Volkswagen, Vulcan Green Steel sign MOU for low-carbon steel supply
Vulcan Green Steel has signed a memorandum of understanding with carmaker Volkswagen to supply low-carbon steel, the automotive company said June 12.
This partnership announcement is one of a series of initiatives by Volkswagen Group to increase the use of low carbon-steel in its production process. Volkswagen has been in partnership with Salzgitter since 2022. It also has a stake in Swedish green steel manufacturer H2 Green Steel via its Scania subsidiary.
“The volumes of low-carbon steel that Volkswagen AG expects to order will cover a significant proportion of total steel requirements and will be used by the Group’s production facilities from 2027 onwards,” Volgswagen said in a statement on its website.
Vulcan Green Steel is part of Jindal Steel Group, an industrial conglomerate with steel, iron ore mining and energy operations as well as activities in India, Oman, Africa and Australia.
The Vulcan Green Steel facility in Duqm, Oman, is currently in the construction phase and is slated to come on stream in 2026. Starting in 2027, Vulcan Green Steel will produce automotive grades and other high-strength steels at its Duqm site. Natural gas will be used at the site during the initial years and later operations will be switched over to hydrogen, cutting carbon emissions by 70% once the transition is complete, Volkswagwn said.
Jindal Steel Group is investing more than $3 billion (Eur2.76 billion) to develop the steel project at Duqm. It aims to produce 5 million mt/year of green steel on an annual basis.
Companies in various industries across the steel value chain are buying increasing volumes of low-carbon and low-stainless “green” steel to reduce their Scope 2 and 3 emissions, closing supply agreements to secure low-emission steel for their products.
Platts, part of S&P Global Commodity Insights, launched its carbon-accounted price assessments in May 2023.
Platts assessed Northwest European hot-rolled carbon-accounted coil at Eur755/mt ($809.964/mt) ex-works Ruhr June 11, down Eur10/mt on the day.
EU announces up to 38% import tariffs on China-made battery electric cars
The EU will slap import tariffs of up to 38.1% on battery electric cars made in China, after the European Commission’s anti-probe investigation confirms “unfair subsidisation.”
In a statement on Wednesday, the EC announced provisional countervailing duties that will be introduced from 4 July, if discussions with Chinese authorities don’t lead to an “effective solution.” The duties would be collected if and when definitive duties are imposed.
For now, carmakers and EU countries have been informed of different tariffs based on the EC’s calculations. These will be available for review, but member states can’t interfere with amounts. They will eventually be required to vote on the proposal. However, “measures can be imposed even if the qualified majority is not reached, provided the votes against do not reach a simple majority.”
The average weighted tariff for BEV producers in China cooperating with the probe is 21%. Those that didn’t cooperate, like China state-owned carmaker SAIC, would be subject to a 38.1% duty, the EC says.
Other disclosed individual sample duties include 17.4% for BYD and 20% for Geely, the latter is the parent company for a number of European brands including Volvo Cars, Polestar and Lotus.
“Following a substantiated request, one BEV producer in China – Tesla – may receive an individually calculated duty rate at the definitive stage,” the EC says, without elaborating.
Definitive measures are to be imposed by 12 October.
Reacting to the long-awaited announcement, European automotive trade body ACEA says that “free and fair trade is essential in creating a globally competitive European automotive industry.” It adds that healthy competition drives innovation and choice for consumers, while emphasising that what the European auto sector needs “above all else is a robust industrial strategy for electromobility.”
“The tariffs are welcome but Europe needs a strong industrial policy to speed up electrification and localise manufacturing.” adds Julia Poliscanova, senior director for vehicles and emobility supply chains at T&E. “Just introducing tariffs while scrapping the 2035 deadline for polluting cars would slow down the transition and be self-defeating.”
The campaign group said in March that one in four BEVs sold in Europe this year could be imported from China, led by European carmakers with production in Asia. The trend is set to reverse in the period up to 2027.
