World’s largest steelmaker invests in Canadian cleantech startup CHAR Technologies

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CHAR Technologies Ltd. YES-X has become the first Canadian company to receive funding from the ArcelorMittal Ltd. XCarb Innovation Fund for its efforts to replace coal in steelmaking.

The fund, which the Luxembourg-based steel producer established in 2021 to invest in startups working to remove carbon emissions from the steelmaking process, will spend $6.6-million on 11 million of CHAR’s TSX Venture Exchange-listed shares for 60 cents each, the companies announced Wednesday. ArcelorMittal will also be entitled to appoint one director to the Canadian company’s board and will have the option to purchase an additional 2.75 million of its shares for 70 cents each over the next 24 months as part of the deal.

While the amount itself is small relative to ArcelorMittal’s roughly $30-billion market value, CHAR chief executive Andrew White said the investment itself represents a major vote of confidence in the young company.

“Having that kind of clear validation that the world’s largest steel company has investigated what we are doing and wants to invest, that is a very key milestone for us,” Mr. White said in an interview.

Using a technology called high temperature pyrolysis, CHAR is able to turn forestry waste products (the parts of the tree that lumber companies would otherwise throw away) into various renewable energy products including biocoal, which can replace metallurgical coal in steelmaking. The process is autothermal, meaning no external heat sources are required and excess energy is created, thereby making the final product carbon-negative.

CHAR has been working with Hamilton-based Dofasco – which is owned by ArcelorMittal – since 2017 to produce replacements for their metallurgical coal.

Steelmaking is one of the most carbon-intensive activities on the planet, producing nearly one-10th of all greenhouse-gas emissions globally. Many producers – Dofasco among them – are in the process of switching from traditional blast furnaces to electric arc furnaces, which have been shown to reduce emissions by roughly 75 per cent.

“Going from a blast furnace to an electric arc furnace also means you drastically reduce the amount of metallurgical coal you need,” Mr. White said. Switching to an arc furnace brings the amount of coal required down to a scale where CHAR can produce enough biocoal “to 100-per-cent replace what they are using now.”

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ArcelorMittal has pledged to become carbon-neutral by 2050 and according to Irina Gorbounova, the company’s vice-president of mergers and acquisitions, the XCarb fund is playing a critical role in seeing that goal achieved.

“We want to see if there are any interesting, disruptive and game-changing technologies that can accelerate our journey to net zero,” Ms. Gorbounova said in an interview from London. “One of the technologies [we want] is exactly around what CHAR is doing, finding a way to replace fossil coal in our operations.”

Much of the investment will go towards CHAR’s facility in Thorold, Ont., which is set to begin production in early 2024. Dofasco already has an agreement to buy the first 5,000 tonnes of annual production from the Thorold facility.

“One interesting thing about Thorold is that it will be a mix of forest byproduct and forestry residuals,” Mr. White said. “We are going to be able to get about half of the feedstock that we need from used shipping pallets.”

Gaining support from XCarb was no small feat, as Ms. Gorbounova said the fund has been “bombarded by lots of various proposals from different countries” since it launched more than two years ago and the pace has yet to slow down.

“Like, in the last 24 to 48 hours alone we must have received 15 to 20 proposals,” she said.

Despite that volume, the fund has invested US$160-million in just seven companies globally to date. Several of those companies have already received a second round of funding from XCarb.

“Normally when we invest we do follow” with another round of funding, Ms. Gorbounova said, “though it is still on a case-by-case basis, it is usually the strategy.”

In the meantime, Mr. White is confident his company’s product can scale to the point where it is realistically possible to remove metallurgical coal from steelmaking. Factoring in the cost of carbon emissions, which must be paid when using metallurgical coal but not when using biocoal, Mr. White said CHAR is cost-competitive

“Could we replace all the met coal used in Eastern Canada? Putting aside any remaining blast furnaces, because their consumption is just so high, I think the answer is absolutely.”