Day: 19 October 2022

The transition from traditional blast furnace-based steelmaking to so-called “green” routes of production has become a central element in major European steel companies’ strategies. Fastmarkets looked at the key milestones, opportunities and challenges the European industry is facing.
Carbon metals’ green transition
Most European blast furnace-based steelmakers have been investing in green steel projects in the past years, cutting emissions to comply with strict EU regulations. Under the European Green Deal, the European Commission proposed a new EU target to reduce greenhouse gas emissions by at least 55% by 2030, compared with the levels emitted in 1990.

Additionally, the growing cost of carbon emissions in the EU has also pushed mills to seek alternative ways of steelmaking.

Particularly, the price for a CO2 emissions permit in the EU reached a historical peak of €98 ($96) per tonne in August 2022, according to market participants.

Demand for green steel from end-users has also been growing recently, but mainly in the flat steel sector, a source said. Long steel products have mainly been considered “green by nature” since these are mostly produced in electric-arc furnaces (EAF), using scrap as a primary raw material.

Low-carbon steel is an integral part of sustainability goals for blast-furnace (BF) steelmakers.

Key green steel projects in Europe
German flat steelmaker Salzgitter is focused on accelerated decarbonization as part of its Salcos project, under which it plans to replace BFs at its Flachstahl mill with direct-reduction plants.

The company will put €723 million of its own funds into the first stage of its Salcos green steel project, Fastmarkets reported.

Swedish steelmaker SSAB, state-owned iron-ore producer LKAB and power company Vattenfall established the joint-venture project Hybrit – which stands for hydrogen breakthrough ironmaking technology – back in 2018 with test production started in 2020.

Another Nordic producer, the newly created H2 Green Steel, plans to build a direct-reduced iron (DRI) unit powered entirely through green hydrogen, with a facility expected to reach a full capacity by 2026.

Liberty Steel plans to replace BFs at Czech and Romanian plants with EAFs, aiming to become carbon neutral by 2030.

In July this year, the company ordered two hybrid electric-arc furnaces for its integrated steelworks in Ostrava, Czech Republic, and started the tender process to supply a new hybrid EAF for its integrated steel works in Galati, Romania.

ArcelorMittal has a number of green steel initiatives, including plans to invest €1 billion in new capacity to develop hydrogen-based steelmaking across two of its existing German plants.

The steelmaker will build a direct-reduction of iron (DRI) and electric-arc furnace (EAF)-based steel production plant at its Bremen site, and will supplement EAF production at its Eisenhuttenstadt site with a new DRI pilot plant.

German industrial Group Thyssenkrupp plans to replace coal-fueled blast furnaces at its plant in Duisburg, Germany, with hydrogen-powered direct-reduction plants, to produce low-CO2 steel within the existing plant structure. The project estimated to cost more than €2 billion and would require public funding, the company announced in September of this year.

By 2030, the company planned to be capable of producing around 5 million tonnes per year of low-CO2 steel.

Austrian steelmaker Voestalpine plans to switch to green steel production via EAFs by 2027, with the estimated investment during the first phase from 2022 to 2024 in the low triple-digit million-euro range, with total investment estimated around €1 billion, Fastmarkets reported.

Unfolding energy crisis in Europe
The price uptrend in the European energy market that started in autumn 2021 has continued into 2022, with the situation worsening after February 24, when the Russia invaded Ukraine.

For example, the average monthly wholesale electricity price in Italy was around €431.47 per megawatt hour in September, up sharply from a monthly average of €158.59 per MWh in September 2021, according to local energy service company Gestore dei Mercati Energetici.

The average wholesale price of electricity in Germany surpassed €500 per MWh for the first time in history during August 2022, sources told Fastmarkets.

Faced with these unprecedented energy price rises, steel mills have tried to increase prices for flat steel products, but these attempts were not successful due to lack of end-user demand.

European flat steel producers have been squeezed between high production costs on one side and low demand on another side.

