PERTH (miningweekly.com) – Diversified miner BHP has made the case that steel, and in effect iron-ore, should also be classified as a critical mineral given it was essential for the decarbonation of power.
Speaking at an investor day, BHP VP for market analysis and economics Dr Huw McKay noted that power generation currently provided less than 2% of global steel demand.
However, this was expected to triple by 2050, with McKay noting every percentage point increase in share in that year would equate to between 20-million and 25-million tonnes, depending upon what was assumed for other sectors.
“The decarbonisation of power will be dominated by onshore wind and solar photovoltaic (PV), with complementary roles to be played by offshore wind, hydro and nuclear energy.
“Where pure steel intensity per megawatt of capacity is concerned, wind and hydro power are the clear standouts. Offshore wind capacity requires 190 t of steel per megawatt, and onshore capacity requires 124 t. Hydro capacity requires 161 t. Solar is less steel intensive, at 45 t per megawatt.
“But the sheer scale of the projected solar buildout makes it the second largest contributor to the overall uplift in steel demand from power generation, behind only onshore wind. Looking solely at steel demand from the wind and solar segment, it is expected to increase five-fold from today to 2050,” McKay said.
Beyond the growing demand for steel from the global decarbonising efforts, BHP also saw a continued demand for steel from growing economies, including China and India.
McKay noted that BHP’s base case maintained that Chinese steel production is in a plateau phase in the current half decade, between 1-billion and 1.1-billion tonnes a year, or between 700 kg and 770 kgs per head.
“The veracity of the plateau concept has been aided by the fact China is on track for a fourth straight year within the above range. It is also underscored by the authorities pursuing zero-growth in 2021 and a net reduction in total output in 2022.
“Probabilistically, the 1.065-billion tonnes produced in 2020 therefore has a better than even chance of being the literal peak, once all is said and done. That observation is notwithstanding the fact that current capacity has demonstrated the ability to produce monthly run-rates that have comfortably exceeded 1.2-billion tonnes a year,” said McKay.
Looking at India, BHP expected the country to expand its steel production four-fold by 2050, using 100-million tonnes in 2020 as the base.
“Starting with demographics, the total population is expected to increase from around 1.4-billion today to around 1.7-billion in 2050. We expect roughly 400-million Indians will migrate from rural to urban areas in the next 30 years. This will take the urban share from around one-third to around one-half. That segment of the urbanisation arc is the sweet spot for traditional commodity demand, and for steel in particular.
“Alongside these monumental demographic and spatial changes, three of the world’s five largest cities are expected to be in India in 2050, up from just one in 2010. We expect living standards will rise from about 10% of US levels to about one-third by 2050, something akin to the relative position of Thailand today. The combination of these secular forces will create enormous demand for affordable steel.”
Beyond India and China, South-East Asia’s steel demand, which currently stands at 110-million tonnes a year, is also expected to triple by 2050.