Insufficient government intervention could strand green projects: Sandbag
Government intervention is necessary to drive “lead markets” and de-risk low-emission technology investment, with the first step being to establish a standard for green steel that consolidates the vast existing steel initiatives. Without this, there may be no mass market for green steel and upcoming green steel projects could end up stranded, says Sandbag.
The Belgium-based climate think tank points out that measures are needed until the operating costs gap between green and conventional production routes is bridged. The green steel standard should not discriminate against scrap, as the sliding scale does.
“Once green steel has been defined, the material needs to be applied in downstream manufacturing sectors, ideally those that command high volumes … such as automotive, so that the premium is well diluted and has the least impact on the willingness of end-users to pay extra,” the organisation says in a report seen by Kallanish.
Thereafter, authorities can enact pull mechanisms as demand-side measures to guarantee the offtake of green steel by manufacturing sectors and the consequent purchase by end-users. These can include green public procurement, quota systems for material sourcing or financial incentives to offset the green premium, as well as trading systems for the exchange of green steel certificates.
Until operation costs equalise, these will need to be complemented by push mechanisms such as financial incentives to encourage steelmaking decarbonisation. “These … will need to be tailored to replace flat steel, which in the EU is mainly produced via the carbon-intensive BF-BOF route, and designed to absorb fluctuating green premiums that cast uncertainty on offtake agreements with downstream manufacturers,” Sandbag notes.
“At the heart of the green steel challenge is the price premium. While the conventional BF-BOF route has predictable operating costs that can be replicated across plants and locations, cleaner production processes are subject to greater fluctuations depending on technological and regional factors,” Sandbag says.
“A green premium that adequately compensates for the additional operating costs of one green steel plant may not be sufficient for another, making pull mechanisms a potential source of uncertainty in terms of inflation, increased public spending or undue profits. In essence, mitigating the risks associated with investment in clean steelmaking technologies requires either public authorities or the steel value chain to bear the burden of unclear costs,” the think-tank concludes.
Adam Smith Poland
Acciaierie d’Italia low output impacts EU steel availability: Assofermet
The prolonged ownership crisis at Acciaierie d’Italia (ADI) and its lower output may lead to a structural shortage of flat steel products, not only in Italy but also at a European level, Italian steel trade association Assofermet warns.
“The quality products available thanks to Taranto production are very often not available within the EU perimeter. Buyers are therefore forced to turn mainly to Asian steel mills, facing import restrictions which increase costs … The crisis at ADI is part of an already very complicated context for the steel sector,” Assofermet says in a document sent to Kallanish.
EU safeguard measures result in a decrease in the quantity of steel imported into the EU. The Carbon Border Adjustment Mechanism (CBAM) will meanwhile introduce a tax on goods coming from territories outside the EU from 2026. The result will be an inevitable increase in the cost of steel products available in the EU.
“The national [Italian] manufacturing sector’s growth needs a primary steel industry, upstream of the supply chain, that can support it with the necessary quantity of steel,” comments president of Assofermet’s flat steel division Paolo Sangoi.
ADI’s production crisis is happening at a time of low steel availability in Italy and Europe. “Steel output is decreasing: the production levels of 2012, the year of the seizure of the hot-end area of the Taranto plant, have not been reached over the past ten years … With declining steel production and the rising cost of steel, it is essential to preserve the industrial value of the plant,” Assofermet concludes.
ADI, the joint venture between state company Invitalia and ArcelorMittal, registered steel output below 3 million tonnes in 2023, according to preliminary data. This is below the shareholders’ initial objective of 4mt in 2023 and 5mt target in 2024.
ArcelorMittal says it is open to an amicable solution to the conflict with authorities, and prepared to give up its stake to partner Invitalia for a price that “is only a fraction” of the company’s investment into ADI since 2018. While Invitalia refused ArcelorMittal’s recent offer, the steelmaking group assures it is still on the table (see Kallanish passim).
Natalia Capra France