Far from phasing out the blast furnaces that use coking coal, Tata Steel will build new ones in India for a decade. But is Australia willing to supply the coal?
Peter Ker
Resources reporter
Huge volumes of coking coal leave Queensland every year bound for the steel mills that Tata Steel runs in India, Thailand, the Netherlands and the United Kingdom, but Tata’s managing director Thachat Viswanath Narendran wants to buy much more.
Not content with buying 33 per cent of all Australian coking coal exports last year and being the single biggest destination for Australian coking coal in five of the past six years, India has vowed to double its steel production to 300 million tonnes a year by 2030.
Mr Narendran says Tata will be part of that growth; the company plans to continue building new blast furnace steel mills that consume coking coal in India for at least another ten years.
He expects the new mills built in the decade ahead to run for at least 20 years.
Even if they are entirely powered by renewables, blast furnace steel mills emit large volumes of carbon dioxide because the process requires the carbon in coal to strip away the oxygen in iron ore.
Many miners and steel mills, including Tata, are researching ways for hydrogen or other products to replace coking coal in the steelmaking process and thereby solve the “hard to abate” emissions from the steel sector.
But Narendran told Carbon Challenge those new technologies would not replace blast furnaces for many decades, and Indian demand for Australian coking coal would rise for many years before there was any decline.
Huge volumes of coking coal leave Queensland every year bound for the steel mills that Tata Steel runs in India, Thailand, the Netherlands and the United Kingdom, but Tata’s managing director Thachat Viswanath Narendran wants to buy much more.
Not content with buying 33 per cent of all Australian coking coal exports last year and being the single biggest destination for Australian coking coal in five of the past six years, India has vowed to double its steel production to 300 million tonnes a year by 2030.
Mr Narendran says Tata will be part of that growth; the company plans to continue building new blast furnace steel mills that consume coking coal in India for at least another ten years.
He expects the new mills built in the decade ahead to run for at least 20 years.
Even if they are entirely powered by renewables, blast furnace steel mills emit large volumes of carbon dioxide because the process requires the carbon in coal to strip away the oxygen in iron ore.
Many miners and steel mills, including Tata, are researching ways for hydrogen or other products to replace coking coal in the steelmaking process and thereby solve the “hard to abate” emissions from the steel sector.
But Narendran told Carbon Challenge those new technologies would not replace blast furnaces for many decades, and Indian demand for Australian coking coal would rise for many years before there was any decline.
Tata Steel chief executive Thachat Viswanath Narendran. Paul Harris
With close to 90 per cent of Indian steel consumed domestically, he doesn’t expect carbon border taxes in places like Europe to make much difference to Indian coal demand.
Narendran came to Australia over the past week to express his concerns that investment in new Australian coking coal mines is not happening as swiftly as India needs
This is an edited transcript of his interview with Carbon Challenge:
What brings you to Australia on this trip?
We buy a lot of coal from Australia, particularly from Queensland so every year we come and do a session with our suppliers, one to one meetings, host a dinner, meet the government officials and basically share what our plans are and hear from our suppliers and the government on what their thoughts are on the future of coking coal in Queensland.
How has your message to Australia changed in recent years?
Three years ago my concern was more about the logistical bottlenecks. At that time we were having a lot of problems on the movement of coal from the mines to the ports here and that was making the supply chain a bit erratic and we were struggling with that. So at that time my pitch was more about the need for us to sort out infrastructure related issues in Queensland.
Today, my message is essentially the same, which is to say that demand for coking coal in India is going to grow, it is going to double in the next 10 years. India is already a bigger importer of coking coal than China.
The concern I have on this visit is a bit more that I don’t see too much investment happening in growing coking coal capacities in Queensland because there is a concern about coal as a whole. I draw the distinction between coking coal and thermal coal. For thermal coal there are maybe issues to think about but coking coal certainly has a future.
The second thing is the [helping the mining] industry see its future as secure enough to make investments. That’s a concern because if India does not see the coking coal supply from Australia increasing over the years then obviously India will have to start looking at other sources which would be a pity because India and Australia have a strong relationship – we signed an FTA [free trade agreement].
Will Tata potentially buy stakes in Australian coal mines to be an exemplar of the coal mine investment you want to see?
