Source: Greening China’s ‘brown steel’ investments in Zimbabwe – Africa at LSE
Zimbabwe is set to become Africa’s largest steel producer, thanks to a investment from China. The country must now choose between environmentally unfriendly ‘brown’ steel or seize the opportunity to lead the continent in ‘green’ steel production, writes Kudakwashe Manjonjo.
Used in infrastructure, vehicles, electricals and much else, steel is a common material in developed countries but is scant in Africa. In 2023, globally, 219 kg of steel was used per person in new products. In sub-Saharan Africa, the per capita consumption was around 30 kg, which is just 14 per cent of the global average.
To change this narrative, two Chinese multinationals, Tsingshan Holding Group and Xinganglian Metallurgical are investing over £3.8 billion in Zimbabwe’s steel industry. Zimbabwe will become Africa’s biggest producer of steel surpassing the current leaders South Africa, Egypt and Morocco. This investment comes at a critical time for Africa as it seeks to reduce its infrastructure deficit. However, most of this steel investment will produce fossil-fuel based ‘brown’ which could potentially hold Zimbabwe and Africa back from fulfilling its ‘green’ steel production potential.
Brown steel vs Green steel
Steel production requires significant energy. It involves heating iron ore or scrap metal to extremely high temperatures (often above 1,000°C) to melt and transform it into steel. Brown steel refers to steel produced using conventional, fossil fuel-based energy such as coal. Green steel is produced with a focus on sustainability, using renewable energy sources and minimizing carbon emissions. Both the Dinson and Palm River Steel projects have coal as their primary source of energy with renewable energy sources providing only a minor contribution.
There are some simple reasons for this. Firstly, coal is cheap to produce. Secondly, steel has traditionally been produced with coal as the main energy source. In traditional production, coal is used as a reducing agent to extract iron from iron ore, as an energy source to provide the high temperatures needed for the steelmaking process, and to help remove impurities and achieve the desired chemical composition. Because of this, the global steel industry is responsible for 9 per cent of global carbon emissions.
The world is increasingly paying attention to how dirty the steel industry is, and concerted efforts are being made to make a shift. Among them are Europe’s Carbon Border Adjustment Mechanism (CBAM) law, which will come into effect in 2026. This European Union (EU) regulation aims to put a price on the carbon emissions of goods imported into the EU. The stated aim is to level the regulatory playing field between EU and foreign producers and reduce carbon leakage, where production is outsourced to places with less stringent environmental protections. This law will affect brown steel investment because CBAM will progressively limit brown steel and products made from brown steel such as car frames for electrical vehicles uncompetitive in the European market. This presents an opportunity for green steel producers, but Zimbabwe may be locking in its brown steel production for years to come.
The Zimbabwean government was the first African country to report its Nationally Determined Contributions Plans that lay outline ambitious targets for emissions reduction, climate resilience, and green economic growth by 2035. Coal emissions in the energy sector were singled out as having to be reduced. The production of brown steel will hamper those efforts. Coal production has turned mining areas and towns into environmental sacrifice zones disproportionately affecting local populations. Dinson Energy for example is mining coal in Hwange to power the steel plant in Manhize exacerbating the 100-year-old colonial consequences of coal mining in the Hwange area. The town is being locked in fossil fuel extraction leading to stranded assets, skills and a dying town because of the lack of transition planning towards a decarbonized global economy.
Green steel
Demand for streel is expected to increase by a third over the next 30 years. This is largely due to growth in Asia and Africa. This makes it more imperative that the industry moves from brown to green steel production.
The technologies required for this to happen are already available. Although not the primary energy source, both new plants in Zimbabwe will have electric arc furnaces which unlike blast furnace, do not need coal to power steel production.
Nearly 30 per cent of global steel is now made through electric arc furnaces gradually chipping away at fossil fuel-based production. Both investments can also use green hydrogen from Namibia to reduce iron ore instead of coal. There will be reduced carbon emissions since there will less to coal being used in the steel plants increasing the steel industry’s alignment with Zimbabwe NDC plans.
Moreover, the Chinese firms investing in Zimbabwe have the latest technology in green hydrogen and electric arc furnaces to make this shift. Bringing in the latest technology on this front will enhance the transfer of skills training from Chinese to local engineers and technicians happening at both steel production sites. This is exemplified through the Shanxi Engineering Vocational college and Harare Polytechnic partnership under the Palm River Energy project.
Beyond producing crude steel, there is massive potential to add value and produce stainless steel. Blessed with energy transition minerals such as nickel and chromium, these is potential for value addition of the minerals leading to a more sustainable and valuable industrial value chain growing in Zimbabwe.
The Palm River Energy project plans to produce one million tonnes a year of stainless steel using the critical energy transition mineral of chromium from Zimbabwe. Dinson’s parent company, Tsingshan is a dominant player in stainless steel production controlling about 25 per cent of the global market primarily through its Indonesia operations. Although Tsingshan has previously raised concerns on the viability of producing stainless steel which also requires nickel which is not found in abundance in Zimbabwe, the potential is still there considering the potential to source nickel from Tanzania, which will also enhance intra-African trade, a key goal of African nations.
Greater cooperation between African countries
The dominant narrative that has come out of these projects is that they are a much-needed boon for Zimbabwe’s manufacturing industry. Although correct, both projects success is reliant on stronger collaboration with the rest of Africa’s economies to meet their potential. The Africa Free Trade Agreement means that the steel produced in Zimbabwe has a ready market in Africa. There is a need for cooperation with South Africa steel companies which are currently in decline to ensure there is no under-cutting of each other’s steel industries which will have a net-negative impact on Africa’s slice of the global steel industry. Cooperating with Namibia will also provide access to green hydrogen which is a key ingredient in producing green steel and potentially nickel from Tanzania.
The move from brown to green steel production is not only an environmental imperative but also an economic necessity to prepare Zimbabwe’s steel investment for a decarbonised world. The Dinson and Palm River Energy projects are much needed initiatives that can propel greater technology transfer, value addition and greater cooperation amongst African countries’ supply and value networks. An increase in the per capita use of steel will be a definite indicator of Africa’s growing industrialisation.
Photo credit: Pexels
The post Greening China’s ‘brown steel’ investments in Zimbabwe appeared first on Zimbabwe Situation.