Fastmarkets calculated its daily steel hot-rolled coil index domestic, exw Northern Europe at €700.00 per tonne on Friday October 14, down by €1.00 per tonne from €701.00 per tonne on Thursday October 13.

The latest calculation of the index is down by €35.00 per tonne week on week and by €86.25 per tonne month on month.

Effect of energy crisis on green steel initiatives
With the mounting pressure on steel prices from unprecedented energy costs on one side and the weak performance of key steel-consuming sectors with looming inflation on another side, there were concerns about the sustainability of green steel initiatives.

Sources expressed concerns about the installation of DRI modules, since that equipment is very energy intensive – specifically, gas intensive.

Some sources suggested that costly green steel projects might be postponed until the macroeconomic situation improves.

“Of course, we all need to go greener and greener, but I don’t think at this moment it’s the time to do it,” a trader in Northern Europe said.

Another trader in Northern Europe said they believe wide-spread use of green steel in Europe will take a long time to achieve – much longer than in the next few years – and that the current plans are wishful thinking.

“The market, the economy, energy [costs] – everything is very uncertain – and then we make large changes to other methods of production. I don’t think it’s the time at this moment,” a third trading source said.

“We don’t have the infrastructure yet, and if we look back at how long it took before we had a certain percentage of green energy produced in Europe – I think it will take longer,” the third source added.

Alternatively, a trader from Germany said the energy crisis is making the topic of green steel and low-carbon more attractive. He added that while the crisis can change “within minutes,” the costs of gas and energy are not as high as expected some weeks ago.

For their part, European flat steelmakers have no plans to postpone the implementation of green steel projects – a number of agreements have been signed between the steelmakers and automotive companies for the supply of green steel.

Flat steelmakers highlighted that their DRI plants will use hydrogen, not fossil-fuel natural gas, and so the only hurdle from the current energy crisis is the cost of electricity, which they viewed as a temporary obstacle to the long-term green steel target.

“We will not use fossil gas for our hydrogen production [even on an interim basis]. And yes, we feel confident that we will have enough for our production. We have already secured the base of our portfolio and will continue to work on it up until start of production. The current planned build-out of energy production in northern Sweden will cover the needs of the industrial ramp up,” a spokesperson for H2 Green Steel said.

“We haven’t seen any direct effect from the energy crisis [on our green steel plans] other than delays in negotiations due to uncertainty in the market. And actually, an increase in focus on renewable energy,” the spokesperson added.

With regard to Hybrit’s plans, a spokesperson for Vattenfall said, “Today’s energy crisis shows additional risks with fossil fuels, which rather strengthens our belief that fossil-free energy and fossil-free industrial processes are the right way to go.”

The spokesperson explained that Vattenfall will produce fossil-free hydrogen with electricity directly on its planned green steel production site, so there was no direct connection to the high price of fossil natural gas. In Northern Sweden there is already a stable supply of fossil-free electricity, they added.

Published by: Julia Bolotova, Ross Yeo, Holly Chant

Posco Holdings chief executive Jeong-Woo Choi has been elected worldsteel chairman for one year from 18 October. Last year’s chairman, Sajjan Jindal, becomes vice chairman, as does Nucor chief executive Leon Topalian.

Severstal chairman Alexey Mordashov has been re-elected to the executive committee, despite falling under EU sanctions earlier this year. The steelmaker is a passive worldsteel member.

Baku Steel Company and thyssenkrupp Steel Europe have meanwhile been welcomed as regular worldsteel members, Kallanish notes.

Crude steel production in the 64 countries reporting to the World Steel Association (worldsteel) dropped for a 13th consecutive month on-year in August, taking eight-month output down 5% on-year to 1.25 billion tonnes.

Adam Smith Poland

ArcelorMittal Warszawa’s production stoppage continues, with the firm working on ways to reduce energy consumption, while investments continue, it says.