On 11 June, China’s foreign ministry spokesman Jian Lin said Beijing urges the EU to terminate the investigation as soon as possible to avoid damaging China-EU economic and trade cooperation, as well as the stability of supply chains. “If the EU insists on its own way, China will never sit idly by and will take all necessary measures to resolutely safeguard its legitimate rights and interests,” Lin added.
Currently, BEVs imported from China are subject to a 10% duty in the EU. European BEVs face a 15% import tariff in China.
China, India to support raw materials prices: Stanislav Zinchenko
Raw materials prices will be supported by demand from China and India in the second half of this year, GMK chief executive Stanislav Zinchenko said at the Kallanish Europe Steel Markets 2024 conference in Milan on Wednesday.
Chinese steel-using sector activity is unchanged from last year, which will help support steel output. Although the country’s real estate sector is experiencing a crisis, other sectors such as manufacturing are helping to offset this.
Apparent steel consumption in China in January-April fell by 7.1% on-year, while average daily trading volume contracted by 5.6% in May. This indicates China could increase its output and apparent steel consumption in the second half of the year. China’s average blast furnace capacity utilisation was 89.5% in May, compared to 86.7% in April.
India’s infrastructure projects will also help support raw materials prices in H2. The country’s apparent steel consumption rose by 9.4% year-on-year in April, while Indian hot rolled coil fob prices increased by $35/tonne in May.
Indian steel demand weakened during the general election, but infrastructure funding is expected to boost demand now the election has been completed. Seasonality will also play a role. Indian demand slows during the monsoon but is typically strong during H2.
GMK estimates rising energy prices have added €8/tonne to Europe’s steelmaking costs. The company predicts business sentiment will improve and steel demand will strengthen in H2. It estimates EU HRC prices will increase by €30-40/t to reach €670-680/t at the end of the second quarter, and prices should reach €700-720/t in Q4, Zinchenko observed.
The price rise will be driven by several factors, including easing import pressure due to import prices not being attractive between April-May, non-competitive India prices and the EU’s safeguard quota revision. Imports should also decline significantly from India, which was the largest supplier of HRC to the EU in H1, Zinchenko concluded.
Suhita Poddar India
Italian longs consumption continues to drag
The Italian longs market continues to drag on the backdrop of slow consumption and a negative outlook, Kallanish understands. Producers implemented a €20/tonne ($21) increase last month but did not manage to increase transactions which remain mostly flat compared with May.
Sellers and buyers in the distribution sector report low sales and back-to-back purchases for merchant bar.
“I have been quite happy until April as I sell several longs and the average for January-April was OK,” an agent comments. “Demand in May across all products was extremely low and I do not see much improvement in June. The month started also very slow.”
Merchant bar prices are flat at €280-290/t base ex-works while Spanish offers are at €260/t delivered. Including size extras, domestic material remains at €700-710/t ex-works. Some producers are beginning to adapt to the new market conditions where clients buy small tonnages every week but require swift delivery. Clients are being offered truckloads of mixed material at competitive prices.
In this market steelmakers offering relatively long lead-times tend to lose orders and volumes. Clients ask to be delivered within a few days and refuse to commit to larger volumes.
“Buyers are scared by the demand weakness of May and expect June and July not to be much better,” another seller comments.
Section prices also struggle to increase. The first category of beams is at about €760-770/t delivered on average, flat on-month, with cheaper European material available. A purchasing group warns of the low margins throughout the value chain and low selling prices downstream as the slow sales volumes are forcing some companies to chase volume discounting material.
ArcelorMittal is announcing higher prices for long products across Europe. The move is driven by the high cost of production and the need to recover margins. The steelmaker is reported to be offering €30/t above its May quotes for all commodity grade longs.
Natalia Capra France
Europe loses production power, retains engineering excellence
Europe remains at the vanguard of steel technology, even though it has to cope with decreasing production, said major industry players at the Kallanish Europe Steel Markets 2024 conference in Milan on Wednesday.
