Steel production: the economics?

This data-file captures the economics and CO2 intensity of producing iron/steel by the reduction of iron ore, in an integrated facility with a blast furnace and basic oxygen furnace.

Our base case is a marginal cost of $550/ton and 2.4 tons of CO2 emitted per ton of steel. Although the results are sensitive to input assumptions, which are backed up by technical data, but can also be stress-tested.

The data-file also allows some evaluation of decarbonization options, including electrification, blue hydrogen and green hydrogen, both as reducing agents and as heating sources.

Mine trucks: transport economics?

There are around 50,000 giant mining trucks in operation globally. The largest examples are around 16m long, 10m wide, 8m high, can carry around 350-450 tons and reach top speeds of 40mph.

This data-file captures the economics of a mine haul truck. A 10% IRR requires a charge of $10/ton of material, if it is transported 100-miles from the mine to processing facility. Assumptions can be stress-tested overleaf.

Fuel consumption is large, around 40bpd, or 0.3mpg, comprising around 30% of total mine truck costs at c$1.5-2/gal diesel prices. Some lower carbon fuels are c5x more expensive, and would thus inflate mined commodity costs.

High utilization rates are also crucial to economics, to defray fixed costs, which are c50% of total costs, as our numbers assume each truck will cover an average of 500 miles per day for c20-25 years.

CO2 capture: a cost curve?

This data-file summarizes the costs of capturing CO2 from different sources, so that it can be converted into materials, electro-fuels or sequestered.

Specifically, we have estimated the full-cycle costs (in $/ton), ultimate potential (in MTpa) and other technical considerations, linking to our other models and data-files.

The lowest-cost options are to access pure CO2 streams that are simply being vented at present, such as from the ethanol or LNG industries, but the ultimate running-room from this opportunity set is <200MTpa.

Blue hydrogen, steel and cement place next on the cost curve and could each have GTpa scale. Power stations place next, at $60-100/ton.

DAC is conceptually attractive, as the only carbon negative technology, but if all CO2 molecules in the atmosphere are fungible, it is not clear why you would pursue DAC until options lower down the cost curve had been exhausted.

Electric arc furnaces for lower-carbon steel production?

Electric arc furnaces generate enormous amounts of heat as very high voltages cause the electric decomposition of air into plasma. This heat can be used to melt down and recycle scrap steel, with 85% lower CO2 emissions than primary steel production.

Our base case model yields a 15% IRR at $475/ton steel prices. However, the timing is flexible. Hence the EAFs can used to smooth out volatile renewables in the power grid, running primarily in periods of high wind and solar generation. If a lower power price is achieved by integrating directly with renewables, then IRRs are uplifted by 2-6pp.

Please download the model to stress-test economic sensitivities.

Copyright: Thunder Said Energy, 2022.