The Warsaw-based mini-mill suspended production over the summer on account of a decline in orders, especially in the rebar segment (see Kallanish passim). The firm’s SBQ production in 2021 was 166,400 tonnes, the highest-ever annual output.

Recent months have seen a significant decline in demand, while prices of electricity and gas have simultaneously recorded a sizeable rise, says the firm’s general director, Artur Gierwatowski. Since the firm halted production, it has been taking measures designed to reduce energy consumption.

“We are thinking in the long term, adapting our activities to market demand and variable energy costs on an ongoing basis. For now, there is great uncertainty in the steel industry,” Gierwatowski writes in the firm’s October newsletter. “We are therefore analysing various scenarios to prepare for an effective response to potential energy or raw material shortages.”

The firm says that, despite the stoppage, it is continuing its investment into soundproofing the dust collector chimney to reduce noise pollution, while the flue gas cooler modernisation has been completed. The firm is also continuing the process, started last year, of obtaining Responsible Steel certification.

The mini-mill plans to reduce its carbon dioxide emissions by 80% in 2025 versus 2020, and by 92% in 2028, by sourcing an increasing volume of electricity produced by renewables.

Adam Smith Poland

Swiss trading firm Trasteel has acquired Italian re-roller Profilmec, Kallanish learns from Trasteel.

The merger reflects the trader’s ambition to verticalise and boost and diversify its re-rolling capacity. The company intends to increase sales and re-rolled volumes output to 1.5 million tonnes/year, it says in a note.

The acquisition was backed by a pool of banks including Crédit Agricole Italy, UniCredit, BNL-B-NP Paribas and MPS Capital Services as warrant lead arranger. Crédit Agricole acted as loan agent.

Turin-based Profilmec has seven production facilities in the north of Italy and an annual production capacity of 350,000t of re-rolled tubular products.

In line with its verticalisation strategy, in 2020 Trasteel completed the acquisition of Officine Tecnosider, an Italian plate rolling mill, located in the northeast of the country. Trasteel holds majority control over the plant. The mill has a capacity of almost 400,000 t/y of plate, rolled from slab (see Kallanish 24 April 2020).

Natalia Capra France

For more than half of Germany’s sheet forming processor companies, electricity contracts with their current suppliers may not continue into 2023.

According to a recent survey by the Sheet Metal Forming Industry Association (IBU), new contracts for 2023 are not in sight for over 50 of some 100 companies that took part in the poll.

The problem was recently brought up by IBU’s umbrella organisation, steel fabricators federation WSM, and its managing director Christian Vietmeyer. “Many of our member companies are not receiving any offers at all, not even regular customers of the utilities, and not even at sky-high prices,” Kallanish heard him say at the MBI Stahl Tag in Frankfurt last month. Utilities have some obligation to supply private households, but not to companies, Vietmeyer explained.

Two thirds of the companies surveyed by IBU see their existence being at risk due to prices for energy and other cost increases. IBU’s publication of the survey is therefore also a call to policymakers to realise the urgency of the situation.

“We need a secure energy supply at acceptable prices, and policymakers must now get specific with that very quickly,” says IBU managing director Bernhard Jacobs. Record prices and insecurity could drive more and more companies to less expensive foreign countries, and accelerate a deindustrialisation in Germany, Jacobs warns.

Christian Koehl Germany

French rebar activity remains weak French rebar demand continues to be weak in October. Distributors tell Kallanish that September was also a weak month, but sales have become particularly low in October and buyers say they cannot see light at the end of the tunnel.

Expectations are for some restocking to happen in November for end-year fiscal reasons. Uncertainty, however, looms over end users due to declining activity in the domestic construction sector. Construction companies are facing a slow private residential construction market, particularly in the Paris area.

Domestic steelmakers continue to implement stoppages but this does not seem enough to balance demand and supply. French rebar contracts are falling on September by some €50-60/tonne ($49-58). Contracts, including size extras, are at an average of €890-910/t ex-works, including size extras. The low and high points of the range depend on client and tonnage, sources suggest.