Henrik Adam, vice president European Corporate Affairs at Tata Steel, and president of European steel federation Eurofer, pointed out Europe is currently caught in a dilemma between decarbonisation and de-industrialisation. On one hand, it is the region most ambitious – along with Japan – in transforming to low-emission steelmaking. But it has also lost much of its traditional strength in manufacturing industries to emerging countries.
With an eye on his own company, he noted that Tata’s plant in Ijmuiden, in the Netherlands, is the second-lowest CO2 emitting integrated mill worldwide.
However, Europe has lost much of his production power, not only in the volumes of steel, but also in customer sectors like solar panels, Adam said. “We have offshored production. Are we also offshoring innovation? That would be a disaster.”
Jindal Shadeed chief executive Harssha Shetty concurred. The company is managing the establishment of Oman-based green steelmaker Vulcan Green Steel. “Europe’s strength is in engineering – Europe can still play on that,” he stated. He believes that Europe can focus on engineering and depend on other regions to get its raw materials, possibly including iron. “Still, Europe is the biggest inspiration for the whole world,” he emphasised.
On the Vulcan Green steel venture, he highlighted Oman’s richness in wind and sun resources, and that the combination of both will be the key to hydrogen-based steelmaking. “Only solar or only wind may not be the optimal answer to make green steel,” he said. “True green steel is when there are fresh investments into fresh capacities to make green steel,” he added.
Meanwhile, Adam pointed to the changes in mindset brought on by the war in Europe. “The war cut Germany off from cheap Russian gas. This has shown us the danger of being too dependent on one source.” He reiterated how the country coped with that challenge pragmatically, by setting up LNG terminals in a matter of 12 months. “In the end, the one thing that matters is speed,” he concluded.
Christian Koehl Germany
Thyssenkrupp Steel loses influential technology chief
Arnd Köfler, chief technology officer at thyssenkrupp Steel, will leave the company by mutual agreement on 30 June, for personal reasons, Kallanish learns from the firm.
Köfler’s departure on short notice is remarkable as he has been a driving force behind the strategy and implementation of the German steelmaker’s transformation to carbon-neutral steel production. He was “driving it forward in crucial times with remarkable dedication and passion right through to the funding decision and start of construction,” says supervisory board chairman Sigmar Gabriel.
He will be succeeded by Dennis Grimm, currently cto at Hüttenwerke Krupp Mannesmann (HKM), in which thyssenkrupp Steel holds a 50% stake.
HKM is also seeing Peter Biele take over as managing director, after eight years in the top position at thyssenkrupp Rasselstein, Germany’s only tinplate producer.
At Rasselstein, he will be succeeded by Clarissa Odewald in the role of chairwoman of the management board and chief sales officer. Before taking over the position in Andernach, Odewald held various positions in purchasing and sales at thyssenkrupp Steel in Duisburg, since 2007. She was responsible for the procurement of raw materials and overseas logistics, and was in charge of sales for the entire Steel business segment.
Christian Koehl Germany
Potential buyers visit Acciaierie d’Italia plants
Representatives of Indian trading company Steel Mont and Oman-based Vulcan Green Steel (VGS) have visited Acciaierie d’Italia’s (ADI) plants in Genova, Novi Ligure and Taranto in recent days, with a view to potentially acquiring the troubled producer. Metinvest representatives are meanwhile expected to visit Taranto later this month, sources close to ADI confirm to Kallanish.
According to multiple sources close to the dossier, several steelmakers have been contacted by the Italian government to consider purchasing ADI, including Arvedi, but there is no real industrial plan for the steelmaker. There is talk of breaking the company up and selling the different facilities, while turning Taranto into an electric arc furnace steelworks.
Acciaierie d’Italia’s special administration commissioners have promised trade unions that two blast furnaces at Taranto, no.1 and 4, will be replaced by two electric arc furnaces. Construction is likely to begin in the first half of 2025 (see Kallanish passim).
