Natural Gas to Lose Out with Green Steel

While power markets get the most press when it comes to decarbonization, the push for lowering emissions extends well beyond electrons. Industrial facilities like steel and iron manufacturing, cement kilns, refineries, chemical manufacturing, and paper mills contribute meaningfully to the United States’ emissions. In response, many industries have laid out paths toward decarbonization. Here we focus on the steel industry and how its decarbonization will impact natural gas demand. 

Manufacturing Emissions Overview 

Industrial emissions make up between 20-25% of total U.S. carbon dioxide (CO2) emissions; however, that covers a wide range of activities. Zooming in on manufacturing emissions, which includes steel manufacturing, shows that petroleum and coal products (mostly refining) and chemical production make up just under half of all manufacturing emissions. 

Steel, alloy, and ferroalloy come in third for manufacturing emissions; in the big picture of all U.S. emissions, they may only make up a small slice. However, U.S. facilities are heavily concentrated in the Midwest along the Great Lakes and Mississippi River, as shown in the map below. This would mean any changes in the industry will have an acute impact on a relatively small geographic area. 

Pathways to Green Steel 

The push for green steel, or carbon-neutral steel production, has a few pathways that will likely be used in tandem to reduce the industry’s carbon impact. The two clearest pathways today are carbon capture and sequestration (CCS) to capture emissions and the substitution of green hydrogen for fossil fuels used in manufacturing. Both have their practical and economic hurdles; however, investments are currently being made in Europe and Asia that will reduce those obstacles for late adopters. 

Since one of the pathways to decarbonization is a shift from natural gas to green hydrogen, let us look at the current state of industrial natural gas consumption. The graphic below is from BTU’s Henry Hub Outlook and shows industrial natural gas consumption across the Lower 48 states. 

Texas and Louisiana account for more than a third of industrial natural gas consumption; much of this comes from use at refineries and chemical manufacturing plants. The Midwest makes up about 20% of Lower 48 industrial demand, with steel and iron making up an important slice of Midwest industrial demand. 

Conclusion 

While changes to the steel industry will only marginally affect natural gas demand in aggregate, the Midwest will disproportionately feel those changes. You can read about this topic and other important developments impacting U.S. crude oil and natural gas production in BTU’s Upstream Outlook.

This article was originally published on the BTU Analytics website.  

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