Free event: Does ‘Green Steel’ threaten our coal exports?

InQueensland’s John McCarthy to question the market analysts challenging metallurgical coal.

Jun 11, 2024, updated Jun 11, 2024
Image: supplied.

Image: supplied.

By Simon Nicholas, Lead Analyst-Global Steel, Institute of Energy Economics and Financial Analysis.

The coal industry tells us that the outlook for Australian metallurgical coal – most of which comes from Queensland – is bright. Coal miners even link demand for met coal with the transition to renewable energy, insisting that that met coal is essential to make steel and, therefore, to make wind turbines.

This gets parroted by government ministers trying to justify their approval of more metallurgical coal mines. However, the Federal government forecasts that global metallurgical coal trade is in decline. It also forecasts that Australia’s met coal exports will peak in 2026 before going into decline. This does not sound very much like a commodity with a long and bright outlook, unaffected by technology change.

Simon Nicholas, joined by fellow financial analyst Tim Buckley, will be in conversation with InQueensland writer John McCarthy about the future demand for metallurgical coal at a FREE EVENT in Brisbane on 1st July. Simon will also speak at similar events in Rockhampton on July 3rd and Mackay on July 4th. Register your attendance here.

It’s also not true that coal is needed to make steel. Most steel in the U.S. is made in electric arc furnaces (EAF) that don’t use coal. Another alternative to coal-consuming blast furnaces is steel production via direct reduced iron (DRI) which runs on gas but can also run on hydrogen. Both DRI and EAFs are mature technologies in use at commercial scale today.

Steelmakers are increasingly planning and investing in a switch to DRI and EAFs to replace their blast furnaces. The International Energy Agency has highlighted the acceleration in this technology shift which will impact demand for met coal.

The steel technology shift away from coal is being led by Europe but there are also important met coal market changes happening in Asia. China is by far the largest steelmaker in the world producing the majority of total global output. It’s also true that the great majority of its steel is made using coal. But steel demand – and hence met coal demand – in China has peaked and is now in decline.

In addition, the decline in China’s met coal demand will be accelerated by efforts to reduce industrial emissions. In May this year, China’s State Council initiated an action plan to bolster the decarbonisation of industries including steel.

India is often highlighted by coal miners. The Indian government is targeting an almost doubling of steelmaking capacity to 300Mt by 2030, with most of the expansion planned to be blast furnace-based. However, there are reasons to believe that may not be achieved.

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In February this year, S&P Global Ratings warned that high met coal prices could maintain or even increase Indian steelmakers’ debt levels for longer than previously anticipated, casting doubt on the Indian steel industry’s capacity to expand as fast a planned.

Coal miners state that carbon capture, utilisation and storage (CCUS) will address the emissions from coal use in the steel industry, and BHP continues to back the technology. However, there is not a single commercial-scale CCUS plant for coal-based steelmaking anywhere in the world, and virtually nothing in the pipeline.

Adding CCUS to coal-consuming steel plants also does nothing to address the methane emissions associated with metallurgical coal mining, which is released when the coal is mined. Metallurgical coal is often more methane intensive than other forms of coal, making it harder to achieve State and Federal climate targets.

Steelmakers will become increasingly exposed to the risk that steel consumers will not want coal involved in their supply chains at all. Coal-based steel production will always be too carbon-intensive to satisfy the growing number of steel consumers demanding truly green steel.


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