Some lower-priced sales are being reported, particularly in southern France, coming from Spanish producers, Kallanish notes.

Natalia Capra France

European steelmakers are on track to receive free CO2 allowances as part of the Emissions Trading System (ETS) beyond 2030, Kallanish learns from sources.

In May, the European Parliament’s committee voted in favour of accelerating the phasing out of ETS free allocations, cutting them for European steelmakers from 2030. In a recent meeting, though, the parties reached an understanding to continue them until at least 2032.

Peter Liese, lawyer and negotiator involved in reforming the ETS system, confirms in a statement that a first agreement was reached.

“The Commission proposal wanted to get rid of the respective calculation methodology which would have created an enormous challenge for the steel industries, much bigger than for other industries, after the implementation of the amended ETS,” Liese says. “We now concluded that the rules for the steel industry will remain the same. Of course, the steel industry will be challenged by the higher target and the respective changes in the linear reduction factor like all other industries.”

Eurofer has welcomed this development, but notes that free allocations will nevertheless be reduced as part of the plan to phase out allowances, and that costs are yet to be calculated for the sector.

Emanuele Norsa Italy

Liberty Steel UK has successfully completed ecoke trials at its Rotherham site as part of the company’s processes to identify opportunities to reduce CO2 emissions, the steelmaker said Oct. 18.

Ecoke is a manufactured fuel containing a minimum of 30% renewable biomass that can replace anthracite – the main source of carbon in electric steelmaking – and cut the carbon footprint of steel by as much as 30%, Liberty said.

Ecoke briquettes are delivered to site in similar packaging to anthracite and then charged into the electric arc furnace in the same way via the scrap basket, the company said.

“The success of Liberty’s ecoke trials is a major step forward for our Greensteel strategy,” Liberty Speciality Steel Plant Manager at Aldwarke Cast Products Scott Jackson said. “The major reductions in CO2 emissions ecoke enables, without any downside to the production process, can help to further decarbonize our production and the wider steel industry.”

Not only would the use of ecoke cut emissions, but it could also save costs due to a reduction in carbon credits, the company said.

After considering all available options, Liberty’s Rotherham team identified UK-based solid fuel producer CPL Industries as its local ecoke supplier.

CPL Industries has also delivered ecoke in August to Spanish special long products steelmaker Sidenor for an industrial-scale trial, S&P Global Commodity Insights reported earlier.

“Ecoke provides an immediate path to decarbonization, and we are committed to a program of product development and investment to deliver further advances in biofuels in order to exceed industry expectations for the coming years,” CPL Industries Solid Fuels CEO Jason Sutton said.

Liberty Steel UK is the third-largest steel manufacturer in the country, with nine sites across England, Scotland, and Wales, and steel rolling capacity approaching 3 million mt/year.

Its Rotherham works have primary and secondary EAF steelmaking facilities, with production at its Rotherham generating just 10% of the direct emissions compared with a traditional blast furnace.

Platts, part of S&P Global Commodity Insights, assessed the weekly UK hot-rolled coil price at GBP700/mt ($790.34/mt) DDP West Midlands Oct. 17, down 15.7% from the start of 2022.

— Annalisa Villa

European new passenger car registrations rose 9.6% year on year and 21.2% on the month in September to a three-month high of 787,870 units, the second consecutive month of on-year gains after 13 months of declines, data from the European Automobile Manufacturers Association, or ACEA, showed Oct. 18.

The year-on-year jump was largely driven by the low base of comparison from September 2021, when the semiconductor shortage hampered vehicle production, ACEA said.

In September, all four of Europe’s largest markets reported growth led by Germany and Spain, which saw double-digit gains of 14.1% and 12.7% year on year respectively.

Germany’s passenger car sales of 224,816 units were also up 12.9% month on month to the highest level since March, while Spain’s 67,240 vehicles were up 29.5% from August to a two-month high.

