Day: 2 February 2023

Urgent action is needed over the next 24-month to create certainty for investors and financiers to make final investment decisions in near-zero emissions primary, or ore-based, steelmaking projects in the UK, according to the Energy Transitions Commission.

The ETC released a report, “Unlocking the first wave of breakthrough steel investments in the UK” Feb. 1 highlighting the key actions needed by industry and government to enable a first wave of these projects, which currently face a gap to a viable investment case.

The report was developed as part of a series of roundtables held by the ETC in the UK in the second-half of 2022 which were open to UK steel value chain stakeholders, including policymakers and financiers.

The UK’s climate targets cannot be met without reducing emissions from steelmaking, the ETC said, forecasting demand to rise by 20% between 2020 and 2030, due to increased consumption from the energy transition and wider economy.

Steelmakers are aiming to make their steel low carbon by pairing direct reduced iron, or DRI, production technologies using green hydrogen with electric arc furnaces, or EAFs.

“Low-emissions primary steelmaking is not only desirable for the UK, but eminently possible, requiring only a few, strategic interventions by industry and government to enable a viable investment case,” ETC Chair Adair Turner said.

He added that the ETC report provided a path for industry and government to rapidly decarbonize UK steel, while preserving the capability to produce domestically.

Actions

The actions the ETC report called for include the implementation of effective carbon pricing on steel imports and domestic production, lowering electricity prices to make scrap recycling more economical, premium forward offtake agreements and guarantees to manage technology risk.

According to the ETC, a progressive carbon price would act as a foundation for the low carbon steel investment case.

It noted that the UK government was reported to be considering support measures totaling GBP600 million ($739.75 million) to maintain and make production low-carbon at existing integrated steelmaking sites, which would be a good use of the funding, but not if the plants remained systematically uncompetitive while imports faced lower or zero carbon costs.

“Implementing a UK carbon border adjustment mechanism (or equivalent measure) to ensure both steel imports and domestic production face the same progressive carbon pricing would be essential,” the ETC said.

High energy costs faced by UK steelmakers when processing scrap was one factor causing scrap to be underutilized, with exports reaching 8 million mt/year. This is caused by — among other factors — the high electricity costs faced by UK steelmakers. Lower electricity prices would, therefore, make scrap use more economical for EAF projects, the ETC said.

Forward purchase agreements from buyers would help the investment case for such projects, while financial guarantees, normally backed by governments, were also an effective tool to help financiers de-risk uncertainty surrounding investment in novel technologies.

Government support

The ETC said direct government support in the form of subsidies was also needed to strengthen the investment case, particularly for the high upfront costs of developing breakthrough projects.

Subsidies for operational expenditures, chiefly for green hydrogen, would also be very impactful but would involve a longer-term commitment on the part of government, according to the report.

“All these actions are feasible in the short term and could unlock a first wave of breakthrough steel investments in the UK,” the ETC said, adding that the necessary breakthrough iron- and steelmaking technologies were already available, while the right conditions for encouraging project proposals and enabling FIDs were also within reach.

In addition to these actions, the report called for cross-value chain collaboration to advance the first wave of projects to achieve FIDs.

The most important condition for unlocking investment was the role of government, as well as switching away from an approach of moving from crisis to crisis and rather setting out a clear vision for the future of the industry.

Platts, part of S&P Global Commodity Insights, assessed the weekly UK hot-rolled coil price at GBP710/mt DDP West Midlands Jan. 26, down 14.5% from the start of 2022.

— Jacqueline Holman

The EU’s Green Deal Industrial Plan must have an overall vision and provide a business case for investment in the continent comparable to the US Inflation Reduction Act to ensure low-carbon steel projects and other clean-tech investments take place, European Steel Association Eurofer said Feb. 1.

The European Commission presented its Green Deal Industrial Plan Feb. 1, which is aimed at enhancing the competitiveness of Europe’s net-zero industry and supporting the fast transition to climate neutrality.

The plan aims to provide a more supportive environment for the scaling up of the EU’s manufacturing capacity for the net-zero technologies and products required to meet Europe’s ambitious climate targets, the EC said.

Main objectives of the plan are to provide a predictable and simplified regulatory environment, faster access to funding, open trade for resilient supply chains and skills enhancement.

Eurofer said in its response to the plan that low-carbon steel was a key driver to the net-zero industry, with it being used in wind turbines to electric vehicles, making it essential for clean-tech value chains to be circular and carbon neutral.

It said the implementation of the plan was crucial to adopting a value chain approach focusing on all key upstream and downstream sectors that were indispensable for reaching the EU’s climate and circular economy objectives.

