15–20% of the total energy consumption of the iron and steel industry and 70% of the energy demand of the rolling process. Typical reheating requires billets or slabs to be heated to 1,250–1,300°C. Induction heating could reach cost parity with gas at electricity prices around USD54/MWh. At a carbon price of USD130/tCO2, the costs of induction and gas become broadly comparable.

Electrification as a pathway to greater energy security

Recent global conflicts have exposed the energy security risks of fossil fuel dependence. Major steelmaking regions such as India and the EU remain highly dependent on external energy supplies. India imports almost 90% of its metallurgical coal demand from the global market. Greater electrification, supported by domestic renewable electricity, can reduce exposure to global fossil fuel markets and strengthen the resilience of industrial energy supplies.

Investment and policy support for steel electrification

Industrial electrification has lagged behind other sectors such as transport and buildings. The International Energy Agency (IEA) forecasts annual investment in electrification to increase to about USD1 trillion by 2035, yet industrial sectors are expected to account for less than 3% of this total. Policy support, infrastructure investment, and market incentives are essential to accelerate this transition and overcome high upfront costs.

Flexibility opportunities from steel electrification

New electric steelmaking technologies can adjust consumption in response to system conditions. In scrap-based EAFs, shifting the timing of batch melting can reduce operating costs by 5–46%. The EU steel sector is estimated to have an annual theoretically shiftable volume of approximately 270GWh of upward flexibility and over 40GWh of downward flexibility to absorb excess generation.

Conclusion

Electrification is widely recognised as an efficient pathway for the energy transition. While secondary steelmaking in EAFs is a mature opportunity, the electrification of high-temperature heat and ironmaking requires further support to reach widespread adoption. Australia, as President of Negotiations for COP31, has an opportunity to push for industrial electrification to meet ambitious 35% by 2035 targets. Without stronger action, the iron and steel sector risks falling behind.