Energy Transition Drives Demand for Steel Alloys Up

Steel alloys, which are mainly used in the steel industry, will play an important role in the energy transition as they also have battery and energy storage applications.

Global stainless steel melt production is expected to be around 62 million tonnes (Mt) in 2022, rising to 90 Mt by 2050. China will be the main driver of production as the country currently accounts for 60% of global output, followed by Indonesia and India.

In comparison, production in the rest of the world is expected to remain flat over the next three decades.

Stainless steel accounts for around 80% of world chromium consumption, 65-70% of nickel, and 20-25% of molybdenum. All stainless steel contains chromium, while use of nickel depends on the grade.

In the mature industries of Europe, the US and Japan, more than 50% of the input material is scrap, which contains nickel and chromium priced at a discount to the pure metal. China, having the younger steel industry, has had less access to scrap but will be able to use more in the future. It will stabilize demand for chromium, nickel and molybdenum in the long run.

The bulk alloys include manganese, chromium, and ferrosilicon. Steel is the highest consumer, accounting for more than 90% of manganese and chromium demand and close to 75% for ferrosilicon. Manganese is generally used in typical carbon steels, while chromium and ferrosilicon are used more in stainless and specialty steels.

China’s 14th five-year plan set goals to reach peak crude steel output within the early 2020s. However, reforms are less focused on high quality and refined products, so stainless and other alloy steels will continue to see growth while Chinese carbon steel declines. As a consequence, global silicomanganese production is expected to become less China-centred, while China’s share of global ferrochrome and ferrosilicon production will hold up, and even rise slightly.

Despite being a major producer of steel alloys, China accounts for only 4% of global manganese ore production and a negligible amount of chromium ore production. It is therefore becoming heavily reliant on imports of these raw materials.

Over the long term outlook, only manganese shows any major shift in demand patterns. Several novel cathode chemistries use manganese, and this will underpin growth in demand from the batteries segment. Manganese could offer a better supply security when compared to other common cathode metals, due to its wider geographic distribution, greater scale of production and larger reserves. Moreover, production costs for the mineral are lower than for cobalt and nickel which also face ESG concerns. As a result, manganese will enjoy a five-fold increase in use for batteries between now and 2040.

Steel also dominates the consumption of “noble alloys” vanadium, niobium and molybdenum. Steel accounts for 90% of vanadium and niobium consumption, and about 70% of molybdenum demand.

Demand for noble alloys is expected to grow because of more stringent technical requirements for steel, particularly for construction. Adding very small quantities of these metals can improve properties such as strength and corrosion resistance. Meanwhile, noble alloys’ potential in making steel lighter, energy storage and EV batteries will give them a role in the energy transition.

Most significantly, vanadium and niobium will find uses in battery applications, although the latter is still subject to technological improvements and successful commercialization. In contrast, vanadium redox batteries (VRB) are already being installed across the globe as part of energy storage systems, particularly in China.

VRB uptake faces challenges relating to the cost of the electrolyte and the potential for vanadium price volatility. However, its advantages include long duration, stable chemistry and a longer lifespan than lithium-ion batteries.

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