Currently we are focused on increasing our steel production in India, spending our capital on growing what we know best which is to make steel and build relationships and partnerships with [coal] suppliers who could invest to grow their businesses. We could have an arrangement where we have [coal] offtake agreements so we give them security of demand. That is the thinking, so we are not looking at investing in coal mines.
Big Japanese steelmakers went the other way historically; they bought minority stakes in Australian coal mines. Some Chinese steel mills did too. In hindsight did they not take the right approach?
The plant operated by Tata Steel in Port Talbot, UK. The Indian operates steel plants all around the world and expects its appetite for coking coal to grow. Chris Ratcliffe
It is slightly different for us because we are very big in mining in India. We do about 35 million tonnes of iron ore mining, for instance. All the iron ore we need we mine ourselves and we have been mining for 100 years. We also do some coal mining. We do about 3 million tonnes of coal mining in India but that only takes care of about 20 per cent of our requirements in India.
So it is not that we are averse to mining, but if we want to double our capacity in the next 10 years in India, that is building 20 million tonnes of steel capacity which calls for a lot of capital. So I would like to prioritise the use of capital in increasing steelmaking capacity in India and increasing iron ore mining in India to cater to the steel requirements than spread it thin over other inputs that we need to buy.
Is Russia the likely alternative if you can’t get enough coal from Australia?
It is. Tata Steel has stopped buying from Russia for the last few months, but many of our peers in India continue to buy from Russia, India is trading with Russia so it is certainly an alternative. But you [in Australia] have better quality coals, a better range of coals and well established supply chains already so there is no reason why we should not leverage what is already there rather than give it up to somebody else.
You drew a distinction between coking coal for steel making and thermal coal for power generation, but coking coal also produces greenhouse gases. How will your plan to grow steel production fit with Tata’s goal to have net zero emissions by 2045?
Steel and cement do have a carbon footprint, but you need steel and cement. Now you need to find alternative ways to make steel and cement by reducing the carbon footprint. We are looking at solutions for that.
In Europe it is about transitioning from coal to gas to hydrogen [as a reductant] or leveraging scrap [steel] more and more to make steel. You have a leaner carbon footprint that way, but that is possible in Europe because the policy framework is in place, there is a carbon border mechanism coming in, customers are willing to pay a premium for green steel, there is a lot of scrap available, the hydrogen infrastructure is being built, so on and so forth.
Unless all of that is in place, other economies cannot just make the transition to a zero carbon future. Look at India for instance; India’s net zero goal is 2070 because India will use a lot of coal for a long time because India doesn’t have gas. India is working on hydrogen but it will take some time. India is working on renewables, but it can never fully substitute the grid. It is OK for many applications but for processing industries you need to find storage solutions ,so there are a lot of complexities in that transition.
The point is, as you make this transition you will continue to need to use coal ... so rather than say all coal is bad, look at the coals that can be substituted for other alternatives and look at the coals that can’t be substituted.
Should Australians expect Tata will not be buying our coking coal beyond 2045 given your net zero target?
The way we see it, even in 2045 we will be running blast furnaces, but we will have fully captured a lot of the carbon dioxide that is being emitted at that time. That is why carbon capture becomes a very important part of the solution. There will be a rising share of production without using coking coal, but there will not be [zero] production with coking coal, that may happen let’s say by 2070 or some time in the future.
The point is coking coal demand is not going to fall off a cliff. Tata Steel has a 2045 ambition, but no other steel producer in India has said net zero by 2045, and we are going to be only 20 per cent of the production in India. So there is a huge market for coking coal out there. It is not as though five or 10 years later there will no demand for coking coal.
How will your Indian steel mills be net zero by 2045?
We believe we will be building blast furnaces [which consume coking coal as a reductant and give off carbon dioxide as a waste] in India for at least another 10 years, by which time we expect gas will be available in eastern India where pretty much all our production is and the iron ore is in eastern India. So any capacity we build after then will likely be gas-based production and eventually when hydrogen is available we will substitute the gas with hydrogen [to serve as the agent that reduces iron ore to iron].
A typical blast furnace life is 20 years and then you do the re-lining, so when we need to do the second re-lining of a blast furnace we will shut it down and substitute it with gas based direct reduced iron.
