Microsoft, ArcelorMittal back Clean Steel MIT spin-off Boston Metals

The $1.6 trillion steel industry is the backbone of the modern world. It is also a significant contributor to global warming, accounting for 7% to 9% of global carbon dioxide emissions, according to the world steel association.

That is why large global corporations, including international steel giant ArcelorMittal and tech giants Microsoftis investing in Boston Metal, an MIT spinout that has developed a new way to make clean steel.

“Without steel there is no economy, there is no infrastructure,” Boston Metal CEO Tadeu Carneiro told CNBC in a video call on Wednesday. So when it comes to tackling climate change by decarbonizing industry, “it’s a big piece of the puzzle. I don’t think it’s obvious to everyone,” Carneiro said.

In 2013, MIT professors Donald Sadoway and Antoine Allanore published a paper in the journal Nature in which laboratory results demonstrated that steel could be produced without releasing carbon dioxide emissions. That same year, they formed a company called Boston Electrometallurgical Corp. to scale up and commercialize the technology.

In 2017, Carneiro joined the company as CEO. He is a veteran with a 40-year career in the steel industry, primarily with Brazilian metal giant CBMM. In 2018, Boston Metal raised $20 million in a funding 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 consider decarbonizing manufacturing. According to Gates’ book How to Avoid Climate Catastrophe, the transport sector gets a lot of attention but accounts for only 16% of global emissions, compared with 31% for manufacturing.

“Whenever I hear ideas about what we can do to curb global warming—whether it’s on a conference table or a cheeseburger—I always ask this question: ‘What’s your plan to steal?'” Gates writes about 2019 on his own blog.

On Friday, Boston Metal announced it had raised a $120 million Series C round led by multinational steel giant ArcelorMittal, with funding also provided by Microsoft’s Climate Innovation Fund.

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

For ArcelorMittal, producing steel that does not emit greenhouse gases is not only a responsibility but also a business imperative, said Irina Gorbounova, Vice President of ArcelorMittal and Head of the XCarb Innovation Fund.

“Our customers demand it, our investors want us to transform, and our employees — and our future employees — want to work for a company that is involved in solutions, not the world’s climate problems,” Gorbounova told CNBC.

“We’re also increasingly seeing a carbon cost,” Gorbunova told CNBC. In Europe, the emissions trading system (ETS) already puts a price on carbon emissions, Gorbounova told CNBC.

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

Ironically, steel is a major component of many decarbonization technologies, such as wind energy and electric vehicles, Gorbounova said.

Microsoft doesn’t make cars or make steel, but it’s working toward its own aggressive climate goals, which include going carbon negative by 2030 and eliminating all of the company’s historic carbon emissions since it was founded in 1975.

Traditionally, the first step in steel production was to combine iron ore, or iron oxide, mined from the ground, with coal in very hot blast furnaces. This process produces significant carbon dioxide emissions.

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

Boston Metal’s technology, molten oxide electrolysis, creates iron and oxygen by mixing iron oxide with what Carneiro calls a “soup of other oxides.” Oxides are compounds that contain at least one oxygen atom, and Boston’s process includes common oxides such as alumina, silica, calcium and magnesium.

There is “no carbon involved” in making iron this way, Carneiro said.

That said, heating this soup to the required 1,600 degrees Celsius would require a lot of electricity—producing 1 million tons of steel a year would require 500 megawatts of baseload clean electricity, about half of what is needed to power a medium-sized city. “The availability of electricity will determine how quickly the process can be implemented,” Carneiro said.

The electricity also has to be clean, otherwise it defeats the whole purpose.

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

There are other processes being developed to use hydrogen to make clean steel, Carniero said, but they require very pure iron oxide, and only about 4 percent commercial iron ore is suitable.

Instead of becoming a steelmaker itself, Boston Metal would eventually license its technology to steel companies.

“Every steelmaking company is reaching out to us to see how we’re progressing and when we’re going to be commercial,” Carneiro told CNBC. “They all committed to be carbon neutral by 2050. They don’t have a real solution right now. So, they really need a solution at scale, and our technology is the only one that can scale to billions or billions.” tons of capacity.”