Category: Latest Updates

ArcelorMittal has announced that it has supplied steel for the manufacturing of pipes specifically designed to transport 100% concentrated hydrogen.

The pipes were manufactured by Greek Corinth Pipeworks using steel supplied from the Fos-sur-Mer and Bremen mills. The tubes were then used in a new 440km high-pressure network in Italy.

“While steel is the best material available to transport hydrogen, a key challenge is the effect that the gas has on the metal,” explains Frederic Bouchaud, ArcelorMittal account manager for oil and gas pipelines. “For this project we have created a robust new steel which will resist embrittlement and transport hydrogen gas safely throughout Europe. The result is a very wide, high-quality steel with low carbon content, excellent cleanliness, a homogenous microstructure, and low levels of sulfur and phosphorous.”

Finished pipes have an outside diameter of 26 inches (660 mm) and thicknesses of 11.1 and 15.9 mm. To meet these specifications, ArcelorMittal produced extra-wide 2,100mm coils. After forming by CPW, the pipes were laboratory tested at maximum pressure and 100% hydrogen.

The possibility to effectively transport hydrogen in Europe is central to the future development of greener steel in the continent, Kallanish notes.

Emanuele Norsa Italy

Decarbonisation, green capital expenditure (capex), and conservative investment by the mining giants are expected to support the iron ore and steel bull markets, according to Nicholas Snowdon, head of base metals and bulks research of Goldman Sachs, Kallanish learns at Singapore Iron Ore Forum (SIOF) 2021 held on 13 July.

Decarbonisation, required by governments, is expected to bring steel demand for new equipment, while output will be under pressure from the move towards net zero emissions. Output will be controlled despite rising global steel capacity and therefore, probable tight supply and new demand can support steel markets, Snowdon believes.

In terms of green capex, environmental policies will drive a capex boom on par with the 1970s and 2000s. Heavy investment is necessary for countries to achieve carbon neutrality. Commodity prices and capex hitorically have roughly the same trend, Nicholas stated.

Although iron ore bull market has entered its third year, global supply/demand balances suggest no material surplus until 2023/24. Meanwhile, the commitment of miners to long-cycle mining developments is falling. The combined mining capex of Glencore, Anglo American, Rio Tinto, and BHP has only recovered to a third of levels a decade ago, and is expected to maintain this level to 2025. Expectations of supply expansion are therefore weakened.

Several speakers also agreed that iron ore prices will continue to be high before next year. “China’s demand for high-quality iron ore that has over 62% Fe will be still strong in the fourth quarter,”said Tracy Liao, vice president of commodities strategy at Citi.

By Kallanish Team

ArcelorMittal`s Spanish Sestao plant is set to become the first global steel producer with zero CO2 emissions across its entire production process, Kallanish learns from the company. This will be possible by using green hydrogen and electricity from renewable energy sources.

The project is part of the memorandum of understanding that ArcelorMittal and the government of Spain signed on 13 June. The plan contemplates an investment of €1 billion ($1.18 billion) in the construction of a direct reduction plant with green hydrogen as well as a new hybrid electric furnace at the Gijón mill.

“This plan depends on supplying huge quantities of hydrogen at affordable prices, access to sustainable financing and a favourable legal framework that allows us to be competitive on a global scale,” company` ceo Aditya Mittal comments. 

The Sestao plant – which manufactures a wide range of flat steel products for the automotive, construction and general industry sectors – is estimated to produce 1.6 million tonnes of zero-carbon steel by 2025. This will be possible by modifying the metallic charge in the two existing electric arc furnaces, increasing the proportion of recycled scrap and using pre-reduced iron produced with green hydrogen in Gijón. The electricity supply in all steel installations of the plant is set be from renewable energy sources, ArcelorMittal explains.

Todor Kirkov Bulgaria

Acciaierie d’Italia, the largest Italian flat steel producer, is likely to close the year below its previous planned production output of 5 million mt, sources told S&P Global Platts on July 13.

The steel unions said that Acciaierie d’Italia is likely to produce 3.5 mln of crude steel this year. When contacted by S&P Global Platts, Acciaierie d’Italia’s spokesman said that the company targets an output of 4.5 million mt of steel by the end of 2021 and that to achieve this, “production will increase to 15,000 mt a day in the second half of the year.”

According to the unions, the company is producing around 10,000 mt of pig iron a day at the moment as only two blast furnaces — No. 1 and No. 2 — are working, while the No. 4 furnace was temporarily shut for maintenance in June. The No.4 furnace was supposed to restart production in the beginning of July but is still temporary offline due to ongoing environmental and technical issues.

The unions and the company spokesperson said that the blast furnace No. 4 was linked to the coke battery number 12, which was directed to be put on idle by Italy’s Transition Ecology Ministry until it met certain standards to make it environment friendly.

