UK government disadvantages Tata Steel
The UK government is putting Tata Steel at a disadvantage compared with its European peers with the comparatively low level of funding it is providing to help the company decarbonise.
The government has committed to provide Tata with £500mn ($635mn) towards the cost of decarbonising its Port Talbot plant in South Wales, which will have an electric arc furnace with a capacity of about 3mn t. This equates to £166/t worth of assistance.
That level of funding would be insufficient to enable other technologies such as two electric arc furnaces or direct reduced iron. Tata itself is investing £700mn in the move, which has widely been criticised by unions and the Labour opposition as a “bad deal”.
In comparison, the German government is giving Salzgitter more than €525/t ($568.80/t) to facilitate its movement to hydrogen-fed green steel. Germany’s ThyssenKrupp will receive almost €870/t to help it transition to green steel at its flagship Duisburg site.
ArcelorMittal is receiving more than €600/t to help decarbonise its Sestao plant in Spain. At its Dunkerque site in France, it has received funding of €850mn to produce 4mn t of lower-carbon steel, equating to €212/t worth of financial assistance. Therefore, most European competitors are receiving greater state assistance.
To feed its electric arc furnace, Tata will still need to import direct reduced iron, pig iron or other metallics to complement the reservoir of domestic scrap. Sources suggest this could be as much as 1mn t/yr.
Should UK electricity prices remain high compared with Europe, there is a risk Tata’s electric arc furnace will still struggle to compete, although the reduction in fixed costs from job cuts and the ability to adjust output quickly will be financially beneficial.
“This steel plant was losing more than £1mn a day, putting it at risk of closure and threatening 8,000 jobs in South Wales and thousands more in the wider supply chain,” a government spokesperson said.
“The government’s unprecedented £500mn grant as part of the £1.25bn investment by Tata Steel will build a new electric arc furnace that protects thousands of long-term jobs, as well as delivering a much greener way of producing steel, cutting carbon emissions in Wales by 22pc.”
European CRC offers scarce, import prices competitive
Reduced availability had little impact on prices as real demand has been slow, and buyers were able to source imported CRC at competitive prices.
“The supply is short at present,” a German service center source said. “Offers from both Italian and Northwest European mills are scarce.”
Mills offered CRC at Eur850-890/mt ex-works Northwest Europe and tradable values were estimated at Eur830-850/mt EXW Ruhr by market participants.
Platts assessed domestic prices for cold-rolled coil in Northwest Europe at Eur850/mt EXW Ruhr Jan. 24, down by Eur15 on the day and steady on the week.
In South Europe, tradable values have been heard at Eur860-880/mt EXW Italy.
Platts assessed the price of domestic cold-rolled coil in South Europe at Eur860/mt EXW Italy Jan. 24, up Eur10 on the week.
Deals for CRC imported from Asia were reported at Eur740-760/mt CIF Antwerp.
Platts assessed prices for imported cold-rolled coil in Northwest Europe at Eur750/mt CIF Antwerp Jan. 24, down by Eur20 on the day and Eur10 on the week.
Offers for hot-dipped galvanized coil remained bullish even though no deals were heard concluded.
Mills offered HDG at Eur870-880/mt EXW Northwest Europe for March shipment and at Eur900-930/mt EXW Northwest Europe for second quarter shipment. Tradable values were estimated at Eur830-870/mt EXW Northwest Europe.
Platts assessed the price of domestic hot-dipped galvanized coil in Northwest Europe at Eur860/mt EXW Ruhr Jan. 24, down Eur10 on the week .
In South Europe, tradable values were heard at Eur860-880/mt EXW Italy and mills made offers at Eur920-930/mt EXW Italy.
Platts assessed the price of domestic hot-dipped galvanized coil in South Europe, stable on the week at Eur870/mt EXW Italy Jan. 24.
Author Rituparna Nath, rituparna.nath@spglobal.
Platts is part of S&P Global Commodity Insights.
Labour calls for UK primary steelmaking impact report
The opposition Labour Party has called on UK business and trade secretary Kemi Badenoch to report to Parliament by 27 February with an assessment of the impact on the UK of the loss of primary steel production capabilities.
In an intriguing year for both the UK’s steel industry and politics, Tata Steel has confirmed the closure of both Port Talbot blast furnaces by end-2024 and commissioning of a 3 million tonnes/year capacity electric arc furnace by 2027. This follows a deal agreed with the Conservative government last year for £500 million ($636m) in funding.
The Competition and Markets Authority is due to publish a report on the grant’s compliance with the subsidy control requirements on 6 February.
