ARMANDO AYALA-ROBLES: Driving global change by seizing local opportunities

ArcelorMittal stands at the crossroads. Will it maintain business as usual or choose the road less travelled by ending its harmful polluting practices and embracing sustainable steel production?

While the company continues to fall short on its global decarbonisation promises, local opportunities could offer solutions to meet its environmental targets. Investing in its SA subsidiary could help ArcelorMittal achieve its sustainability promises and position SA at the forefront of its decarbonisation agenda. 

The steel sector is one of the most carbon intensive and polluting industries, responsible for at least 7% of global greenhouse gas emissions (GHG) and causing significant local environmental harms. As the second-largest steel producer in the world, the ArcelorMittal group has an enormous responsibility for the social, environmental and climate effects of its operations. The company’s human rights and climate failures are under scrutiny now more than ever, as documented by the Fair Steel Coalition.

The rapid transformation of steel production is critical in our carbon-constrained world. ArcelorMittal has used its prominent position and promises of decarbonisation to secure substantial subsidies from countries such as Spain and France. But despite these vast sums of taxpayer money and its own $1.5bn pledge for green steel plans, the company has backtracked on its promises, while expanding coal-based production in the Global South.

ArcelorMittal claims prohibitive costs and lack of green hydrogen hampered progress, a perplexing attitude, given its strong market position and the $11bn spent on buybacks and dividends from 2021 to 2023 — 22 times the amount it spent on decarbonisation in the same period. This raises the question: is it a matter of will or financial constraints? Is profit being prioritised over the wellbeing of people and the environment? If anyone can expedite the availability of green hydrogen, surely a committed global steel giant can. 

While the substantial costs of decarbonising are undeniable, ArcelorMittal could face even higher long-term capital expenditures by not investing in change today. The price of inaction, compounded by rising carbon taxes and regulations such as the EU’s carbon border adjustment mechanism (CBAM), could far exceed initial decarbonisation investments.

ArcelorMittal must adopt a proactive stance to maintain its competitive edge and mitigate future risks. Further delaying decarbonisation efforts will not only continue to worsen our climate crises, but also set the group on the back foot in the race towards profitable sustainability, as its carbon-based operations run out of time.  

On the other hand, ArcelorMittal SA (Amsa), the group’s SA subsidiary, has immense opportunities to drive the steel sector into a better future. SA’s vast renewable energy resources and high-quality iron ore create a significant opportunity for the company. Amsa has already identified the potential of its decommissioned Saldanha steel plant in the Western Cape.

A significant investment by ArcelorMittal could lead to a refurbished Saldanha plant producing green direct reduced iron (DRI). This would allow primary iron to be made locally, using a combination of renewable energies, and used for green steel making operations in Europe and elsewhere — an opportunity for the group to showcase its commitment to decarbonisation while capitalising on regional advantages.

The imperative for ArcelorMittal to invest in decarbonisation in SA is further illustrated by the pressure on local steel value chains, as highlighted in a report by the Centre for Environmental Right. Car manufacturing is one of SA’s largest economic sectors, with many vehicles produced for export to European markets.

With the implementation of trade regulations such as CBAM, local car manufacturers will have to decarbonise their steel supply chains. By initiating these efforts in SA, Amsa could leverage local solutions that benefit carmakers in the country, while responding to the increasing global demand for green steel.  

Given that the automotive industry is one of the largest consumers of steel globally, it holds significant potential to be the spark of change. Some carmakers are already rising to the challenge as shown by Lead the Charge’s annual leader board on automotive supply chain. In 2023 more than 60% of the carmakers evaluated scored 0% on efforts to decarbonise their steel supply chains.

The situation reversed by 2024; carmakers that scored 0% or less than 10% were in the minority, representing only a third of those evaluated. These quickly shifting market dynamics should further incentivise ArcelorMittal to act promptly. 

Failure to tangibly change steel production risks financial repercussions for the steel and automotive industry and further endangers our planet’s wellbeing. By seizing local opportunities to decarbonise ArcelorMittal could materialise its environmental commitments, benefit its stakeholders and salvage its reputation as an innovative leader in the industry.  

• Ayala-Robles is senior researcher at the Centre for Environmental Rights.