“The company appealed at a court in Rome against the minister’s directions and ask for three month extension to meet the environmental requirements, amid COVID-19-related lockdowns that delayed the requisite changes. The tribunal of Rome has already asked to the ministry to reconsider its order to idle Battery 12.” Acciaierie d’Italia’s spokesman said.

The company has a total of five blast furnaces, blast furnace No. 1 and No. 2 each have a designed production capacity of 1.8 million-1.9 million mt/year of crude steel, but they are not operating at capacity. Blast furnace No. 5, the largest in Europe with a production capacity of around 3.5 million mt/year, was idled in 2015. Blast furnace No. 3 has a capacity of about 2 million mt/year of crude steel, but was idled in 1994 and is set to be dismantled.

The steel unions have planned a strike for July 20 to demand more clarity and commitment from the government, union sources told Platts.

The Italian market consumes around 12 million-13 million mt of coils annually, market sources told Platts. In 2020, the country produced about 20 million mt of crude steel and was the second largest European steel producer, according to Federacciai, the Italian federation of steel companies.

Acciaierie d’Italia is the largest Italian flat producer, followed by Arvedi. Arvedi is set to produce 3.6-3.8 million mt of hot-rolled coils this year, close to its installed capacity, Platts reported earlier.

Arvedi has two electric arc furnaces at its headquarters in Cremona. The No. 1 furnace has 1.4 million mt/year of crude steel capacity and the No. 2 furnace was upgraded and expanded in 2020 to increase its capacity to 2.6 million mt/year.

The Italian coils market is going strong, with prices reaching historical levels in June. Prices were softening amid the summer holidays and attractive imports, but domestic prices were still high, Platts reported earlier.

— Annalisa Villa

Unprecedented high iron ore and pellet prices are forcing small secondary steel units (non-blast furnace producers) in India to shut down or reduce steel production. In West Bengal (WB), five such micro, small, and medium enterprises (MSME) have closed down, while 100-115 others curtailed production by between 15-50%, according to the Steel Re-rolling Mills Association (SRMA).

Pellet prices have surged from INR 4500/tonnes ($60.35/t) in May 2020 to INR 15,000/t ($201.13/t) in June 2021, resulting in a cost impact of INR 20,800/t in finished steel production. Despite such high steel prices, 50,000 secondary steel MSME’s plunged into loss, Kallanish notes.

“The induction furnace route steelmakers are also surrendering power requirements from the DVC and the WBSEDCL (West Bengal State Electricity Distribution Company Limited),” says SRMA chairman Vivek Adukia.

Various steel associations from steel-producing states have pleaded to the prime minister’s office and the steel ministry, to impose a 50% duty on iron ore and pellet exports for the last one year, but no action has been taken yet, Adukia adds.

Companies with captive mines and pellet making units are making a profit, but other small manufacturing units are struggling hard to manage hand to mouth raw material requirements. In the wake of unprecedented iron ore prices, associations are also pleading to the ministry to allow a consortium of smaller units (up to 5 members per consortium) to bid in auctions that will help reduce dependence on the open market.

Sayed Aameer India

Eurofer issued a statement this week ahead of the expected announcement by the European Commission of a set of new measures for the EU climate policies containing “concerning” proposals over the emission trading scheme (ETS) and carbon border adjustement mechanism (CBAM).

Later this week the EC is set to publish its Fit for 55 package, described as “one of the most significant – and largest – groups of measures the EU has ever released in one go.” The package will revise EU climate policies, Kallanish notes.

Within the package Eurofer expects a steep reduction of free allocations of ETS allowances. These would “increase the steel industry exposure to EU ETS costs” and “artificially drive up the carbon price.”

In addition to that, the EC is set to announce its CBAM plan, a system to protect the market further from carbon leakage. Nevertheless Eurofer noted that “at this stage it is unlikely that the proposal will include any solution for EU export competitiveness or provide any effective measures against circumvention practices by importers, such resource shuffling or cost absorption.”

“Higher climate ambition requires strengthened – not weakened – carbon leakage protection,” said Axel Eggert, director general of Eurofer. “Artificially higher carbon costs would hinder the steel sector’s ability to reduce emissions and meet our targets. Even before the current EU ETS revision, the sector was facing €30-45 billion in EU ETS1 costs between 2021-2030.”

Eurofer indicates that ETS allowances should not be limited further and indirect CO2 costs should be compensated until the first industrial decarbonisation projects have been upscaled properly. Further actions by Eurofer are expected once the full package of measures is published.

Emanuele Norsa Italy

Italian stainless scrap sales volumes this month are expected to be lower than June as some mills, particularly longs producers, will be purchasing less due to the summer closures in August, market sources tell Kallanish.

Traditional sellers have only implemented small contracts so far below 500 tonnes and are now negotiating with the large mills for July contracts. While small tonnage transactions were implemented at the beginning of the month, the market is said to be expecting increases for the large purchases this week due to nickel price fluctuations.

