Microsoft, ArcelorMittal back pure steel MIT spinout Boston Metal

The $1.6 trillion steel industry is the backbone of the modern world. It also contributes significantly to global warming, accounting for 7% to 9% of global carbon dioxide emissions, according to the World Steel Association.

That is why huge global enterprises, including the international steel giant ArcelorMittal and technology Microsoftare investing in Boston Metal, a company that came out of the Massachusetts Institute of Technology and developed a new way to produce clean steel.

“There is no economy, no infrastructure without steel,” Boston Metal CEO Tadeo Carneiro told CNBC via video link on Wednesday. So when it comes to decarbonizing industry to combat climate change, “that’s a big piece of the puzzle. I don’t think it’s obvious to everybody,” Carneiro said.

In 2013, MIT professors Donald Sadoway and Antoine Allanor published an article in the journal Nature with the results of laboratory studies proving that it is possible to produce steel without carbon dioxide emissions. In the same year, they launched Boston Electrometallurgical Corp. to scale up and commercialize this technology.

In 2017, Carneiro joined the company as CEO. He is a veteran of a 40-year career in the steel industry, mostly with Brazilian steel giant CBMM. In 2018, Boston Metal raised its first round of funding of $20 million in a round led by Breakthrough Energy Ventures, a climate investment firm founded by Microsoft co-founder Bill Gates.

For years, Gates has emphasized the need to think about decarbonizing the manufacturing sector. According to Gates’ book, How to Avoid Climate Disaster, transportation gets a lot of attention, but it’s only responsible for 16% of global emissions, while manufacturing creates 31%.

“Whenever I hear an idea about what we can do to curb global warming — whether it’s around the conference table or over a cheeseburger — I always ask, ‘What’s your plan for steel?'” he wrote. Gates on his blog in 2019.

Boston Metal announced on Friday that it has raised a $120 million Series C round led by multinational steel giant ArcelorMittal, along with funding from Microsoft’s Climate Innovation Fund.

With the financing, Boston Metal will increase green steel production at its pilot plant in Woburn, Massachusetts, and support the construction of its Brazilian subsidiary, Boston Metal do Brasil, where the company will produce a variety of metals. The company plans to start construction on a demonstration steel plant in 2024 and a commercial plant in 2026, Carneiro told CNBC.

According to Iryna Garbunova, Vice President and Head of ArcelorMittal’s XCarb Innovation Fund, for ArcelorMittal, producing steel without greenhouse gas emissions is not only a responsibility, but also a business necessity.

“Our customers are asking for it, our investors are expecting us to transition, and our employees — and our future workforce — want to work for a company that is part of the solution, not part of the global climate problem,” Garbunova told CNBC.

“Increasingly, we’re seeing a carbon price,” Garbunova told CNBC. In Europe, the Emissions Trading System, or ETS, already sets a price for carbon emissions, Garbunova told CNBC.

“The EU has been at the forefront of climate policy, but it is reasonable to expect other regions to follow suit. Thus, we have a business case for decarbonization,” Garbunova told CNBC. “Steel with zero or near-zero carbon emissions will become a reality. The only question is how quickly we can do it. If steel companies don’t decarbonize, they won’t stand the test of time.”

Ironically, steel is a key component in many technologies being developed for decarbonization, such as wind and electric vehicles, Garbunova said.

Microsoft doesn’t build cars or make steel, but it is trying to meet its own climate goals, which include going carbon neutral by 2030 and eliminating all historical carbon emissions since the company was founded in 1975.

Traditionally, the first step in steelmaking is to combine iron ore or iron oxide, which is mined from the ground, with coal in a very hot blast furnace. This process creates significant CO2 emissions.

Scrap recycling is also a key part of the global industry, which accounts for 30% of steel production (70% in the United States) and has a “much smaller” carbon footprint, Carneiro said.

Boston Metal’s technology, molten oxide electrolysis, passes electricity through iron oxide mixed with what Carneira calls a “soup of other oxides” to produce iron and oxygen. Oxides are chemical compounds that contain at least one oxygen atom, and the Boston process includes common oxides such as aluminum oxide, silicon dioxide, calcium, and magnesium.

Carneiro said there is “no carbon” in the process of making iron using this method.

However, heating this soup to the required 1,600 degrees Celsius requires a significant amount of electricity—producing one million tons of steel per year would require 500 megawatts of net base-load electricity, or about half the electricity needed to power a medium-sized city. “The availability of electricity will determine how quickly the process can be implemented,” Carneiro said.

Electricity must also be clean or it defeats the whole purpose.

“We believe that in the future we will have abundant and reliable, clean and cheap electricity to use this process and produce clean steel,” Carniero said.

There are other processes being developed to make pure hydrogen steel, but they require very pure iron oxide, and only about 4% of the iron ore that is commercialized is suitable, Carniero said.

Boston Metal will eventually license its technology to steel companies rather than be a steel producer itself.

“Every steel company is contacting us to understand our progress and when we will be commercial,” Carneiro told CNBC. “They all commit to becoming carbon neutral by 2050. And now they don’t really have a solution. So they really need a solution for large scale, and our technology is the only one that can scale to these billions of tons of capacity.”