On September 20, the parties signed a Memorandum of Understanding (MoU) in Budapest that set out the terms of collaboration, in the presence of senior executives from all three.
Under the plan, the Dunaferr steelworks will switch from the coal-intensive steelmaking route to electric-arc furnace (EAF) technology. The company will replace its existing blast furnaces and basic-oxygen furnace with a new 150-tonne EAF, to be supplied by CISDI. This will allow the Dunaferr site to slash its carbon dioxide emissions by as much as 80%, the company said.
The plans would be subject to EU regulatory approval, however, the release said.
According to market sources, the Dunaferr steelworks is currently idle, with both BFs offline and the rolling mills stopped in August due to a lack of feedstock.
Dunaferr has two blast furnaces with combined capacity for 1.4 million tonnes per year of pig iron, This is used to produce hot-rolled, cold-rolled and hot-dipped galvanized coil steel products.
The design capacity of Dunaferr’s HRC mill is around 2 million tpy, according to Fastmarkets’ company database.
What is driving decarbonization in the EU?
Low-carbon steel has become an integral part of sustainability goals for BF-based steelmakers in recent years.
Major European BF-based steelmakers have been investing in green steel projects, cutting emissions to comply with strict EU regulations.
Under the European Green Deal, the European Commission proposed a new EU target to reduce greenhouse gas emissions by at least 55% by 2030, compared with the levels emitted in 1990.
Most commonly, producers would switch from BF+BOF steelmaking to EAF-based steelmaking, with some also opting to install direct-reduced iron (DRI) modules to ensure a supply of raw materials on-site.
The growing cost of carbon emissions in the EU has also pushed mills to seek alternative ways of steelmaking.
In particular, the carbon permit price under the EU Emissions Trading System (ETS) was €82.68-89.87 ($88.05-95.71) per tonne in August 2023, having reached an all-time high of €105.73 per tonne in February this year.
Market sources expected the gradual elimination of free carbon-emissions allocations under the European ETS to drive decarbonization in steelmaking and to spur buying interest for CO2-reduced steel products.
This elimination of free carbon allocations was scheduled to begin in 2026. By 2030, free allocations will be cut nearly in half (down by 48.50%), while by 2034 the free carbon allowances will be completely eliminated.
As a result, some market participants expected the carbon permit price to rise exponentially. Some of those involved in the European steel industry have estimated that CO2 allowance prices will jump to €200-250 ($213-266) per tonne when the free allocations are phased out in 2034.
Current premiums for flat green steel in Europe were offered in the range of €100 to €300 per tonne “for nearly 100% decarbonized steel,” Fastmarkets has reported.
Fastmarkets’ weekly assessment of the green steel, domestic, flat-rolled, differential to HRC index, exw Northern Europe, was €100-250 per tonne on September 21, unchanged since August 24.
Demand for green steel was still patchy across Europe, with buyers saying that they largely felt no pressure to book decarbonized steel at the moment.
The range of premiums remained quite wide, reflecting the immaturity of the market and the offer-bid mismatch.