Day: 9 June 2022

Carbon capture utilization and storage can provide a transitional solution to European steelmakers as the industry looks to cut carbon dioxide emissions. However, a final solution for achieving net-zero steel production will depend on how the steel is produced and the location of the mill, analysts with S&P Global Commodity Insights said June 8.

In a webinar discussing the potential use of CCUS to decarbonize the steel and cement industries, analysts from S&P Global’s Clean Energy Technology Group said that while these sectors are among the top emitters of industrial CO2, they also are core pillars of today’s society, being two of the most important engineering and construction materials. Combined, global steel and cement production contributes to 13% of global CO2 emissions, representing a major challenge for global net-zero emissions targets, with major steelmakers targeting net-zero emissions by 2050.

To achieve emissions reductions above 80% in Europe’s steel industry, currently three options are the most attractive: hydrogen, natural gas with CCUS in DRI-EAF steelmaking, or utilizing steel scrap, said Paola Perez Pena, principal research analyst at S&P Global. However, she noted that scrap has some limitations, depending on the region.

CCUS only part of solution

The top three steel producers in Europe are considering CCUS to reduce emissions but are also exploring hydrogen-based technologies as part of the solution, Perez Pena said.

In Europe, carbon emissions trading system allowances will make multiple decarbonization routes economical to replace blast furnace and basic oxygen furnace production by 2030, but only hydrogen will provide deep decarbonization, she said.

“Although CCUS is one of the technologies that the steel industry is evaluating, the complexity of the capture process for this industry is one of the big challenges since the most common steel production process has multiple CO2 sources,” Perez Pena said.

Steel production via blast furnace is the most carbon intensive method and is the most widely utilized method of production in Europe currently.

“As the predominant production method of this industry is the conventional coal-dependent blast furnace process, the need to assess alternative breakthrough technologies to reduce CO2 emissions is high,” Perez Pena said.

However, the decarbonization pathway of individual steelmakers will depend on which production process is being utilized. As a result, it is important that flexibility in the choice of decarbonization technologies is maintained to account for the differences in regional characteristics, including natural resources and infrastructure, she said.

Government support key to decarbonization

The EU steel industry has collectively committed to reduce emissions by 30% by 2030 versus 2021 but is seeking ways for this to be achieved as cost efficiently as possible.

Eurofer, the European Steel Association, is advocating for greenhouse gas emissions benchmark-based free allocation of CO2 allowances, compensation of indirect costs and complementary carbon adjustment as the elements that will help through the transition; the EU parliament is expected to vote on its proposals soon.

Currently, the steel and cement industries account for 5% of the current CCUS pipeline of large-scale projects, mainly in Europe.

“Although these numbers seem small in the overall pipeline of projects, this is a significant step ahead,” Perez Pena said.

While China accounts for more than 55% of all global steel production, Europe is one of the first regions facing the decarbonization challenge as carbon regulations increase in the region, Perez Pena said. Changing customer demand and growing investor and public interest in sustainability are further driving the need to decarbonize.

An analysis by the Clean Energy Technology Group found that steel can decarbonize at a lower premium than cement, but the right conditions need to exist for steelmakers.

The production premium for steel could go up to 15% for the European steel sector. However, when factoring in paying for the cost of carbon emitted, producing steel with some decarbonization solutions could be cheaper in some cases, based on 2030 estimates assuming an ETS price above $100/mt, Perez Pena said.

“Given how competitive the market is and the thin industry margins, decarbonization is not easy for business and governments will need to provide the right conditions in place to make sure the domestic industry is not destroyed,” she said.

— Justine Coyne

German steel producers, traders and buyers are bearish on pricing over June and are almost unanimous in their expectation that production levels will fall, according to data from S&P Global Commodity Insights monthly steel sentiment survey.

The survey saw traders and producers equally bearish on pricing, with the June index at around 20 points, down from around 42 points in May.

The market was experiencing slow demand for long steel products as buyers held back in expectation of further price falls. Most mill sources said demand was recovering but still below average.

“Customers are in wait-and-see mode,” one long steel producer told S&P Global Commodity Insights. “They will have to come back to the market. That is a matter of one week or two and then we can have a better idea about prices but for now they are holding back.”

Platts, part of S&P Global Commodity Insights, assessed TSI Northwest Europe Rebar Eur142.50/mt lower over May at Eur1,185/mt ex-works on June 1.

On the flat steel side, demand for coil products remained weak across Europe in May and the situation was unlikely to see any visible changes in June. Some market sources said buying interest had slightly improved, but was still slower than normal.

Steel demand from automotive industry had been undercut by continuing shortage of components. And other industries had also been less interested in flat steel.

Platts assessed TSI North European HRC Eur290/mt lower over May at Eur975/mt ex-works Ruhr on June 1.

German output lower

The production outlook edged lower from May with the index sliding 14 points to 26 for June, suggesting mills were in no hurry to produce. Steelmakers continued to operate at a low level of capacity utilization, amid high energy costs and low demand.

“Mills are planning on cutting production because of high electricity costs but I don’t think there will be a big change from April or May,” one long steel producer said.

On the flat steel side, however, against the expectation of market participants, steelmakers did not announce any production cuts. It was expected that the steel output reduction could have helped to balance weaker demand and supply. However, it is likely that the mills will make longer summer maintenances instead.