“Competitiveness will be key to attract clean investment in the EU as the Inflation Reduction Act will do in the US,” Eurofer said, with Director General Axel Eggert adding that the IRA showed it was possible to have a “proactive, structural, carbon-neutral industrial policy centered on incentives and industrial competitiveness, rather than relying primarily on obligations and targets complemented only by piecemeal, uncertain support.”

Eurofer estimated that the IRA, combined with additional resources from the US Department of Energy, could provide at least $85 billion of funding available for low carbon steel production and upstream decarbonized energy, Eggert said, adding that the US measures were estimated to result in green hydrogen costs falling about $3-$4/kg.

There was a risk that this would widen the current gap in steel cost production between the EU and the US by up to 60%, he added.

Platts assessed domestic HRC prices in Northern Europe at Eur755/mt ex-works Ruhr Jan. 31, down 18% since the start of 2022, S&P Global Commodity Insights data showed.

There were 60 industrial-scale low carbon steel projects ready to be implemented in Europe before 2030, which could place the steel industry as an industrial front-runner in deep CO2 emissions reduction cuts, Eurofer said.

However, these required capital investment of around Eur31 billion ($33.8 billion), for which decisions had to be taken in 2023, as well as access to abundant, affordable low-carbon energy.

The association estimated total operational expenditure at Eur53 billion, adding that low-carbon steel needed a level playing field with global competitors and demand-side measures to become viable and boost its uptake in the market.

“We call on the Commission to work out, jointly with industry, a concrete plan that secures access to timely, abundant and affordable fossil-free energy and hydrogen for steel and other sectors which are ready to speed up decarbonization, as well as access to carbon capture, utilization and storage, together with more certainty for and swifter access to funding and permitting of projects,” Eggert said.

He said the industrial policy should be structured, comprehensive and long-term and match the level of incentives provided by international competitors.

“This is why we should consider a re-assessment of the EU policies, based on the principles of competitiveness and level-playing field, with an open and target-focused discussion between policymakers and the industry,” Eggert said.

“They can be mainstreamed and actively promoted in all relevant policy areas for industry, as the US has already done with the IRA,” he added.

The Eurofer statement comes a day after the European Automobile Manufacturers’ Association called Jan. 31 for an ambitious and structured automotive industrial policy to rival that of other competitor regions.

The UK’s Energy Transitions Commission also called Feb. 1 for urgent action over the next 24 months to create certainty for investors and financiers to make final investment decisions in near-zero emissions primary, or ore-based, steelmaking projects in the UK.

— Jacqueline Holman

Turkey’s largest steel pipe producer Borusan Mannesmann will start construction of its new steel pipe facility in Romania in March, which is scheduled to start serial production at the end of 2023, it said Jan. 31.

“We will process pipes at the facility to meet our automotive customers’ special pipe requirements, like cylinder tubes used in dashpots as well as cutting and processing works of the monotubes,” the company said.

The facility worth Eur15 million ($16.3 million) will have a 4,800 sq m production and stock yard and has a sales target of more than 10,000 mt as of 2026, it said.

The company had already received a Eur5.8 million government incentive for the project.

Borusan Tube Products was established in Romania in July 2021.

The company also has a 28,000 mt/year plant in Vobarno, Italy, that produces cold-drawn special pipes.

Its electric-resistance welded pipe mill in Baytown, Texas, has a capacity of 300,000 mt/year and the company plans to raise this to 400,000 mt/year with new finishing lines.

Borusan Mannesmann’s Turkish mill capacity is 750,000 mt/year of ERW pipes and 300,000 mt/year of HSAW pipes.

Platts, part of S&P Global Commodity Insights, assessed Turkish HRC at $750/mt EXW Jan. 27, down from an intra-year high of over $1,200/mt reached mid-March 2022.

— Cenk Can

Domestic prices for hot-rolled coil in Europe have been fairly stable on Feb. 1 as buyers have been showing doubt about the sustainability of the prices.

Import offers have increased in Europe after Asian mills returned from Lunar New Year holidays, supporting domestic prices in the EU. In addition, domestic mills have full order books for the first-quarter rolling coil and they have been in no hurry to give discounts for the second-quarter production material.

Buyers, however, have been uncertain that the positive trend would continue due to combination of limited end-user demand from some industries, such as construction, availability of competitive import from stocks in Europe and anticipated increase of availability. After three European steelmakers confirmed the restart of blast furnaces in Spain, Finland and Slovakia, market participants have been waiting for return of other equipment idled in 2022.

“Market is more relaxed as peak of restocking ended and now we see signals that prices are likely to soften in the second quarter,” a German service center said.

