An excerpt follows.
- The report focuses on ways to decarbonize the steel industry, using hydrogen, carbon capture and storage (CCS), as well as referencing biogas/biomass. We analyze the constraints on producing green steel from green hydrogen including: availability of high-grade iron ore; access to new renewable energy sources; electrolyzer capacity; and the sunk costs of existing blast furnaces.
- The steel industry is one of the largest contributors to global carbon emissions, accounting for 7% of total emissions in 2019.1 Left unchecked, emissions are forecast to rise by 44% by 2050.2 However, there is another option where emissions could fall by 54% by 2050: green steel from zero-emissions hydrogen.
- Zero-emissions hydrogen can act as catalyst for accelerating the decarbonization of other industries including fertilizer, transportation/shipping, ceramics and glassmaking. Using hydrogen as a heat source is not new—what has changed is the dramatic decline in cost of inputs, including renewable energy.
- The report includes case studies on POSCO, Baosteel and SSAB/LKAB/Vattenfall JV. We break down the processes for producing steel in a blast furnace, a hybrid fluidized reduction furnace and zero-emissions fluidized reduction furnace.
- We are optimistic that the switch to green steel using hydrogen as the reductant and heat source will occur in developed markets. However, as the drivers of the forecasted one-billion-ton increase in steel demand by 2050 will be concentrated in emerging markets, these countries will need support and technology transfer if the challenge of decarbonization in the global steel industry is to be successful.
WHAT ARE THE RISKS?
All investments involve risks, including possible loss of principal. The value of investments can go down as well as up, and investors may not get back the full amount invested.
Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions.
Special risks are associated with foreign investing, including currency fluctuations, economic instability and political developments; investments in emerging markets involve heightened risks related to the same factors. To the extent a strategy focuses on particular countries, regions, industries, sectors or types of investment from time to time, it may be subject to greater risks of adverse developments in such areas of focus than a strategy that invests in a wider variety of countries, regions, industries, sectors or investments.
The companies and case studies shown herein are used solely for illustrative purposes; any investment may or may not be currently held by any portfolio advised by Franklin Templeton Investments. The opinions are intended solely to provide insight into how securities are analyzed. The information provided is not a recommendation or individual investment advice for any particular security, strategy, or investment product and is not an indication of the trading intent of any Franklin Templeton managed portfolio.
This is not a complete analysis of every material fact regarding any industry, security or investment and should not be viewed as an investment recommendation. This is intended to provide insight into the portfolio selection and research process. Factual statements are taken from sources considered reliable, but have not been independently verified for completeness or accuracy. These opinions may not be relied upon as investment advice or as an offer for any particular security.
It should not be assumed that any securities transactions were or will be profitable. The analysis and opinions of securities discussed herein may change at any time. There is no assurance that any security purchased will remain in the portfolio, or that any security sold will not be repurchased. Factual statements are from sources deemed reliable but have not been independently verified for completeness or accuracy. The examples may not be relied upon as investment advice or recommendations or an offer for a particular security or as an indication of trading intent.
Franklin Templeton and our Specialist Investment Managers have certain environmental, sustainability and governance (ESG) goals or capabilities; however, not all strategies are managed to “ESG” oriented objectives.
Past performance does not guarantee future results.
IMPORTANT LEGAL INFORMATION
This material is intended to be of general interest only and should not be construed as individual investment advice or a recommendation or solicitation to buy, sell or hold any security or to adopt any investment strategy. It does not constitute legal or tax advice.
The views expressed are those of the investment manager and the comments, opinions and analyses are rendered as at publication date and may change without notice. The information provided in this material is not intended as a complete analysis of every material fact regarding any country, region or market. All investments involve risks, including possible loss of principal.
Data from third party sources may have been used in the preparation of this material and Franklin Templeton (“FT”) has not independently verified, validated or audited such data. FT accepts no liability whatsoever for any loss arising from use of this information and reliance upon the comments opinions and analyses in the material is at the sole discretion of the user.
Products, services and information may not be available in all jurisdictions and are offered outside the U.S. by other FT affiliates and/or their distributors as local laws and regulation permits. Please consult your own financial professional or Franklin Templeton institutional contact for further information on availability of products and services in your jurisdiction.
Issued in the U.S. by Franklin Distributors, LLC, One Franklin Parkway, San Mateo, California 94403-1906, (800) DIAL BEN/342-5236, franklintempleton.com – Franklin Distributors, LLC is the principal distributor of Franklin Templeton U.S. registered products, which are not FDIC insured; may lose value; and are not bank guaranteed and are available only in jurisdictions where an offer or solicitation of such products is permitted under applicable laws and regulation.
Franklin Distributors, LLC
1. Source: Energy Transmissions Commission.
2. Source: Energy Transmissions Commission. There is no assurance that any estimate, forecast or projection will be realized.