The commissioners have presented to unions a draft of a new industrial plan that aims to increase production with the restart of BF no.1 and 2. Taranto is currently working at minimum production levels, using only BF no.4. The plan is to operate BFs no.1, 2 and 4 by 2025 in order to reach 6 million tonnes/year of steel production. The EAFs are to be commissioned in 2027.
According to the initial plan, there is no intention to revamp and restart BF no.5, which has been idled for several years. The Italian government is now preparing to inject €150 million ($161m) into the company and lobbying the EU for a loan of €320m following the submission of a detailed industrial plan. The special administration is also said to be considering a €600m loan from a pool of banks.
Meanwhile, the former Ilva’s three commissioners, Giancarlo Quaranta, Davide Tabarelli and Giovanni Fiori, are building up a new management team. Maurizio Saitta has been appointed ADI general director, replacing Giuseppe Cavalli. Angelo Colucci has become supply chain chief, while Benedetto Valli has taken up the role of Taranto plant manager.
Despite prioritising its future Italian flat steel mill in Piombino, Metinvest said it may later consider becoming a shareholder in ADI. Metinvest is currently supplying Taranto with raw materials and sourcing slab from Taranto for its Italian facilities.
Natalia Capra France
EU HRC prices inch down on day amid muted activity
“Market is still quiet and there is very low demand,” a service center source said. “There is no re-stocking activity and barely any movement in the market.”
Some mills have used proposed changes to the existing safeguard measures in Europe to push their offers higher. However, market fundamentals do not support an increase in prices, sources said.
The European Commission said May 30 that it was considering a 15% cap for a single country over the Tariff Rate Quota volume for HRC initially available in each quarter. European authorities are scheduled to announce definitive measures by June 30.
As HRC imports from Japan, Taiwan, Vietnam and Egypt are likely to be reduced as a result of the proposed changes, Europe-based buyers will have to substitute the material with either European coil or alternative non-EU suppliers that do not have a country-specific quota.
Platts assessed domestic prices for HRC in Northwest Europe at Eur630/mt ex-works Ruhr, down Eur10 on the day.
Offers were reported at Eur620-650/mt ex-works Benelux. Tradable values were heard at Eur620-640/mt ex-works Northwest Europe. No deals have been heard.
Platts assessed domestic prices for HRC in South Europe stable on the day at Eur635/mt ex-works Italy June 10.
In addition, scheduled maintenances at EU mills during the summer are expected to provide some support to the prices.
China’s push to start emissions trading for steel industry this year faces critical challenges
China launched its ETS in July 2021, which currently only covers the power sector. There have been many politicians and industrial stakeholders calling for an accelerated ETS expansion to include other emissions-intensive sectors, especially those liable under the EU’s Carbon Border Adjustment Mechanism, like cement, aluminum, iron and steel.
Earlier in 2024, the Ministry of Ecology and Environment or MEE released for public consultation emissions accounting and reporting guidelines targeted toward the cement and aluminum sectors, paving way for their inclusion in the ETS. However, the guideline is yet to be released for the iron and steel industry due to its long list of products and sophisticated emissions accounting procedures.
A spokesperson for the China Iron and Steel Association or CISA told state media China Environment News June 6 that “the iron and steel sector is expected to be included in the national ETS this year after a series of early-stage preparations, following the government’s call.”
Some industrial experts regarded this as a quasi-official voice that committed to onboard the iron and steel sector despite challenges.
China Environment News is the mouthpiece of MEE, which oversees carbon market development. Articles on this newspaper usually aim at lobbying other government bodies and industrial stakeholders to take certain actions.
Despite MEE’s clear push, the central government is wary of any policy that could compromise the economy. This becomes even tricker for the iron and steel sector as it contributes about 15% of the country’s CO2 emissions but also over 50% of global steel production.
Lack of carbon management capacities
“Compared with power sector, iron and steel sector has much more complicated industrial processes, raw materials and products. As such, it will be much more difficult to conduct emission accounting and verifications, as well as crafting the allocation plan of ETS allowances,” CISA said in an interview with China Environment News.
