Canadian steel manufacturers embracing ‘green steel’ as carbon taxes set to rise
By The Canadian Press
The steel industry is at a crossroads, with government policies like carbon pricing designed to combat climate change hitting manufacturers’ bottom lines and international pledges likely to seek further concessions from companies that burn fossil fuels.
And the chief executive of Algoma Steel is hoping the company’s costly investment to make “green steel” will help to insulate it from the kinds of sector-wide downturns that previously threw it into bankruptcies.
“I would never say never, but we are certainly doing everything in our power to certainly minimize, if not eliminate that risk,” says chief executive Michael McQuade, who has plans to reduce the company’s carbon emissions by about 70 per cent.
Canada’s steel industry is currently in a position of strength as the economy recovers from a COVID-19 pandemic that diminished demand and having emerged in 2019 from a period of punishing tariffs imposed by the Trump administration.
The $15 billion industry produces about 13 million tonnes of primary steel, steel pipe and tube products in more than 30 facilities in five provinces.
Profits are soaring as production destined primarily for sale in Canada and the U.S. fetches elevated prices amid strong demand from an uptick in oil drilling and infrastructure spending. That has not always been the case as rivals have previously flooded the market when transportation costs were lower, sending the commodity price of the metal lower.
Algoma is taking advantage of the current situation to pursue initiatives it says will position it as a low-cost producer in the future.
Just three months after again becoming a public company and three years after emerging from court protection from creditors, the largest employer in Sault Ste. Marie, Ont., announced a $703-million plan to go electric by converting its greenhouse-gas spewing blast furnace to an electric arc furnace.
The move, supported by $420-million from the federal government and US$306 million from its merger with Legato, would reduce the 120-year-old company’s carbon emissions by about 70 per cent.
The new furnace would primarily convert scrap metal into molten steel using Ontario’s electricity grid, which is largely sourced from non-fossil fuel sources.
McQuade said the electric arc furnace is a proven technology that would allow Algoma to adjust output to market demand, something that is not easily achievable with traditional blast furnaces that heat iron ore with coking coal at high temperatures. Its annual capacity would also increase more than 50 per cent to 3.7 million tonnes from its current capacity of 2.4 to 2.5 million tonnes.
A big driver for this conversion is planned increases to carbon pricing by the federal government to spur a reduction in Canada’s greenhouse gas emissions. Carbon prices are set to rise to about $170 per ton of carbon dioxide by 2030 from $40 currently.
The federal government is also tapping into an $8-billion program supporting industrial decarbonization by investing $400 million in ArcelorMittal Dofasco, which is pursuing a $1.7 billion project to phase out coal-fired steelmaking at its facilities.
Canada’s largest producer of flat-rolled steel and the largest private-sector employer in Hamilton said the project would reduce carbon dioxide (CO2) emissions by up to three million tonnes per year by 2030.