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Chaired by executive officer Brian Aranha.
The group is responsible for informing and shaping the company’s climate change strategy. Members of the group include VP government affairs, VP corporate communications & CR; VP head of strategy; VP technology strategy; GM, head of SD.
This group links to the GBTC via VP technology strategy.
Government Affairs Council.
Chaired by Frank Schulz, VP government affairs.
This group is responsible for aligning local climate change policy strategies with the overall Group strategy. This ensures consistent engagement activities on climaterelated issues across the Group.
37 ARCELORMITTAL CLIMATE ACTION REPORT 1 CONTENTS PREVIOUS BACK FORWARD
Governance and risk.
Managing climate-related risks.
At ArcelorMittal, we review our risk universe regularly, including specific climate-related risks. In summary, we have identified and are managing the following top climate-related risks:
TRANSITION RISKS Type & status Response.
Policy & Regulation.
Our most substantial climate-related policy risk is the EU ETS, which applies to all our European plants, making up 44% of our total capacity. The risk concerns our primary steelmaking plants which are exposed to this regulation and yet unprotected against competition from imported steel. We have evaluated this risk against a carbon price of €15 per tonne of CO2, and the cumulative risk exposure26 for our European business over 2021 to 2030 stands at more than €3 billion, rising to €5 billion under a carbon price of €25 per tonne of CO2.
We are also tracking carbon market policy developments in South Africa, Mexico, Brazil, Kazakhstan and Canada, where a further 30% of our production capacity resides. We consider that the financial risks arising from these are less immediate. Furthermore, we are also closely monitoring policy developments in the United States, which has shifted from federal climate policy to more decentralised policies at the state and local levels.
We are developing a range of low-emission technologies, and many of these to demonstration stage. However, significant longterm mitigation requires supportive policies to ensure the roll out of our lowemissions technologies is viable. We have analysed the implications of different policy and technology scenarios (see chapter 4) and this has informed our policy positions outlined in chapter 6.
In the medium term, we are developing an emissions reduction roadmap to support a new 2030 carbon target.
Reputation Our stakeholders’ views on our response to the climate challenge affect the ratings we receive from investors. In the context of the transition to a low-emissions economy, our social licence to operate is defined by several key factors including: our transparency on carbon emissions, our ability to communicate on a complex subject, and our ability to make a credible commitment to meeting the objectives of the Paris Agreement.
We respond to CDP annually. We also engage with stakeholders on climate risk issues and we hope that this Climate Action Report helps to build further understanding of our climate-related commitments and current constraints.
Technology As the world acts to mitigate GHG emissions, investments in technological innovations such as Carbalyst® and Torero are vital to our long-term resilience and competitiveness. The risk of these technologies not becoming viable for us in the medium to long term is dependent on the development of the technologies, the availability of investment to implement them, access to sufficient renewable energy to support them, and policies that promote these conditions. Novel technologies require a long timeline to be scaled up. The risk is increased by the slow and uncertain development of policies needed to create sufficient incentives to exploit these opportunities. A key problem is that current policies are based on a linear economic model; by contrast, the novel technologies we are already advancing adopt a circular approach to reusing resources and so both energy and materials policies need to be integrated.
See chapter 4 on lowemissions technology pathways and policy scenarios.
See chapter 5 on ArcelorMittal’s low-emissions innovation programme.
26 Non discounted with current technologies 38 ARCELORMITTAL CLIMATE ACTION REPORT 1 CONTENTS PREVIOUS BACK FORWARD
TRANSITION RISKS Type & status Response.
Market We have faced the risk of substitution from competing materials displacing steel in particular applications. We have seen this from aluminium and cement due to an excessive focus on emissions from products in their use phase only (where the lightest weight wins) rather than on a whole lifecycle basis (cradle to grave). However, as customers deepen their understanding of embedded and lifecycle emissions of the materials, steel compares favourably, and so we see this risk diminishing.
