German steel companies can hold their own against international competition with environmentally friendly steel, if the costs for crude steel can be kept below €600/tonne ($685/t). But this strongly depends on political measures to provide the framework conditions, Kallanish learns from a new study.
The study, commissioned by foundation Hans-Böckler-Stiftung, and carried out by the University of Mannheim, finds that the transition will only succeed if the industrial policy framework is right for the transition’s critical phase.
This requires, amongst other things, a long-term cap on industrial electricity and hydrogen prices. On European level, it would need a ‘Buy European’ rule in public procurement and safeguards against steel being sold at rock-bottom prices “as a result of environmental and social dumping and subsidies”.
Without a functional steel sector, the German economy along the value chain will lose up to €50 billion in value-added revenue a year, the authors have calculated.
“It is like with computer chips, antibiotics, and chemicals: we cannot do without steel, and if we do, we will see a bad surprise,” the study notes.
In terms of prices, they propose a guaranteed electricity price of €60/megawatt-hour (MWh), including grid charges and all levies, and for green hydrogen, a guaranteed purchase price of €140/MWh until 2035.
Under these conditions, they calculate that the costs of crude steel on the DRI route would come to €590/t. In view of an average market price for hot-rolled coil of €640/t over the past three years, that cost level is economically viable, according to the study. On the electric-arc furnace route, scrap-based crude steel would cost €464/t, which is viable as well, the authors note.