Sales in Italy rose 5.4% on the year and 55.9% on the month to a three-month high of 110,976 units, while sales in France climbed 5.5% year on year and rose 54.4% from August to 141,137 units, also a three-month high.

Platts, part of S&P Global Commodity Insights, assessed hot-rolled coil in Northwest Europe Eur30/mt lower in September, falling from Eur760/mt ex-works Ruhr to Eur730/mt ex-works Ruhr.

Over the first three quarters of 2022, the EU passenger car market decreased 9.9% on the year to 6.8 million units, despite the positive results recorded in the last two months.

This was reflected in most countries’ performance, with all the region’s four major markets also registering a contraction in the nine-month period, the ACEA data showed.

Of the top four markets, Italy saw the largest fall at 16.3% to 976,055 units, followed by sales dropping 11.8% in France to 1.1 million vehicles, sales in Germany declining 7.4% to 1.9 million units and Spain’s down 7.4% to 600,281 vehicles.

— Annalisa Villa, Jacqueline Holman

EU scrap recyclers have continued to voice concerns over the consequences of potential curbs to EU ferrous scrap exports proposed in the current revision process to the EU Waste Shipment Regulation (WSR).

“My understanding today is that it will be very difficult to get the [EU] off the track that they are following now — I think we will see restrictions on [scrap] exports but to what extent remains to be seen,” Denis Reuter, chief operations officer at German recycler TSR Recycling, said at the International Bureau of Recycling, or BIR, convention in Dubai on Oct. 17.

“For heavy melting scrap [HMS] grades, I don’t see any opportunity to get around those restrictions, but for shredded scrap – if it’s a clean quality – I could imagine there would be possibilities for export in the future, and, of course, products like bushelling scrap, it should not be a problem but for HMS qualities, I have no hope,” Reuter added.

The European Parliament’s Environment Committee is expected to vote on the on the proposed WSR on Nov. 30 or Dec. 1, with the plenary European Parliament vote expected to take place in January 2023, a source close to the Committee told S&P Global Commodity Insights Oct. 17. However, the official timeline for the voting process has not yet been confirmed.

“I expect that the revised Waste Shipment Regulation will affect [scrap exports to] both OECD and non-OECD members,” the source added. The initial WSR proposal was mostly expected to affect scrap exports to non-OECD countries only.

In attempting to ensure availability of high-grade scrap within the EU as a part of the bloc’s decarbonization goals, the revised WSR aims to ban exports of EU-origin scrap to countries which don’t have EU waste treatment standards and would be obliged to conduct independent audits of their processing facilities. Cross-border shipment of waste between EU nations would be facilitated for reuse, recycling or disposal.

“The expectation is that the regulation could come into force from 2026,” Jens Björkman, head of ferrous trade at Sweden’s Stena Recycling, said at the Irepas conference in Monaco on Oct. 11.

“There has been strong lobbying from Eurofer [the European steel producers’ association] that the EU needs to control this strategically important raw material but the reality is that the total volume of ferrous scrap [produced in the EU] is too large to be wholly processed within the EU,” Björkman said.

“Around 20-22 million mt of ferrous scrap is currently exported each year from the EU, and perhaps a few million metric tons more will remain within the EU, as some steel production shifts from the blast furnace [BF] route to the electric arc furnace [EAF] route, but the rest will still need to find another home.”

“You can’t favor one strategically important industry [steelmakers] against another [scrap recyclers],” F.D. Baysal, President at US steel distributor Seba International, said at the Irepas conference.

The Federal Association of German Steel and Recycling Companies (BDSV) has also called on the EU to differentiate between steel raw materials recovered from recycling and untreated waste in the WSR, adding that they “expressly welcome stricter export restrictions for problematic waste streams.”

“The proposed export restrictions risk significant job losses in an industry whose competitiveness depends largely on its ability to commercialize recycled feedstock to recover the costs of proper waste management,” BDSV said on Oct. 6.

— Rabia Arif, Viral Shah