As a result, the rolled and semi-finished steel stocks of the steelmakers were expected to remain relatively high in summer.

Distributors, in the meantime, had sufficient stocks of coil and were holding back from making deals due to negative sentiment prevailing in the EU coil market, according to sources. Buyers’ stocks were on the higher side due to panic buying earlier this year, they said.

“For our customers, inventory levels are around normal levels, but if they are not going to buy they will end up depleting those inventory levels and they will have to come back to the market, it’s just a matter of when,” one long steel producer said.

The index for inventory sentiment stood at 35, suggesting that market participants expected stored steel volumes for June to be low, compared to an index of around 46 points in May. Traders agreed that inventory levels were expected to be significantly lower during June, with an index of 37.5 points, down from 60 in May. However, steel producers were largely firm on their stance on inventory levels for June with an index of 33, compared to 31 points. in May.

— Rabia Arif, Maria Tanatar

Tata Steel will invest GBP7 million ($8.79 million) in a new slitting line at its Hartlepool tube mill, the UK’s largest steel producer said on June 8.

The new slitter will allow the site to process coils of steel delivered from its Port Talbot steelmaking site. At the moment, wide steel slabs are slit in Port Talbot before being rolled and sent to Hartlepool to be turned into steel tubes.

The tubes are used for agricultural machinery, sports stadiums, steel-framed buildings and the energy sector.

The investment at the Hartlepool site, where almost 300 people work producing up to 200,000 mt of steel tubes a year, is expected to pay for itself in less than three years, with the project expected to take more than a year to be completed. The new slitter will allow the Hartlepool site to improve capacity, cut CO2 emissions and reduce costs.

Tata Steel aims to produce net-zero steel by 2050 in the UK at the latest and to have reduced CO2 emissions by 30% by 2030.

The vast majority of that work will happen at Port Talbot. Tata Steel UK has a designed steelmaking capacity of 5 million mt/year, and it produces around 3.5 million mt/year. It employs around 8,000 people in the UK, half of which are at Port Talbot.

Platts assessed HRC in Northern Europe at Eur950/mt ex-works Ruhr on June 7, stable day on day.

— Annalisa Villa

The Italian heavy plate market continues to stagnate this month with declining prices and virtually no sales, sources tell Kallanish. Despite the lull, however, northern European producers are said to have full order books, in some cases through the end of the year. Their sales are driven by strong demand from infrastructure and renewable energy projects such as on and offshore wind farms.

In Italy, uncertainty and low visibility are causing a wave of price falls for all steel products. Smaller and larger distributors are focusing on getting rid of their stocks of plates bought at high prices in March and April. While sales to distributors are currently “frozen,” some end-users such as shipbuilders predict that their purchasing volumes will not lower this year (see Kallanish 31 May). Despite the low Asian import offers for plates, there is no appetite for material and no desire to commit to the import’s long delivery time. Several distributors say their usual high-volume customers, in May and June, are not requesting any material.

Domestic prices for the basic grade S275 from domestic players are at €1,350-1,400/tonne ($1,445-1,499/t) base ex-works, but “there is no market at the moment,” a re-roller confirms.

Metinvest’s Italian plate subsidiary, Trametal, is currently implementing maintenance works and should resume output in the next days after having received a vessel of slabs. Other re-rollers are reducing output to adapt to a low level of demand.

Demand from the large Italian buyers is seen resuming by the end of June and beginning of July.

Natalia Capra France

European steel federation Eurofer has welcomed the adoption by EU member states of the European Commission’s proposal to continue steel safeguard measures, saying it supported the stability of the EU steel market and ensured smooth supply flows.

In a statement June 8, Eurofer Director General Axel Eggert said member states’ “massive support” for the continuation of the safeguard action would bring “stability to the EU steel market while avoiding excessive, market-disrupting steel imports from third countries.”

However, European importers of hot-rolled coil told S&P Global Commodity Insights previously that the proposed amendments in EU steel safeguard measures for finished steel imports were unlikely to bring changes to the market and to reflect trade flow concerns.

Domestic prices for HRC have been declining in Europe since the second half of March due to weak demand. Platts daily assessments for HRC in Northern Europe declined to Eur950/mt ex-works Ruhr on June 8 and in Italy to Eur890/mt ex-works, down 3% and 6% since the start of 2022, respectively, according to S&P Global Commodity Insights data.

After an annual safeguard review, the EC sent a draft of proposed reviewed safeguard measures to the World Trade Organization on May 30, which said it planned to introduce global quotas for some products and prolong steel safeguard measures to 2024.

The document indicated that county-specific quotas will remain in place, but global quotas will be introduced for some other products, including heavy plate, in light of the impact of the Russian invasion on the Ukrainian steel producing and exporting industry.

Eurofer added that the EC had also confirmed that the recent change of the US section 232 import tariff of 25% into a tariff-rate quota for the EU had little to no impact on the functioning and rationale of the safeguard measure.

In the proposal, the yearly quota volumes were increased to 4% from 3%.

“Over the lifetime of the safeguard action, consecutive yearly liberalization has pushed up quota levels way above the demand situation, which has not recovered yet from the COVID-crisis,” Eurofer said

“This gap will now be further increased,” Eggert said, adding that there was no economic need or legal obligation for such an increase.

The EC is scheduled to officially release the safeguard details by June 30, effective for one year starting July 1.

— Jacqueline Holman