← CERAWeek Podcast with Atul Arya
CERAWeek Podcast with Atul Arya
José Fonrouge, Ternium, on Decarbonizing Steel in a Two-billion-ton Industry
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Foreign.
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Welcome to the Sarawik Podcast where the world's energy leaders and innovators share insights on the future of energy, technology and climate. I am Atul Arya, Chief energy strategist at S and P Global. In each episode we dive into the critical issues and bold ideas shaping our energy future.
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A
So let's get started. Hello everyone. Welcome to Sarah Wick podcast. I'm Atul Arya, Chief energy strategist at S P Global and today we have a very special episode because we are going to go to Latin America. And joining us is Jose Von Rouge, Global environmental director for Terneum. Jose, welcome to Saravic podcast.
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C
Thank you Atul. Very pleased to be here with you.
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A
So, just a little bit of a background. You are the global sustainability senior director at Ternium leading the decarbonization strategy. You're president of the environmental committee of World Steel and Aero Global and Latin America Steel associations. And you're an environmental engineer holding a postgraduate degree in environmental technology and management. So you are the right person to tell our audience about steel and about decarbonizing of steel. So let's start with a brief overview of Terneum. What do you do your areas of business, major markets.
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C
Sure. Atul, thank you for the introduction. Yes, part to be an employee of this company, it's been like 24 years now. I'm always on the environmental arena or challenges. Back to your question. Ternium. It's Latin American leading producers of flat and long steel products that goes from the iron ore and to sophisticated finalized products. We basically operate in Mexico, Argentina, United States. In Mexico it's where we have our major market. We operate the three alternatives. This is the way of producing steel. In the first place, blast furnace based on coal. Second option available worldwide, it's natural gas dri. This is direct reduction iron for steel making and in combination or standalone, the electric arc furnace which uses 100% ferrous scrap as a raw material. They have different footprints in terms of CO2 per ton of crude steel produced. The three ways we have an operate internium. It's more or less the three ways that worldwide has as technology available routes or production ways to produce steel. This is the blast furnace based on coal which has 70% of the supply of steel worldwide. We operate those blast furnaces in Argentina and Brazil. We also have natural bay which is a lower carbon emission technology based for steel for automotive industry also in Mexico. And last but not least, 100% electric arc furnace fed with ferrous crap which is the lowest of steel emitting the lowest rate possible for crude steel production.
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Most of the steel produced in the world is all blasphemous. Is that correct?
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C
Sure. Let me start by saying that steel industry market, it's the most dynamic industrial market worldwide today 2 billion tons per year it's being produced 50% it's being produced in volume in China where the 90% of that production is based in blast furnace based in coal as an energy matrix or source worldwide speaking that figures goes to a 70%. 70% of consumed produced worldwide comes from the same energy matrix. And as a sector as a whole it contributes to a 9% of gag emissions. And if you consider this impact and the difficulties or the barriers that the steel sector faces, that's why it's been considered as a hard to abate industry. We have a lot of challenge to switch the energy matrix to a low carbon matrix such as natural gas which is available as we know in certain regions and not everywhere. And of course electricity, it's a scarce resource. The infrastructure is still not there. So the pace in which technology will move forward to a lower carbon emission it is conditioned to this local context where the steel is produced back to the footprint. These three ways of producing steel has the highest 1, 2.3 tons of CO2 based on blast furnace. Then we have a step change natural gas based the average of the footprint worldwide speaking 2.3. It's the average contribution of a blast furnace and then a 1.5 in a natural based direct reduction. And the lowest step, it's 0.7 for 100% scrap based EAS way of producing steel. Of course, let me round up the idea by saying that there isn't good or bad ways of producing steel there the three ways needed for a lower carbon economy in the future it will be dependent on the local conditions and saving the barriers that now stops or slow down the pace for decarbonization.
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A
So now how big is your company, how many employees and how much you produce?
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C
We are around 35,000 employees. We produce or we shipped best meeting 15 million tonnes of steel per year. And our net sales it's US$70 billion.
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A
And you are part of the Techint? Can you say a little bit about Techint Group?
