Environment and Energy

Fitch: BF-BOF Steelmaking Faces Long-Term Climate Risks

Written by Laura Miller

Because of their large amount of carbon emissions, blast furnace-basic oxygen furnace (BF-BOF) steelmaking and the raw materials used in the steelmaking process are extremely vulnerable to long-term climate risks in the transition to a low-carbon economy, according to Fitch Ratings.

Fitch has assigned Climate Vulnerability Scores to the metals and mining sectors in a new report, with the higher the score suggesting the greater vulnerability in the transition to a low-carbon economy. Sectors with lower scores will see fewer disruptions and may even benefit from the transition, while sectors with higher scores may face an existential threat.

The BF-BOF sector’s score rises steadily from 30 in 2025 to 80 by 2050. The EAF route, meanwhile, starts at 20 in 2025 and rises to just 40 by 2050.

As pressure increases on carbon costs and capex needs rise, BF-BOF steelmaking will become less competitive than the electric arc furnace route. EAF steelmaking is a much easier way for companies to achieve carbon neutrality, Fitch says.

The raw materials used in BF-BOF steelmaking, including metallurgical coal and iron ore, also face climate vulnerabilities and declining demand as more companies choose the EAF route. Iron ore’s long-term climate risk, with a score of 20 in 2025 and 40 by 2050, is lower than met coal, as iron ore is used in all steelmaking processes, save for EAFs utilizing only scrap, and demand is forecast to remain stable. Met coal’s score rises from 30 in 2025 to 80 by 2050.

By Laura Miller, Laura@SteelMarketUpdate.com

Laura Miller

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