US Steel, once the world’s largest company of any kind, can take considerable credit for the growth of American industrial power in the 20th century. But in recent decades it has closed mills and shed workers. Now the iconic Pittsburgh manufacturer will be acquired by a Japanese steelmaker, Nippon Steel — if the federal government allows the deal to go ahead.
Earlier this month, reports emerged that the Biden administration was blocking the nearly $15 billion merger on the grounds that it posed a threat to America’s national security interests. The United Steelworkers union opposes it, fearing future layoffs and weaker labor protections under new ownership. So are both major candidates for president, competing for votes in the Rust Belt. Supporters of the agreement, such as the Washington Post editorial board and the nonpartisan think tank The Atlantic Council, have cast the politicians’ opposition as election-season pandering, and argued that the national security rationale on which Biden could block it is slim. But one area where the question of whether the merger will go through could be particularly consequential has gone largely unnoticed in the conversation: what it means for the climate.
Some environmentalists say the deal could delay the crucial progress the steel industry needs to make to decarbonise. Their argument stems from the fact that both US Steel and Nippon Steel have been slow, compared to industry peers, to adopt the most impactful decarbonisation technologies, even with federal funding available in the US to do so.
The most common process by which primary steel is produced is massively carbon intensive. The reasons for this lie in chemistry. Steel is made from iron, but the form in which iron ore occurs in the earth’s crust is mostly iron oxide (similar to rust). To get usable iron out of it, one has to remove the oxygen. For centuries, ironmakers managed this by using coke, a fuel made from coal, which is heated with iron ore in a blast furnace at such high temperatures that the iron melts into a liquid while the oxygen combines with the carbon in the coke binds. and produces carbon dioxide.
Blast furnaces account for the lion’s share of carbon emissions from steelmaking, and the inextricability of carbon emissions from the ironmaking process is a large part of the reason why steelmaking overall accounts for 7 percent of global carbon emissions, and a quarter of industrial carbon emissions. These percentages are likely to grow as other sectors of the economy decarbonize. In the US, demand for steel is also expected to grow dramatically over the next decade to provide the raw material for the industrial growth brought about by the Inflation Reduction Act and the planned build-out of clean energy infrastructure and transmission lines. For these reasons, the task of decarbonizing steel is as urgent as it is difficult and expensive.
Fortunately, there is a solution that has recently become viable due to new technological advances — and one that the Biden administration has tried to heavily subsidize: replacing blast furnaces with a process called direct reduction, and using hydrogen as a reducing agent instead of carbon, ultimately discharging water rather than carbon dioxide. “The chemistry is sound, it’s being built, it’s been piloted and demonstrated,” said Yong Kwon, a senior adviser to the Sierra Club’s Industrial Transformation Campaign. “The question now is: Will industries adopt it?”
There are eight operating steel mills in the United States that make “primary” steel (newly created steel, rather than the generally lower-quality “secondary” steel produced from scrap metal). Three are owned by US Steel. Cleveland-Cliffs, the owner of the other five, also made an offer to buy US Steel and has been much more proactive in making the switch to greener production. “The Department of Energy has made a lot of money available to partner with industry to demonstrate the value of decarbonization projects,” said Todd Tucker, director of the industrial policy and trade program at the Roosevelt Institute. “Cleveland-Cliffs has entered into a partnership two projects and US Steel didn’t cooperate on anything.”
One of the recently announced Cleveland-Cliffs projects will replace a blast furnace at a steel mill in Middletown, Ohio, with a direct reduced iron plant — part of a $575 million grant from the Department of Energy. It will not be fossil fuel free initially. While the company works to secure a reliable source of hydrogen, that plant will initially rely on natural gas to make iron, a process that will still produce carbon emissions, although less than the current coal-based process. But in the long term, as low-carbon or carbon-free “green hydrogen” is developed, the new technology offers an opportunity for steel mills to lose their carbon footprint and the Rust Belt to regain lost jobs.
The stakes of the potential US Steel-Nippon Steel merger are perhaps best illustrated in the city of Gary, Indiana, which was built by US Steel in 1906 to house workers at its Gary Works steel mill. That mill is home to the nation’s largest and most carbon-emitting blast furnace — and it’s nearing the end of its life. This situation hypothetically presents the furnace’s owner with an ideal opportunity to switch to a cleaner technology, with federal funding on the table to do so. But in August, Nippon Steel announced his prospective plans for Gary Works, which include a $300 million investment in relining the furnace to extend its life by another 20 years. With this announcement, Kwon said, “Not only did they pursue solutions back in Japan that we feel are responsible; they have now explicitly come out and said that they are not going to pursue the solution that is on the table for reducing the climate change and public health damage which is currently produced by the ironmaking process.”