Since 2013, China has established several provincial, pilot carbon markets. These pilots have covered about 80 iron and steel companies, enabling them to accumulate experience in carbon asset management and emissions trading, CISA said.
“However, these companies only contributed about 13% of crude steel outputs. Majorities of iron and steel companies still lack the ETS-related experiences,” the spokesperson said. Even for some companies that have already participated in provincial markets, they mainly focus on fulfilling liabilities and did not actively participate in emissions trading, CISA noted.
“When I ask steel producers about their decarbonization strategies, most of them still give me a confused look,” a China-based steel market analyst said.
The analyst used a Chinese idiom to describe the iron and steel sector’s situation — “the arrow is already on the bowstring, so you have to shoot.”
“They must follow the government’s call to participate in the ETS no matter how challenging it can be. Meanwhile, the EU’s CBAM is coming and there may be more CBAMs from more countries coming.”
Compromised profitability
Including the sector in the ETS will exert a stronger push for more decarbonization investments. However, some steel producers worry that the costs could be unbearable, questioning whether investing in decarbonization is “luxurious” as they are facing razor thin profit margins.
In January-February, China’s steel export volume increased by 32.6%, but the average export price dropped by 32.1%, CISA told the state media, highlighting that, since 2023, low prices have triggered investigations by the US, the EU and Thailand and caused trade frictions with India.
Notably, China’s emissions allowance price was at Yuan 96.07/mtCO2e ($13.26/mtCO2e) on June 7. Steel producers said their current profits were Yuan 100-300 ($13.80-$41.39) for each ton of steel.
Around 1.78 mt of CO2 emissions will be incurred for producing a ton of product, a China-based long steel producer said, adding that carbon footprints vary significantly by steel products and many producers are still unable to conduct such emissions accounting.
The producer expected ETS costs to start low, because, like the power sector, the government will give each producer a free emissions quota based on its annual output. Producers only need to buy emissions allowances if they emit more than their free quotas.
CISA has published a decarbonization roadmap for the iron and steel sector that targets to peak the sector’s emissions in 2030, reduce the sector’s emissions by 40% in 2040 from 2020 levels and by 95% in 2060, as well as achieving carbon neutrality with carbon capture, utilization and storage technologies and carbon offsets.
Tata continues UK transformation despite election concerns
Tata Steel says it will continue with its Port Talbot blast furnace operations closure despite being “apprehensive” about reports the upcoming UK general election may put the investment under threat.
“We urge and request the current and the incoming government post-elections, to adhere to and safeguard the agreed terms of the £500 million package of support for the Electric Arc Furnace (EAF) project announced in September 2023,” Tata Steel writes in a note seen by Kallanish.
“The proposed grant funding from the UK Government is ring fenced for building the new EAF, which is critical to securing long-term supply of steel for Tata Steel’s UK downstream assets and protecting 5,000 jobs in various Tata Steel UK sites. It is not linked to the ongoing financial losses and the instability of the existing heavy end assets, whose closure is now underway and immutable. We are therefore concerned with the UK media reports since yesterday as further political uncertainty on the timing and form of the grant will place the EAF project and the long-term future of steelmaking at Port Talbot at significant risk,” it added on Tuesday.
Tata said in April it is proceeding with its single 3 million tonnes/year electric arc furnace plan for Port Talbot following seven months of formal and informal national level discussions with UK trade unions (see Kallanish passim). Unions responded by saying they plan to call a strike.
Port Talbot’s two blast furnaces, no.5 and no.4, are scheduled to be closed by end-June and end-September respectively. The UK general election is scheduled for 4 July, with the opposition Labour Party ahead in the polls.
Tata Steel UK’s deliveries in the March quarter fell 9% on-year but rose 8% on-quarter to 690,000t, while liquid steel output fell 11% on-year and dropped 8% on-quarter to 660,000t.
Adam Smith Poland