With the switch to electric vehicles, we see opportunities for high-strength steels for battery protection and electrical steels. We also project that the move to wind and solar power generation will require more steel per unit of electricity generated compared to conventional technologies.
We continue to grow opportunities in all these markets, for example via our S-in motion® and Steligence programmes (see page 5).
PHYSICAL RISKS Type & status Response.
Acute physical risks.
Adverse weather events, such as extreme low temperatures in North America, very high winds in Europe and flooding in Spain have on occasion hampered our supply and distribution routes. Our Calvert JV plant is in an area prone to hurricanes and tornadoes, and wildfires are a risk to our sites in Kazakhstan and South Africa. With 3 to 4°C of warming, hurricanes are projected to increase in intensity – along with associated increases in heavy precipitation – but not in frequency.
Our risk management process enables us to build resilience at our plants and in supply chains where extreme events already occur; this may need further development where extreme events are currently rare, but may be more frequent or intense in the future.
Chronic physical risks.
Water is crucial to our steelmaking processes and where plants are in areas of water stress, this is even more important. Some facilities are at risk of being affected by long periods of drought conditions.
Where these risks exist, such as in South Africa and Brazil, we have developed local resource management plans to ensure that operational water requirements can be met. We are fully engaged with local stakeholders on this issue.
39 ARCELORMITTAL CLIMATE ACTION REPORT 1 CONTENTS PREVIOUS BACK FORWARD
9 Alignment with TCFD recommendations.
TCFD Recommended Disclosures Chapter.
Further information (where applicable)
Governance.
A) Describe the board’s oversight of climate-related risks and opportunities.
8.
B) Describe management’s role in assessing and managing risks and opportunities.
8 2018 CDP Climate Change response C1.2.
Strategy.
A) Describe the climate-related risks and opportunities the organisation has identified over the short, medium, and long term.
2, 3, 8 2018 CDP Climate Change response C2.1, C2.2c, C2.3a, C2.4a.
B) Describe the impact of climate-related risks and opportunities on the organisation’s businesses, strategy, and financial planning.
5, 8 P13 – 15 Form 20f Item 3 Section D. Risk Factors 27 2018 CDP response C2.3, C2.5, C2.6.
C) Describe the resilience of the organisation’s strategy, taking into consideration different climate-related scenarios, including a 2°C or lower scenario.
4 2018 CDP response C3.1.
Risk Management.
A) Describe the organisation’s processes for identifying and assessing climate-related risks.
8 2018 CDP response C2.2b.
B) Describe the organisation’s processes for managing climate-related risks.
8 2018 CDP response C2.2d.
C) Describe how processes for identifying, assessing, and managing climate-related risks are integrated into the organisation’s overall risk management.
8.
Metrics and Targets.
A) Disclose the metrics used by the organisation to assess climate-related risks and opportunities in line with its strategy and risk management process.
7 2018 CDP response C4.1b.
B) Disclose Scope 1, Scope 2, and, if appropriate, Scope 3 greenhouse gas (GHG) emissions, and the related risks.
7 2018 CDP response C5.1, C6.1, C6.3, C6.5.
C) Describe the targets used by the organisation to manage climate-related risks and opportunities and performance against targets.
7 2018 CDP response C4.1b 27 https://corporate.arcelormittal.com/~/media/Files/A/ArcelorMittal/investors/20-f/2018/form-20f-2018.pdf 40 ARCELORMITTAL CLIMATE ACTION REPORT 1 CONTENTS PREVIOUS BACK FORWARD
10 Annex 1: The steelmaking process.
We use an integrated steel plant to make primary steel (i.e. virgin steel) mostly from iron ore, which is extracted from mines, and a small share of scrap steel. As iron ore – a compound made up of iron and oxygen – is found in nature, it is chemically a very stable compound. Iron is not alone in this respect – most metals from aluminium to uranium are found in nature bound to oxygen. In primary steelmaking, we use energy and carbon to separate iron from oxygen in a blast furnace, and in subsequent steps, we adjust the product chemically and physically into the final desired form with characteristics such as strength, flexibility and corrosion tailored to the needs of the end user.