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C
Sure. We are part of this Te Ching group of companies that has over 100,000 employees. That on top of working on the steel business with our cousins that are another company that produces another type of steel which is based basically oil and gas products, mainly seamless pipes, but also engineering, construction, oil and gas and technology and health sector embedded in this TETIN group of Koenigs and of course steel
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A
is a very basic important building block of the modern. So let's talk a little bit about the steel market. What's unique about this market and the emission footprint of the steel making?
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C
Sure. Basically as mentioned, global crude steel production Nowadays it's around 2 billion tons per year. It's basically dominated more than a 50% of that produced in China. 70% it's based on blast furnace route one fourth of it. Of this volume it's been traded. That's why it's extremely exposed to international market. And now nowadays in these tariff wars and sea bumps popping up, it's particularly of interest in volume as a sector it contributes with a 9% of gag emissions. That's why we are considered hard to abate not only because of the volume but also because the difficulties we are having or facing to switch from coal based energy source to to a lower carbon footprint metrics like natural gas or even electricity.
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A
What has been happening in terms of the steel making technologies? How is it changing? How are you looking at reducing emissions and also the energy intensity of steel making?
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C
Unfortunately in the last 20 to 15 years we have not seen much improvement in terms of the performance or the rates of CO2 emitted per ton of crude steel production. Yes, we have been improving our competitiveness, we have improving in efficiency due to trends in prices but we have not seen and we are not going to see much of an improvement in the near future because these hard to abate barriers that we need to solve as an industry. Of course as I mentioned, energy efficiency, it's a must and we did our homework. And as I always say in the inside my company as a mantra, the best and cheapest and cleanest low carbon energy is one that we not need. That's why we embrace this mantra interchange group of companies. But yes, there have been some developments, very niche cases like the one we already mastered in Mexico operations by implementing certain capacities for selective CO2 from our. Capturing CO2 selectively from our processes and delivering this CO2 as a product, as a CO product to beverage industry, as a soda industry to replace fossil fuel based CO2. This is one unique case we are proud to share because we already have these developments of course with hand by hand with our technology branch called Tenova that delivers this kind of technology third parties as well.
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A
So when I'm having a Mexican soda, I might be getting CO2 is coming from your plant, is that correct?
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C
It's that correct? Yes, you might be drinking some CO2 on your soda or on your beer if you are to visit Monterrey.
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Oh, okay. I'll keep that in mind and I'll think of you when we do that. So let's talk about the other big thing I hear which is all about recycling. You know, let's recycle more. So how much steel is recycled and what is the impact and can you substitute things? Give us a picture of that.
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C
Very interesting question. Yes, we produce crude steel using 1/3 of of ferrous scrap as a feedstock, as a raw material, displacing natural gas or coal and of course iron ore. This is a lot. And we consider the champion of recycling. If we consider that we recycle in volume the sum of other materials such as aluminum, glass or paper, altogether. I mean, this is a lot of volume. It's 700 million tons per year, it's being recycled. This is one third of the production. This is because the inherent attribute of being magnetism, you can selectively separate from the post consumer products, all the steel and prevent that to go in a landfill. So we embrace and we strive to get all the steel post consumer steel out from the post consumer streams in order to save money, to save raw materials, to save GHG emissions. A very interesting figure we published through the World steel is that 1.5 ton of CO2 per ton of crude steel produced. It's been saved when you recycle post consumer scrap.
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What about other materials substitution opportunities?
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C
I think Atul that there aren't any alternative to steel that has a better footprint, not only in terms of gag emissions, but also on other environmental aspects. If you take into consideration carbon fiber, aluminium or even plastics, composite plastics, they all have a higher carbon footprint per final application. So we think that it's because this property of infinite recyclability, of course of the steel that we are considered being the champion of circular economy as well.
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Yeah, I think that's a really good and important point to emphasize into those because for example, we know, and I'm sure you see this in the places we operate, that plastic recycling is not that easy, isn't it? I mean, steel has a great advantage that you know how it looks like, how it feels like you can recycle it much easier, right?
