Decarbonising Steel: BlueScope’s $400m Bet on Clean Innovation

If the world is to achieve net zero by 2050, decarbonisation of the steel industry is one of the great imperatives.

BlueScope, the nation’s leading steelmaker, is investing in decarbonisation – about $300m-$400m out to 2030 to test and develop a range of technologies and projects.

“We do believe there’s a pathway (to net zero), and that’s the work that we continue to undertake,” the company’s chief executive of climate change and sustainability, Deborah Caudle, said.

Boasting a high strength to weight ratio, steel has long been the backbone of the construction, manufacturing and infrastructure industries.

As a key material in wind towers, solar farms and transmission, it’s key to the clean energy transformation and can be endlessly recycled, making it an important ingredient in the circular economy.

The issue with steel, however, is its 7% contribution to global greenhouse gas emissions, overwhelmingly due to the use of metallurgical coal in conventional blast furnaces to produce iron – the main component of steel.

Effectively, the elimination of coal-dependent processes from ironmaking is the key to steel decarbonisation.

In BlueScope’s 2025 sustainability report, released earlier this month, chief executive Mark Vassella said the company was making “real progress” on its climate strategy.

In particular, Mr Vassella referenced the NeoSmelt joint venture with Rio Tinto, BHP, Woodside Energy and Mitsui Iron Ore Development, which is aiming to validate lower emissions ironmaking using direct reduced iron (DRI) - electric smelting furnace (ESF) technology at pilot scale.

Most of the DRI produced today is through shaft furnaces using natural gas prior to an Electric Arc Furnace (EAF) for steelmaking, a process not suited to Australia’s Pilbara ores.  The NeoSmelt technology would enable use of Pilbara ores to produce iron without the need for traditional blast furnaces.

The project secured $19.8m in funding from the Australian Renewable Energy Agency to support the feasibility study, in addition to pending approval for a $75m contribution to construction of the pilot plant from the Western Australian Government.

A final investment decision is anticipated before the end of calendar 2026.

If approved, the plant is expected to produce 30,000 to 40,000 tonnes of molten iron a year, starting in 2028.

“We’re confident [the technology] will work; it’s just a matter of piloting it to show that it does work, and that we can successfully scale it up” Ms Caudle said.

“We run the only ironmaking ESF in the world in Glenbrook, New Zealand, we’re confident we can adapt that technology from low-grade iron sands to a Pilbara ore.”

Transitioning Port Kembla, one of the Australia’s largest industrial facilities, to natural gas DRI to produce steel would lower emissions by 60%, with a pathway to even lower emissions steel using green hydrogen.

A 60% emissions reduction on the 7%-8% contribution to global emissions from steelmaking was “a prize worth going after”, she said.

In NZ, BlueScope’s electric arc furnace (EAF), featuring a $NZ140m co-investment with the NZ Government, is on track for its first steel production early next year.

EAF – a steelmaking furnace where scrap and other iron sources are heated and melted by electric arcs - will replace the existing basic oxygen furnace and eliminate two of the four coal-fed kilns.

BlueScope has also secured supply agreements for increased use of scrap steel.

This will enable processing of around 300,000 tonnes a year, equivalent to more than half of NZ’s annual scrap steel exports.

As a result of these measures, the company expects a reduction of up to 55% or 1Mtpa in the facility’s greenhouse gas emissions.

BlueScope’s goal is to achieve net zero for its Scope 1 and Scope 2 emissions, which represent 44% of the group’s total emissions, from its global steelmaking and non-steelmaking operations by 2050.

It also has interim, 2030 targets, namely a 12% reduction in emissions intensity from its steelmaking sites at Port Kembla, Glenbrook in NZ and North Star in the US, and a 30% reduction in emissions intensity from its midstream sites.

As to Scope 3 or indirect emissions, mainly from purchased iron and steel, the extraction, processing and production of raw materials and use of the products it sells, BlueScope has improved its data collection and is now determining “feasible” decarbonisation opportunities.

The company said achievement of its 2050 net zero target for its Scope 1 and Scope 2 emissions was contingent on five key enablers.

They were technology evolution, supply of raw materials, affordable and firmed renewable energy, the availability of competitively priced natural gas as a transitional step before green hydrogen, and supportive public policy.

“It’s just about getting the enablers in place,” Ms Caudle said.

“When you look at the cost differential between the DRI pathway and the blast furnace, there’s a significant step-up in the cost and steelmaking is not a high-margin business which can absorb that cost.

“So we need to get the cost of the natural gas down.  Low-cost energy and supportive infrastructure will determine where the steel industry will build out during this decarbonisation transition.  What we’ll ultimately end up seeing is capital flowing to locations where there’s low-cost energy.

“We’re starting to see some of that in the Middle East and in the US as well.”

While the time horizon for large-scale application of green hydrogen had lengthened, Ms Caudle said there were also other technologies to examine, such as carbon capture and storage.

“That’s an easier technology to deploy on DRI than what it is on a blast furnace because you’ve got a single emissions point instead of multiple emissions points across an integrated steelworks,” she said.

“So there’s a number of pathways and technologies being looked at to get us (to net zero by 2050).

“Time is ticking, which is why we’re taking action.”

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