"Steel is essential for an energy transition and a low carbon economy"
Ternium CEO Máximo Vedoya hones in on how the steel sector will shape the energy transition. He highlights the significant efforts of Ternium with its 2030 decarbonization plan, in conjunction with the actions of other Techint Group companies, to minimize environmental impact and implement change for a cleaner future in steel production.
You announced to shareholders and stakeholders a commitment to the decarbonization process. Why is it relevant for Ternium to have this issue on the agenda?
Decarbonization is extremely relevant to Ternium's agenda. I think we all must try to minimize the effects of climate change, and CO2 emissions are the factor that contributes the most to the greenhouse effect. Everyone must have a very serious, professional, and deep agenda to reduce carbon footprints. Ternium forms part of this evolution.
We are aware of our role as a heavy industry player to contribute meaningfully to the goals that lead to the Paris Agreement.
The steel industry – which includes Group companies Ternium and Tenaris – is among the sectors that generate the highest level of CO2 emissions. How will the 2030 decarbonization plan take place under the terms being planned?
The steel industry, including emissions of the energy it consumes (scope 2 emissions), emits almost 8% of the world's CO2 emissions. This is very similar to the footprint of the cement industry and to that of energy and transportation.
I believe that the global steel industry is reacting. However, what happens in each part of the world is very different. Worldsteel figures reflect the steel industry's average emissions are 1.8 tons of CO2 for every ton of steel produced. But when you go deeper into the countries, you can see that the United States emits 1 ton of CO2 for every ton produced based on CRU information. According to the information from the Mexican Steel Association, Mexico emits 1 ton of CO2 for every ton of steel. Europe is on the world average, with 1.8; and China, according to the CRU information, is at 2.2. So, we can see that there are regions that must act more than others for the steel industry to achieve this goal. Europe is reacting with new legislation, and China states it is heading in the same direction, but we still need to see how they will implement it.
Regarding Ternium, we are below this world average. Based on 2020 data, and considering Scope 1 & 2, we emit 1.6 tons of CO2 per ton of steel produced. And we have already planned to reduce this by 20% by 2030. We are working with other companies in the Group, such as Tenova and the Energy Transition Business Unit created in Tecpetrol, with the vision to reach carbon neutrality, but this is something that we have not yet announced. Although the steel sector is among the largest emitters, steel is essential for an energy transition and a low carbon economy. This is because of its characteristics; the material's high recyclability helps power circular economic systems. More steel is recycled in the world than all other materials combined, so the potential is enormous. We must work towards a cleaner production of steel.
Thinking about Ternium mills in Mexico, Argentina, Brazil, Central America, and the United States, what are the decarbonization bottlenecks and the biggest challenge to moving this forward?
The biggest challenge we have, and that of the entire steel sector, is how to decarbonize or reduce emissions from the blast furnaces route. Today, around 75% of the world's steel production is made via blast furnaces, and it emits much more - almost double – the emissions versus a direct reduction method with an electric steel mill. There is no definitive solution for that. Yes, there are ways to reduce the emissions slightly. But there is no disruptive technical solution yet, so the world must work hard on it. The carbon capture, usage, and storage (CCUS) are already being tested, but the costs are far from being competitive. This is the biggest challenge we face as an industry.
Is the idea then to transition to DRI (Direct Reduced Iron) systems?
Yes, to move to DRI systems with an electric arc furnace, but this implies tremendous challenges. For example, Eurofer calculated that if Europe had to change from blast furnaces to DRI and electric furnaces, it would have to invest 34 billion dollars. In addition, there is the cost of producing with DRI, which would also have to be green DRI made with hydrogen. But the price would entail an increase of approximately 150 dollars per ton of steel produced. That's an estimate made recently by Tenova. There are many open questions: Do we have to replace all or part of the system? Will the new structure be a carbon capture storage system? We are analyzing all of this in the Group and across the industry.
This transition to a lower carbon footprint also implies a change in the culture of the people, would you agree?
Yes, definitely. Cultural change is needed. At Ternium, we have come a long way in recent years. This is similar to how we addressed safety; we set a "Safety First" goal to improve how safety is perceived, valued and acted on. We helped strengthen a culture of safety among our employees. The progress was significant.
In terms of the environment, we are taking the same approach to raising awareness of the cultural shift needed among our employees for a more significant impact on our communities, our partners, and our decarbonization efforts. We are moving forward and see a much stronger environmental culture in Ternium. For example, today, an operator in the steel mills of Guerrero, Mexico, can follow emissions in real-time and act to lower them. In other words, our operators are much more aware of our actions as a company to reduce emissions. The challenge is to bring the decarbonization process to all levels.
How do you see Ternium's performance over the next ten years in fulfilling its goals?
Much better, with emissions even lower than our 20% target. We are committed to implementing change. In certain areas, we are leading our space: we have three Tenova direct reduction plants throughout Ternium, one in Puebla, and two in Guerrero, Mexico, and they are among the few plants in the world that perform carbon capture. All the gas flow from the reactor - not from the burners - goes through a process where the carbon is captured, and we sell it to the soft drinks industry.
We have laid out an ambitious, attainable plan to decarbonize our operations as have our biggest competitors, some of which have set 2050 goals for achieving carbon neutrality. This, too, is our overarching goal.