In contrast, in an electric arc furnace (EAF), we use scrap steel and/or scrap substitutes such as direct reduced iron (DRI). We melt these materials using electrical energy, thus entirely replacing all of the steps up to and including the energyintensive blast furnace. Similar to the integrated steel plant route, we cast, and then shape or roll the liquid steel produced from the EAF into its final form.
These two steelmaking routes are outlined in more detail on the following two pages.
Steel is a material that consists almost completely of iron, with small shares of carbon and even smaller shares of other elements such as manganese and nickel. Today, steel is primarily made using two different technologies: the integrated steel plant and the electric arc furnace (EAF).
41 ARCELORMITTAL CLIMATE ACTION REPORT 1 CONTENTS PREVIOUS BACK FORWARD
Figure 16: steelmaking at an integrated steel plant (using iron ore)
The steelmaking process.
Integrated steel plant.
Preparation of materials for the blast furnace.
The first steps in the primary steelmaking route are to prepare the materials used in the blast furnace – coke and sinter. Coke is a material high in carbon made by heating metallurgical coal at high temperatures in a coke oven in the absence of oxygen. The process of making coke also results in the production of a hydrogen-rich synthetic gas (coke oven gas) which we can use as an energy source to heat coke ovens. Alternatively, we can use blast furnace gas to heat the coke oven. Combustion of these gases in the coke oven creates CO2.
Sinter is an agglomeration which is produced from a mixture of all kinds of iron ores, coal and coke particles. We ignite the coal/coke particles in the mixture using coke oven gas, blast furnace gas or natural gas. This results in sinter cake, which we later crush and cool. CO2 is a by-product of the sinter plant. Sinter accounts for about 70 to 90% of the metals loaded into the blast furnace; the remaining part of the burden consists of pellets and lump ore.
Ironmaking in the blast furnace.
In the blast furnace, we load sinter, coke and lime into the top, and we inject hot air from the bottom. We also inject pulverized coal into the blast furnace to reduce the amount of coke used, which reduces costs as well as CO2 emissions. The hot air reacts with the coke and coal to form carbon monoxide (CO), which is the reducing agent that separates the elements of iron ore: iron and oxygen. When CO extracts oxygen from iron ore, CO2 is formed. Carbon is therefore essential in the integrated steel plant and CO2 is an inevitable by-product of the chemical reactions. The waste gases from the process contain equal amounts of CO and CO2, as well as hydrogen and nitrogen.
Heat is also generated in the blast furnace, which is essential to melting the reduced iron ore to form liquid hot metal (molten iron). The impurities react with lime to produce slag, which floats on top of the liquid hot metal and contains impurities in the iron ore, coke and coal ash. Slag has a chemical composition similar to clinker, which is used to make cement. This means that slag can be used as a substitute for clinker.
Steelmaking in a basic oxygen furnace.
To make steel, we need to adjust the chemical composition of the liquid hot metal in a basic oxygen furnace (BOF). We charge the furnace with 15-25% scrap steel and 75-85% liquid hot metal. We also inject oxygen into the furnace, which reacts with carbon and other impurities in the liquid hot metal. In the BOF, the process converts the impurities into slag, which floats on top of the liquid steel, and into waste gases (or BOF gas), which mostly consists of CO.
We tap the liquid purified steel into a steel ladle, where we can further adjust the steel chemistry. We then transport it to a continuous caster for casting and we further shape or roll the steel into its final form. Various finishing or coating processes may follow this casting and rolling. The steel slag is tapped into another vessel to be cooled down and prepared for external use.
CO2 CO.
CO CO2.
Scrap.
Coke oven Coal.
Coke.
Pulverised coal.
Iron ore Sintering plant.
Sinter.
Hot metal.