For the existing blast furnaces we are looking at how can we reduce the carbon footprint so we signed an MOU with BHP for instances to look at what we can do to reduce the carbon footprint of the blast furnaces and we are doing some work with CSIRO here.
There are various other options on carbon capture and storage because we believe those solutions will also need to be scaled up.
We are also setting up electric arc furnace-based facilities and trying to use greener energy as much as possible.
So there are multiple initiatives that will take us to that net zero by 2045. The path is clear to 2025 or 2030 but from 2030 to 2045 is a bit more evolving because a lot depends on how quickly hydrogen is available, the gas is available and the carbon capture storage technology is available.
The Tianqi lithium hydroxide facility in Kwinana, Western Australia. Thachat Viswanath Narendran says Australia’s plunge into so-called green metals such as lithium comes at the expense of continued investment in coking coal production which is also needed to make steel for the electrification of industry.
You mentioned you will continue building new blast furnaces that consume coking coal for quite a few years. If you can see these new methods and technologies are emerging for making steel with a lower carbon footprint, why not go straight to building those types of mills rather than new blast furnaces?
Because today there is no hydrogen available in India, and like your question about why we aren’t investing in [Australian] coal mines, we cannot be making hydrogen ourselves because somebody else is probably better at doing that. So even if you say let’s shift to gas today, there is no gas in eastern India and even more so now there is a [global] gas shortage.
That is why the transition from coking coal to other sources will take time ... you need LNG terminals, you need gas pipelines, you need to have the infrastructure. Unless the ecosystem [is there] you cannot spend a billion dollars setting up a steel plant based on gas if there is no gas or the gas is not guaranteed.
Even for scrap [scrap steel as a lower carbon feedstock for steel mills], there is only so much scrap available in India so you would need to import scrap and today more and more countries are discouraging exports of scrap because they want to use the scrap in-house.
Can gas or hydrogen fully replace coking coal in your blast furnace steel mills?
No. You can substitute some of the coking coal with gas or with hydrogen or biochar, but a blast furnace will dominantly be using coking coal, the biggest component will be coking coal. So if you want to get out of coking coal you need to shift the process.
Are you confident the world can achieve net zero emissions by 2050 if India has a 2070 goal and China has a 2060 goal?
That’s a climate justice issue right? Why should everyone chase 2050, why can’t somebody be 2040 or 2030 and some of the other countries in an earlier stage of development be 2060 and 2070 so that the world is a bit closer to net zero at that point in time?
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The second point the Indian government has made is that when the [2015] Paris accord was signed there was supposed to be $US100 billion a year of funding to help the poorer countries transition. I don’t think that has come either in the last many years. There is a cost and complexity to this transition and who is going to pay the cost?
Ultimately it has to be shared between the governments, industry and the customers. The question is also between the developed and developing world because in India today the focus is on making sure electricity is available to everyone. India has made huge progress on renewables and is one of the biggest producers of renewable energy in the world, but coal will still be used to generate electricity for some time. Incremental capacity will be more renewables, but the existing capacities will still need coal.
So the journey is complex. I think sometimes we underestimate the cost and complexity of this transition, the impact it will have on society at large.
Will a carbon border mechanism in Europe force Indian steel mills and manufacturers to decarbonise sooner and indirectly hurt Australia’s coking coal export industry?
Today India exports about 10 per cent to 15 per cent of the steel it produces, but even that has slowed down because the Indian government has put a tax on exports. So Indian steel producers are more dependent on the domestic market than international markets.
If you look at Japan and Korea they were exporting 30 per cent to 40 per cent of their [steel] production. I don’t think India will ever be at that level. I think around 10 per cent to 15 per cent is around the level at which India will operate in international markets.
On the carbon border adjustment mechanism, we have a [steel making] footprint in Europe, so we are in favour of that because if you make significant investments to transition to cleaner process routes you need to be sure there is some support because otherwise cheaper steel will come from elsewhere which will not be clean.
In India the policy to promote use of green materials is evolving; today the greening of the economy is focused more on renewables targets and things like that but I think possibly soon you will see some sort of carbon trading mechanism in India as well.
Aug 11, 2022 –
News and analysis on the obstacles and opportunities in the transition to a net-zero economy.
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