“On one hand, I think that prices are stable with some tendency to increase further as industries, including automotive, are showing reasonable activity,” a German distributor said. “This will support remaining automotive negotiations of course. On the other hand, when I hear that some EU mills restarted idled furnaces, scheduled or not, I am worried. I doubt that the additional capacities are needed in the market now. As a consequence, if things are running bad, mills will get pressure to sell their available capacity and we all know well which impact that will have on prices.”

Platts assessed domestic prices for hot-rolled coil in Northwest Europe at Eur755/mt ex-works Ruhr on Feb. 1, stable day on day.

Tradable values have been reported at Eur750-760/mt ex-works Ruhr and offers at Eur780/mt ex-works Ruhr.

The assessment for imported hot-rolled coil in the region was Eur735/mt CIF Antwerp, reflecting offers from Asia reported at Eur730-740/mt CIF Antwerp.

Platts assessed domestic prices for hot-rolled coil in South Europe at Eur740/mt ex-works Italy on Feb. 1, down by Eur5/mt on day.

Deals have been reported at Eur730-740/mt ex-works Italy, tradable value at Eur740/mt ex-works and offers at Eur760-770/mt ex-works Ruhr.

Platts is part of S&P Global Commodity Insights.

— Maria Tanatar, Laura Varriale

Domestic prices for cold-rolled and hot-dipped galvanized coil in South Europe increased in the week to Feb. 1 supported by higher import offers and good order books of the European mills.

Platts assessed domestic prices of cold-rolled coil in Italy at Eur845/mt ex-works Italy, up Eur15/mt week on week.

Market participants estimated tradable values at Eur840-860/mt ex-works Italy, with offers reported at the equivalent of Eur880/mt ex-works South Europe.

Import offers for CRC in Italy were reported at Eur800-810/mt CIF Italy from India and Far East mills.

Platts assessed domestic prices of hot-dipped galvanized coil in South Europe at Eur865/mt ex-works Italy on Feb. 1, up Eur15/mt week on week.

The assessment was based on achievable prices heard at Eur850-880/mt ex-works Italy.

Domestic prices for downstream coil products were supported by good order books of the European mills. With the steelmakers having sold out the first-quarter rolling coil, they were reported to offer second-quarter production material.

In addition, the availability of CRC was seen reduced by some steelmakers in both Germany and Italy with some mills not offering the material. According to market sources, those steelmakers were focused on the production and sales of HDG material.

“The mills try to sell more coated steel, as the material has higher added value, which is normal,” a German distributor said. “And there are some new galvanizing lines running, while cold-rolling capacities were unchanged, so there is less CRC in the market.”

Platts assessed domestic prices of cold-rolled coil in Northwest Europe at Eur855/mt ex-works Ruhr on Feb. 1, up Eur5/mt day on day, but down Eur20/mt week on week.

The assessment was based on tradable values heard around Eur850-860/mt ex-works Ruhr. However, official offers of Eur880-900/mt ex-works Ruhr were deemed “unrealistic” by several market sources.

Import offers were reported at Eur830-840/mt CIF Antwerp for the material from Asia.

Platts assessed domestic prices for hot-dipped galvanized coil in the region at Eur890/mt ex-works Ruhr, down Eur35/mt week on week.

Tradable values and offers were reported at Eur850-900/mt ex-works Ruhr and Eur900-920/mt ex-works Ruhr, respectively.

The drop in the domestic prices of the CRC and HDG in the Platts assessments was caused by the absence of unrealistic high offers from mills seen in the previous week and buyers’ cautious bearish stance.

Platts is part of S&P Global Commodity Insights.

— Maria Tanatar

Italian integrated flat steel producer Acciaierie d’Italia (ADI) has confirmed its plans to boost crude steel production to 4 million mt in 2023 and to 5 million mt in 2024, the company told S&P Global Commodity Insights Feb. 1.

This is up from production of below 3 million mt in 2022, according to market participants’ estimates.

Previously market sources said the company was producing 10,000 mt/day of pig iron from the two blast furnaces.

The steelmaker also confirmed its intention to restart Blast Furnace 2 this year and to start the relining of Blast Furnace 5 in the second half of 2023.

The move follows the Ministry of Finance’s move to give a government grant of Eur680 million ($742 million) to the company, which the latter has said would be used to invest in the plant and support production capacity.

The BF5 relining is scheduled to start in the second half of 2023, while the construction of an electric arc furnace is also expected to start in H2.

“Over the years we have always maintained that without the refurbishment of the BF5 and the verticalization of the downstream systems there will be no future for the plant,” the Italian Union of Metalworkers said.