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Absolutely. There isn't any downgrading when you recommend recycle steel. That's what happens in plastic and other recyclable materials.
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And also you have to separate, you require energy to clean it, whereas steel, you can just use it as it is, more or less, isn't it? As a scrap?
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Yeah. On that I forgot to mention the unique property, an inherent magnetism property that saves money and time from selective these ferrous scrap out from the post consumer streams. So it's really a good business case for recycling to recover and to save raw materials when we take post consumer steel out from landfills.
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Very good point. And as children we all remember having our little magnets to go and collect things, right? So that we still use that technology here. Let's talk a little bit about green steel. I mean I hear there's green steel coming but it's more expensive. So what is the cost premium and who is actually buying this green steel?
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C
Let me start from an opinion that we embrace at war steel. And I'm happy to mention that I chair the Eco meeting. This is the environmental committee. Since 2021 when since there hasn't been any common understanding of or standard or definition agreed upon the members, we have not embraced the green steel labeling but low carbon steel emissions. Some of you might have a different opinion, but from a turning understanding or point of view we are not keen on using this labeling attribute. We just go through a genuine strategy and trying to deliver a low carbon steel but not labeling with any specific standard for the time being. Because some of the marketing strategies that some of the members are delivering to the market are based on mass allocation, virtual allocation or and mass balancing. And for now we see more risks than opportunities to embrace specific standards until there is a global understanding on the definition and methodologies.
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But you do have some targets to reduce your emissions, correct?
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Absolutely. We published in our sustainability report reduction till 2030 considering scope 1213 of a 15% reduction on Pacific emissions. This is basically based on low carbon technology. We are delivering hopefully by the end of this year in Pescheria and renewables as an alternative to a market based energy footprint.
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A
Just want to go back to your comment about green versus low carbon emission. It's similar isn't it to kind of people calling green hydrogen and then moving away because there is no clear definition. When you say low emission you can actually say how much emission per ton of steel. Right. So it's a more kind of clear quantitative measure, right?
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C
That's a good analogy. Yes. In hydrogen production there is more common ground in considering green when you do some electrolyzing water using 100% renewables. That in essence won't happen in steel industry in the near future, not even in the midterm scenario. That's why we advocate for a more conservative narrative other than using a green label over steels.
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A
I think Very important. So where are the sort of challenges and barriers to speeding up the decarbonization of steel manufacturing?
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C
On that and related to your previous questions, the willingness to pay, it's a signal that we yet don't see in the market and we expect that to happen. Of course we will celebrate that. But as I said, in Latin Americans, market willingness to pay is not there. And I would say that nowadays within these trade wars, the competitiveness is, it's the name of the game, it's the enabler. I mean, and on that carrot strategies like incentives other than stick strategies like cap and trade or CBAM are the more desirable strategies or policies out there that accelerate the pace in which the steel making industry is decarbonizing our footprints. I mean predictability as any other business, it's key and we strongly believe that if the proper legal framework, it's out there, if you manage to make low carbon industry more competitive that standard ones, the decarbonization speed will speed up. Let me give you an example. Last year in Argentina, here in South America we installed the first wind farm here in Buenos Aires, close to our steel plant in San Diego where we enabled to replace up to 90% of our scope 2 emissions by making a huge CapEx or investment of $225 million. It's 100 megawatts capacity, 22 turbines. I mean this is a project that was really business driven. Not only decarbonizing our footprint but also it makes a lot of sense to invest in this own capacity, renewable capacity replacing fossil fuel based energy matrix in Argentina. We expect this to happen in all the regions where we operate.
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A
Yeah, and good strategy also because you have a more predictable cost because you know what the energy cost of your own generation is going to be, isn't it?
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C
Absolutely, absolutely. Long term view and strategy. It's what the Chin group of companies, not only ternium has in its DNA.