So far grade 304 has been sold at €1,500-1,550/tonne ($1,778-1,837) delivered in Italy but prices for large purchases are expected to push the current range higher this week. Sales for 316 are lower in terms of volumes compared to 304 as this grade is more expensive and in short supply. 316 has been sold so far at €1,960-2,080/t delivered, sources suggest.

Nickel prices for cash buyers were at $18,673/t on 9 July, Kallanish notes.

Natalia Capra France

Italian demand for merchant bar and beams is said to have cooled down in July due to the current high prices, distribution and production sources tell Kallanish.

July is seasonally one of the best months for Italian longs but as prices remain elevated the large distributors are refusing to restock and purchases only happen back-to-back. Agents however say that despite the calm, sales targets are being reached and volumes remain at good levels. Beam producers in particular have long lead-times stretching to the beginning of September. Demand for beams and merchant bars from other European countries continues to be strong. Italian steelmakers are shipping large volumes to Eastern Europe, Germany and France.

Domestic values for merchant bars remain at €470-490/tonne ($557-580) base ex-works, or €890-910/t ex-works including size extras. The first category of beams is at €600-610/t base ex-works, or €985-990/t ex-works. Offers from the distributors are at €1,050-1, 060/t on average for the first category. Values increase by €20/t for each subsequent category, sources say.

Natalia Capra France

Six options have been considered for the European Commission’s implementation of a Carbon Border Adjustment Mechanism (CBAM), according to a draft circulated July 12 by Contexte, a French media organization. One of the options proposes a 10-year phase-out from 2026 of allowances that can be obtained for free by less-polluting EU steelmakers and aluminum producers under the EU Emissions Trading System.

The EC is set to make initial proposals for the CBAM July 14, for implementation in 2023, as part of a “Fit for 55” package of measures to slash the bloc’s carbon emissions by 55% of 1990 levels by 2030. The CBAM will target emissions in “hard-to-abate” sector including steel, aluminum, cement and electricity.

The first CBAM option considered is for an import carbon tax, paid by the importer when products enter the EU, according to the text of the leaked document. The tax would be collected by customs at the border, reflecting the price of carbon in the EU combined with a default carbon intensity of the products. Importers would have the opportunity to claim a reduction of the CBAM based on their individual carbon footprint and any carbon price paid in the country of production.

The second option reportedly involves the application on imports of a system that replicates the EU ETS applicable to domestic production. Similar to the EU ETS allowances system, this would involve surrendering “CBAM certificates” by importers, based on the embedded emission intensity of the products imported, and purchased at a price corresponding to that of the EU ETS allowances at any point in time.

The third option bases the carbon price of imports on actual emissions from third country producers rather than on a default value based on EU producers’ averages, involving the importer reporting the actual emissions embedded in the product and surrendering a corresponding number of CBAM certificates, according to the document.

Option four consists of surrendering CBAM certificates on imported products. This considers a 10 years transitional period starting at the earliest in 2026 during which free allocations of allowances under the EU ETS would be gradually phased out by 10 percentage points each year as the CBAM is phased in.

“The combined and transitional application of EU ETS allowances allocated free of charge, of indirect cost compensation of carbon costs passed on electricity prices and of the CBAM should in no case result in more favourable treatment for EU products compared to imported goods,” the text of the document says. “CBAM certificates differ from EU ETS allowances for which tradability is an essential feature and whose prices fluctuate on a daily basis.”

Option five would cover carbon-intensive materials that are part of semi-finished and finished products along the value chain. For imports, the CBAM would again be based on the actual emissions from third country producers.

Option six consists of an excise duty on carbon-intensive materials covering consumption in the EU of both domestic and imported products, besides the continuation of the EU ETS including the free allocation of allowances covering production in the EU.

All six options have been considered potentially effective in the aim to reduce carbon emissions in the EU and address the risk of carbon leakage, according to the document.

“While the objective of the CBAM is to prevent the risk of carbon leakage, this Regulation is expected to also encourage the use of more GHG-efficient technologies by third countries producers, so that less emissions per unit of output are generated,” it said.

Questioned on the proposals, an EC spokesperson said July 12 that the Commission “does not comment on leaks.”

Allowances in short supply

European Steelmakers’ Association Eurofer said July 12 it is “particularly concerned” at the EC’s apparent intentions for the EU ETS revision, and calls for the CBAM and ETS to be complementary systems. “The steep reduction of free allocation would markedly increase industry exposure to EU ETS costs. The ‘rebasing’ and Market Stability Reserve changes would artificially drive up the carbon price for the same level of 2030 climate ambition,” Eurofer stated.

“Artificially higher carbon costs would hinder the steel sector’s ability to reduce emissions and meet our targets. Even before the current EU ETS revision, the sector was facing Eur30-45 billion in EU ETS costs between 2021-2030,” Eurofer Director General Axel Eggert was cited as saying in the statement. He noted that this calculation is based on the current EU ETS allowance price of Eur55, which has the potential to rise to Eur100 per allowance due to current shortages in availability under the regime finalized in 2018.

— Diana Kinch and William Healy