Currently ADI operates BF1 and BF4. The steelmaker idled production at BF2 in July last year in response to low demand, declining steel prices and high production costs, while 3.5 million mt/year capacity BF5 has been idled since 2015.

“We welcome the news and the willingness to revamp Furnace 5, which will be a priority for achieving the production objectives to make the site strategic at national and international level,” another industry union UGL said. “The company has also expressed its intention to operate with three kilns in the second half of 2023, arguing that if there are funds for the procurement of raw materials, it does not preclude a higher production than that declared…i.e. 4 million mt.”

However, the outlook of some market participants on the news regarding the production rise at ADI was more mixed. “We have seen a lot of plans related to restarting furnaces at Acciaierie d’Italia in the past, and they rarely materialized,” an Italian trader said.

Recently, several European steelmakers — SSAB in Finland, ArcelorMittal in Italy and US Steel Kosice in Slovakia — have resumed operations at blast furnaces idled in 2022. The return of these capacities in the market have made buyers concerned that the increased availability might put an end to the upward price trend in the EU coil market. Full order books for mills have been one of the main drivers behind flat steel price recovery, with European steelmakers selling out of rolling coil in the first quarter.

Platts, part of S&P Global Commodity Insights, assessed domestic hot-rolled coil prices in Southern Europe at Eur745/mt ex-works Italy on Jan. 31, up by Eur10/mt week on week and Eur65/mt on the month.

— Maria Tanatar

The coming two years offer a narrow but clear window of opportunity, during which action must be taken if there is to be a revitalisation of the UK steel industry through breakthrough technology, the Energy Transitions Commission (ETC) says in a report seen by Kallanish.

This is because certain UK blast furnaces will potentially require a relining investment decision as early as 2025.

To avoid “carbon lock-in” – reinvestment into existing integrated mills and preserving carbon-intensive steelmaking – or “import lock-in” – foregoing investment and turning to imports to meet demand – the UK must create conditions for investment into a route to breakthrough steel.

These conditions include effective carbon pricing on both domestic production and steel imports, lower costs associated with sourcing and processing scrap steel, a market for differentiated, higher-priced low-carbon steel, and government guarantees to de-risk new technology. Direct government funding support for breakthrough ironmaking technology would go one step further and extend the investment case to cover both iron- and steelmaking processes, ETC says.

Effective carbon pricing will be critical. The UK government is currently considering funding to support the country’s existing integrated steelmaking sites to decarbonise. Transitioning to breakthrough technology would be a good use of this funding, but not if the resulting sites remain uncompetitive with steel imports that face lower or zero carbon costs, ETC points out.

Large scrap volumes are already available in the UK, but government regulatory action is needed to make its use more affordable. Restricting scrap exports is problematic, but measures to reduce electricity costs for steelmakers would make scrap intake more economical. Lowering or waiving network charges for industrial electricity consumers is an option, like the arrangements already in place in several European countries.

The right demand signals could be achieved through an alliance of UK steel buyers, similar to the First Movers Coalition or SteelZero efforts globally, underpinned by firm volume-based commitments. “Alongside private sector demand, the power of green public procurement should not be underestimated,” ETC observes. The government should also make firm commitments to ensure a portion of its steel procurement is met with near-zero-emissions steel.

Changes to UK content rules, such as requirements that bids for public tenders include greater proportions of domestically produced steel, could add further support.

“Should the pathway of breakthrough steel be chosen, an immediate priority would be the formation of a consortium of private sector stakeholders of the steel value chain (spanning energy suppliers, iron ore miners, steelmaking equipment manufacturers, steelmakers, buyers, and finance). Coalescing around a specific breakthrough project proposal, this consortium would be well placed to set out a robust case to government and swiftly act upon policy decisions,” ETC concludes.

Adam Smith Poland

Italian plate prices are increasing in contracts following the hike attempts by local producers in January, Kallanish learns from market participants.

Plate re-rollers are now quoting and obtaining €900/tonne ($979) for the basic S275 grade and €950/t for the higher 355 grade. This is up from January levels of €850/t ex-works.

Sellers are reporting good order intake thanks to the resurfacing of apparent demand from the second half of December. January was good in terms of sales volumes thanks also to distributors’ restocking. Italian producers are quoting end-March lead times.

Domestic contracts have increased this month to €870-900/t ex-works for S275. Because of the increasing prices of slab and energy costs, plate values are expected to continue to surge to the level of €1,000/t ex-works in February.

Asian-origin slab is now offered at $750/t cfr Italy.

Natalia Capra France