The European steel landscape will be substantially different by 2040, as oxygen-route production becomes uncompetitive and most steelmaking will occur in regions outside Europe, according to a study by PricewaterhouseCoopers (PwC) Germany.
The study references three scenarios how the overall economy might develop, and influence the future of the steel industry. The first notes that if in the long run, imports resurge while European countries cannot get a grip on their energy costs, then ore-based iron making will disappear in Europe. The second assumes that some primary green steel production will prosper in Scandinavia. While in the third scenario, improving political and regulatory conditions, along with lower energy costs, will help to retain iron and steel making.
All three scenarios, however, rule out the survival of blast furnaces, which will become extinct by political will, in the interest of the environment, Kallanish understands.
Meanwhile, India and the Gulf countries are making progress with building up capacities of DRI-based mills, encouraged by available local energy. By 2030, DRI-made steel using gas from those countries will already be 30% cheaper than oxygen-route steel made in Europe.
In this regard, the study questions the efforts and spendings by German steelmakers into a technical transition of their mills. With their low-emission steels costing significantly more than those from Indian and Gulf region suppliers, it says. Only Scandinavia will have a chance to continue playing a role in primary steelmaking with newly built capacities for low-emission steels.
A competitive niche for the other European producer countries will be EAF production based on scrap, of which Europe has relatively large amounts of material.
The study gives three strategic recommendations. Firstly, the companies should actively accompany the relocation of energy-intensive production stages to other regions.
Secondly, Germany especially should bank on its broad technical knowledge to support the value added processes that will remain in the country. Fabricators, too, should prepare for international shifts in supply relationships.
Thirdly, sophisticated production and processing needs dedicated locations in form of regional clusters with diverse players. For Germany, the author proposes the Rhine-Ruhr area with its existing steel industry, the northern coast with access to the sea and offshore wind power, and the Lower Saxony heartland, where companies such as Volkswagen and Salzgitter are located.
“The relocation of energy-intensive raw material production abroad is not deindustrialisation if it is replaced by value creation based on knowledge, specialisation and system competence,” says Andree Simon Gerken, partner energy transition & decarbonisation at PwC Germany.
Author: Christian Koehl