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You mentioned briefly Jose, your Pescheria steel count in Mexico, tell us about it. What's unique, what's special in this new
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C
phase of Pescheria expansion project we are delivering by the end of this year the most modern and efficient and sustainable state of the art steel making capacity of 2.6 million tons per year for the mobility of the future. This is going to be based again in natural based DRI and EAF electric arc furnace based on our technology ARM or branch called Tenova. We are installing this technology. That means that we are going to be saving sensitive heat from the furnace to heat up ferrous scrap coming into the ovens. Saving energy, saving CO2. And in the DRI unit we are going to be selectively capturing CO2 to deliver to the market these low carbon CO2 CO products. By replacing fossil fuel phase CO2 we are obtaining, gaining the lowest carbon footprint ever in the region for our sophisticated markets, which is a more automotive industry in the region.
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A
Congratulations. So look forward to hearing more about this last question on sort of technology before we come back to Saravik. We touched on hydrogen. How significant could hydrogen be in terms of decarbonization? You know we hear of hydrogen to reduce the emission intensity. What's been your experience?
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C
Oh, let me tell you that on hydrogen we have a lot of experience and we are betting on that, on that transition. But it's going to take a lot of time. For the time being we already use hydrogen sourced by this natural gas or coal based production. In essence we crack the molecule and we obtain this hydrogen that would reduce the iron ore. This is again taking out the oxygen out of the iron, which is hard, I mean in terms of energy. So we used embedded in the process the hydrogen as a reductant agent. We are betting on this hydrogen transition to instead of a green route of production, we are betting on a turquoise route of production. Let me explain what's turquoise hydrogen production? It's based in paralyzing natural gas, the molecule of natural gas in the absence of oxygen. We're going to crack that. We're using a plasma provided again by Tenova, our technology branch of the Chingrupov company and obtaining not only a low carbon embedded CO2 hydrogen, it will be as low as the energy source of the plasma will be in the future, but also carbon, solid or black carbon, very good as a co product for our other industries. So we are building this pilot plant and in the same site as Pescheri, still making mention a few minutes ago. So we expect to prove this technology and to scale up a competitive hydrogen low carbon based for not only for us as a consumer or off takers, but for third parties as well.
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A
How long before the plant starts operation? You're already building it, is that correct?
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C
We are starting the construction, civil works are ongoing. It's two years horizon to see these results up and running at the site.
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A
Perhaps sometime in the future. Sarah, you can come and tell us how it is going, Right?
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C
Right. We are in fact doing it right now. We are provoking the conversation, we are sharing the knowledge, we are sharing the experience so far. And of course we are asking for investors because this ventures company.
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Oh, I see. Okay.
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This Tulum as the name of the company was defined. It's a project that was seed on these technology ventures we launched a few years ago again in Te Chin group of companies. So we are happy to engage the conversation and join the challenge of this technology with third parties.
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A
So I should tell our audience that be on the lookout for you and those that are interested. So I want to come back to Sarah Wiek and no, we don't go with what is trending. So we're clearly we'll talk about AI, but we want to talk about hard to abate as you said earlier, including steel which is such a large carbon footprint, isn't it? So my question to you is that what kind of conversations you're planning to have when you will be in Houston?
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I'm very anxious to be at SARAH Week to update our mood, I would say of decarbonization of heavy industries to see the progression the pushback innovation in low carbon technology. Understand of course the losers and the winners of this sebum measure that European is leading of course in this environment, in this landscape, moving landscape. There will be major shifts in this strategy on the pace at least of decarbonizing and also backing up our team specific team of Tulum that will be sharing more details insights about the project.
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A
Jose Von Roos thank you so much for doing this podcast. You've given our audience a really good short quick lesson on steel making, some of the challenges and what most importantly what you're doing in turnium to address many of these challenges. Thanks again for joining us.
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C
My pleasure Atul. Thank you very much.
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Thank you for joining us on the Sarah Week Podcast to stay connected with the ideas driving change across energy and technology. Subscribe, share and rate this episode.
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It helps us get the word out.
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Let's continue having impactful conversations.
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I'm Atul Arya.
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Until the next time, the saraweek Podcast with Atul Arya is brought to you by saraweek, the world's premier energy conference. Be part of the conversations moving the world of Energy Forward 3-23-27, 2026 in Houston. Discover more@saraweek.com.