CBAM: Turkish industry could face scope 3 challenges
Turkey’s electric arc furnace-dominated steel industry is well-positioned to benefit from reduced emissions requirements under the EU’s Carbon Border Adjustment Mechanism (CBAM), says Çolakoğlu chief executive Uğur Dalbeler. However, Scope 3 emissions, tied to the transportation of raw materials and finished products, remain a challenge.
“Turkey is in a stronger position, not only because 75% of its steel production is EAF-based but also due to its over 15 million tonnes of HRC production capacity from EAF, with very low emissions and good experience and good [quality steel production] expertise, Dalbeler tells Kallanish.
The Turkish government has eased regulations for manufacturers to establish renewable energy capacities, aligning Turkey’s renewable energy ratio with that of Germany and Italy. This progress positions Turkey to achieve climate neutrality in Scope 2 emissions.
Although Scope 3 emissions remain a challenge, Turkey still holds a competitive advantage over countries like China, Japan, and Korea.
The primary hurdle to decarbonising the steel industry is securing funding for net-zero projects, Dalbeler says. Experts argue that while funding exists, the projects themselves are often not compelling enough. Wood Mackenzie estimates that achieving the 1.5-degree temperature reduction scenario globally will require $78 trillion, with 90% of energy derived from renewables – a target that seems improbable.
Furthermore, unresolved issues around clean hydrogen availability, storage, and CCUS utilisation persist. The IEA has downgraded CCUS’s role in achieving net-zero from 53% to 37% by 2050, though reaching the target remains feasible for the steel industry.
Dalbeler advocates a more pragmatic approach, emphasising efficiency improvements in production and processing to reduce CO2 intensity. “If we can increase yield in every step, we can significantly lower the CO2 intensity of the final product,” he explains.
He highlights the need to focus on the BF/BOF production route, as creating new EAF capacities is not a comprehensive solution due to limited scrap availability and the scarcity of high-quality ore for direct reduction.
“We need to concentrate on [decarbonising] the BF/BOF route of steel because creating new EAF capacities will not solve the problem. Availability of scrap is limited and the majority is only good for long products. High quality ore for direct reduction is also limited; therefore, we need to reduce BF/BOF emissions, especially as this type of steel production grows in India and Southeast Asia,” he notes.
Setting global CO2 emission limits per tonne of steel, akin to emissions standards for cars, could address both excess capacity and emissions issues. “There’s a significant difference between old and new-generation BFs. We need a global consensus on permissible CO2 emissions per tonne of steel. Anything exceeding this limit should not be produced or traded,” he emphasises.
Dalbeler also stresses the importance of global standards for measuring and standardising greenhouse gas emissions.
Rather than investing in new steelmaking capacities, he suggests prioritising the optimisation of existing facilities. This would enable funds allocated for new EAF projects to be redirected to more impactful areas.
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Turkish steel industry enters into stagnation period: Colakoglu CEO
The Turkish steel industry has entered into a stagnation period, as the growth period has come to an end amid increased conflicts around the world, Ugur Dalbeler, CEO of Colakoglu, said at the 89th Irepas Meeting held in Istanbul Sept. 18.
Highlighting the decline seen in Turkish mills’ steel exports and steel production in 2023 amid unfavorable market conditions and protection measures, the CEO said: “We should keep what we have in our hands, but it will be hard.”
Steel export/import coverage ratio of the Turkish steel industry fell to 48:100 in the first seven months of 2023 from 94:100 a year prior, as steel exports declined 44% on the year to 5.3 million mt on low demand in main export markets, while imports increased by 22% on the year to 11 million mt, the Turkish Steel Producers’ Association data showed.
Despite the 7.7% on the year rise seen in Turkey’s crude steel production in July after a 14-month declining trend, crude steel production remained 13.3% lower on the year at 18.8 million mt in the first seven months of 2023, according to TCUD data.
Stiff Asian suppliers, particularly China, competition both in the domestic and global markets also harmed Turkish steel mills’ production and sales in 2023.
Turkish steel producers submitted a petition at the beginning of September to Turkey’s Trade Ministry for an antidumping investigation on imports of hot-rolled coil (HRC) from Chinese, Indian and Russian suppliers, as Dalbeler previously told S&P Global Commodity Insights.
“The global trade activity declined notably, due to high inflation, strong dollar and the Russia-Ukraine war,” Dalbeler said, adding that sanctions on Russian steel have also become a threat for Turkish steel producers.
“Some US officials have visited some companies in Turkey explaining the risks of not cutting ties with Russia,” the CEO said, adding that the EU producers have been also asking Turkish producers to prove that they have not been using Russian-origin semi-finished steel.
Noting that the US and the EU have been maintaining protection measures, Dalbeler said: “They have changed the rules of the play during the game as their competitive power declined.”
Highlighting that the EU has initiated its carbon border adjustment mechanism, the Colakoglu CEO said Turkey should also bring its own regulations into force in this regard.
Major Turkish steel producer Colakoglu, meanwhile, recently completed its ongoing capacity increase project and increased its HRC production capacity by 50% to 4.5 million mt/year despite unfavorable market conditions, Dalbeler noted.
Platts, part of S&P Global, last assessed domestic Turkish HRC at $655/mt ex-works on Sept. 15, down $10/mt on the week.
Author: Cenk Can