The Labour Party however leads the polls and could win the next UK general election, which Prime Minister Rishi Sunak is expected to call in the second half of this year. Labour has pledged it would invest up to £3 billion over ten years to decarbonise the steel industry, Kallanish notes.
The UK government allowing blast furnace no.4 at Port Talbot to close is “an act of economic vandalism” and sends a message that “decarbonisation effectively means deindustrialisation”, says UK shadow secretary of state for business, energy and industrial strategy Jonathan Reynolds.
“The claim that 90% of what Port Talbot does could be met with an electric arc furnace does not stand up, as key products in packaging and automotive materials cannot be produced in one,” Reynolds told a House of Commons debate on Tuesday.
Addressing UK industry and economic security minister Nusrat Ghani, Reynolds added: “I am asking the Minister – quite honestly, I am begging her – to consider the arguments and what is really value for money, and not to make decisions that are irreversible and prevent a far better outcome in future.”
The UK’s other primary steelmaker, British Steel, meanwhile remains in talks with the government to agree funding following its proposal announced last November to replace its blast furnace with two EAFs. The plan has been criticised by unions, who will be closely watching developments at Port Talbot.
Holly Mumby-Croft, Member of Parliament for Scunthorpe, where British Steel is located, said: “I have no problem with building electric arc furnaces – it is a good idea – but I passionately believe that the UK should retain, at least in the medium term, some blast furnace capability alongside that. After the sad news in Port Talbot, that has to be in Scunthorpe.”
“If we are to give British Steel hundreds of millions of pounds of public money, we need to ensure that it retains those blast furnaces until the transition. In short, that must be written into the deal,” she added.
Some concern has been raised about the UK not being able to supply its own steel for defence purposes were it to lose primary steelmaking capability. UK Secretary of State for Wales David Davies however pointed out that Port Talbot does not supply the defence industry, which sources steel from Sheffield Forgemasters, produced in an EAF.
In the Welsh Parliament on Tuesday, First Minister of Wales Mark Drakeford said his government did not agree with the blast furnace no.4 closure and called the alternative Syndex/multi-union plan credible. This proposes to keep the 2m t/y BF4 running while the new EAF is built, and thereafter until 2032.
Welsh economy minister Vaughan Gething pointed out there is a contrast between the UK approach and the more favourable one being taken by the Netherlands government towards investment in hydrogen and direct reduced iron making. Tata contracted in 2022 Danieli and Hatch to provide an engineering package for the transition to hydrogen-based DRI-EAF steelmaking at its IJmuiden plant.
On Wednesday during Prime Minister’s Questions, meanwhile, UK PM Rishi Sunak stressed that 8,000 jobs had been on the line at Tata Steel UK, far in excess of the 2,800 slated to go. “Because of the government’s investment and support, and partnership with Tata, we have safeguarded 5,000 direct jobs, thousands more in the supply chain, and ensured the long-term sustainability of that steel plant.”
Tata Steel published its December-quarter earnings on Wednesday, showing that its UK business posted 720,000 tonnes of liquid steel output and 640,000t of deliveries, flat and down 3% on-year respectively. Revenue was down 12% to INR 6,294 crores ($757 million) and Ebitda loss deepened 12% to INR 1,657 crores.
Adam Smith Poland
Outokumpu completes Cronimet North-East stake acquisition
Outokumpu has completed the acquisition of a 10% minority interest in Cronimet North-East after fulfilling closing conditions.
The latter is the German holding company of Cronimet’s business in northeastern Europe, holding subsidiaries in the surroundings of Outokumpu’s European production sites. Outokumpu and Cronimet announced last November the expansion of their long-term collaboration to further secure the sourcing and retain the supply of high-quality scrap within northeastern Europe (see Kallanish passim).
“We want to accelerate the circular economy in the Northeastern European market area and source recycled steel, which is collected here in the area, close to where it is needed. This is about expanding our existing successful cooperation to ensure that recycled steel that we acquire has the best possible quality and comes from as close as possible, allowing us to decrease the carbon footprint of our production,” says Outokumpu chief procurement officer Marc-Simon Schaar.
The parties will also cooperate on joint innovation and research with the goal to improve technologies to further reduce CO2 emissions, lower costs through better predictability and drive waste reduction within the supply chain, the steelmaker says.
As a shareholder, Outokumpu acts as a strategic partner in Cronimet’s northeastern business, while Cronimet retains full operational control of the companies involved. “Outokumpu does not see vertical integration into the supply chain of stainless steel scrap as part of its raw material strategy but considers cooperation and partnerships as the way forward,” the firm says.
Adam Smith Poland