Decarbonizing global iron ore and steel industry
Urgent action and investments worth US$1.4 trillion are needed to decarbonize the global iron ore and steel industry by 2050.

According to the global research and consultancy business Wood Mackenzie, decarbonizing the steel and iron ore industry by 2050, in tune with the Paris Climate Agreement, would require US$1.4 trillion of investment. The organization claimed that there was no ‘silver bullet’ on the horizon and that a revolution was needed across every stage of the value chain.
Wood Mackenzie’s latest Horizons research report, ‘Pedal to the metal: Iron and steel’s $1.4 trillion shot at decarbonisation,’ stated that the current scenario represented both an urgent challenge and an enormous opportunity. The analysis highlighted the industrialized world’s reliance on steel.
Approximately 2.2 billion tons of production is required to meet global steel demand by 2050. This represents a 15% increase from 2021. The industry is highly carbon intensive across the board – from iron ore mining to steel manufacturing. Indeed, iron and steel production emits a combined 3.4 billion tons of carbon annually, which equals 7% of global emissions.
Steel is one of the world’s most versatile and vital materials. Strong, recyclable, and inexpensive to manufacture, steel is practically everywhere in the modern world. The alloy is used to construct everything from buildings, automobiles, trains (and tracks), appliances, weapons, boats, bridges and a plethora of other items.
While steel is used extensively around the world, only 64 countries manufacture the material in any significant quantity. These 64 countries produced approximately 98% of the world’s steel in 2020. Unlike many industries, steel production was able to weather the COVID-19 pandemic fairly well. Year-on-year production fell less than 1% in 2020. Global steel production reached 1,950.5 million tonnes (Mt) in 2021. This was an increase of 3.7% from the previous total of 1,880.4 Mt in 2020.
Commenting on the magnitude of the task at hand, Malan Wu, research director at Wood Mackenzie and lead author of the aforementioned report, opined:

“Decarbonising the steel industry is a staggeringly big task. To meet Wood Mackenzie’s 1.5 °C accelerated energy transition scenario by 2050, steel emissions must reduce by 90% from current levels. There is an urgent need to act now to decarbonise the iron and steel sectors. Business as usual is no longer sustainable.”
Iron & Steel investments to hit net zero by 2050
The ‘revolution’ highlighted in Wood Mackenzie’s analysis requires a sea change at every stage of the industrial value chain – from mining to consumption. This could potentially present an investment opportunity for operators as the industry aims to achieve net zero by 2050.
Wood Mackenzie’s analysis reveals that around US$800-900 billion would be essential to reduce carbon emissions from existing steelmaking infrastructure. This could be achieved through innovative solutions like setting up new hydrogen-based direct reduced iron (DRI) and electric arc furnaces.
Wu elaborated: “Mining companies will need to play an active role in cutting their operational emissions as well as invest in new high-grade mines and green pellet capacities to feed green steel. In turn, this will require five times the current supply of high-grade pellet feed, an equivalent to 750 million tons, translating into an investment of US$250-300 billion.
“To achieve net zero by 2050, three-quarters of steel production will have to use low-carbon technologies, requiring the commercialisation and uptake of new technologies such as DRI and molten oxide electrolysis running on renewable energy. Switching to clean energy will also require around 2,000 gigawatts of dedicated renewable generation capacity, equivalent to two-thirds of current global renewable generation capacity.”
“A hydrogen ecosystem will also need to be developed for green steel, as decarbonisation will require around 50 million tons per annum of competitively priced green hydrogen, with commercial viability versus conventional steelmaking routes requiring green hydrogen supply at US$2/kg,” Wu added.
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Carbon offset measures and a ‘green premium’ inevitable
Wood Mackenzie’s report warns that these measures by themselves would probably not be able to meet emissions targets. Hence, an incremental US$200-250 billion investment could be required in carbon offset measures including Carbon Capture and Utilization and Storage (CCUS). This is of paramount importance to enable the industry to capture and store around 470 million tons of carbon so that it can meet its emission target in 2050.
Green premiums could also prove to be inevitable given the fact that new technologies and low carbon feedstocks would probably increase steel production costs by 15-20%. According to Wood Mackenzie estimates, steelmakers would be paying around US$100 per ton by 2050 in order to align themselves with the 1.5 °C goal.
Wu added: “While steelmakers will have to swallow the price hikes for raw materials, carbon abatement costs will ultimately be passed onto steel end-users, meaning it is the consumer who must pay for the green premiums.”
Regional disparities likely to emerge
The iron and steel industry is likely to depend upon support from global carbon policy. At present, the vast majority of national carbon markets are still in their nascent stage. Furthermore, they are largely concentrated in mature economies. Given the fact that more than 60% of steel production comes from China, Beijing has to implement aggressive carbon pricing and taxation so that it can effectively address steel’s high carbon footprint.
Wu said: “Regional disparity will emerge, as a global response looks unlikely. Carbon mitigation tactics and strategies will vary widely, with mature economies – such as the EU, the US, Japan and South Korea – spending 50% more than emerging economies. Mature economies will also decarbonise much faster incurring a higher carbon abatement cost.”
“The transition to net zero calls for collaborative action globally and a unified approach across the value chain to turn risks into opportunities,” Wu concluded.