Spanish steel plants suspending operations amid record energy: Unesid

A number of Spanish steel plants have halted production due to high energy costs, Spain’s steel industry association Unesid said March 8 without adding details.

While some have suspended production since early March others have brought forward maintenance outages during the spike, according to director general Andres Barcelo.

Spanish power prices hit a new record high of Eur544.98/MWh on the OMIE exchange for March 8 delivery, an increase of 23% from the previous high set March 7 and a 44% increase from the day before.

The gas price on the MIBGAS exchange was Eur214.36/MWh for March delivery, up 10% on the day and also a record high.

Spain is Europe’s fourth largest steel producer, behind Germany, Italy, France.

According to Europa Press, on March 4 Megasa halted production at its 700,000 mt/yr Naron steel plant near A Coruna, having already shifted much of its production to night shifts to avoid peak prices.

The company did not reply to messages seeking confirmation.

One of Spain’s largest steel producers ArceloMittal de Espana said March 8 it had not taken any decision to cease production but had been carrying out selective outages in its long products division since the end of 2021 in response to hourly power prices.

According to Spain’s large consumer association AEGE, industrial users have been more exposed to spot price volatility since interruptible contracts were phased out in 2019.

A government proposal to offer large consumers bilateral contracts at competitive prices was yet to proceed, according to AEGE General Director Fernando Soto.

One answer has been for consumers to sign multi-year power purchase agreements with power generators at stable prices.

Steel tube maker Tubos Reunidos announced March 8 it had agreed a ten-year deal with Norway’s Statkraft, with power sourced from Statkraft’s 1.2-GW Spanish renewables portfolio and payments protected under Spain’s electro-intensive industries’ guarantee mechanism, FERGEI.

Arcelor Mittal already has one small-scale (10 MW) PPA running since April 2019, while Sidenor signed an offtake deal with Naturgy in March 2021 for 350 GWh/yr, sufficient to produce 600,000 mt/yr of steel, according to S&P Global Commodity Insights.

Spanish PPA offers made by project developers on Zeigo’s platform averaged Eur34.36/MWh in Q4 2021 for 10-20 year agreements.

— Gianluca Baratti