Tag: GMK Center

EU steelmaking is likely to shift to locations in the bloc where renewable energy is the cheapest, while current electricity price disparity between EU countries will become more pronounced, according to Stanislav Zinchenko, chief executive of consultancy GMK Center.

Besides competition with imports, EU members are competing among themselves, but the playing field is not even. Average day-ahead electricity prices in Italy were around €55 per megawatt-hour higher than in France in October. Italy nevertheless has the biggest share of electric arc furnace-based steel production in the EU.

“We can assume production in the EU will move away from high power cost countries to low cost ones,” Zinchenko noted at Kallanish Green Steel Strategies in Brussels this week. “Everything will depend on energy policy and investment into energy infrastructure – this investment is key,” he added.

Moreover, energy is likely to become even costlier as demand for it grows while steelmaking electrifies in Europe, with the electricity share in production cost seen rising to 40%. “Forget about scrap and DRI: the main raw material is energy,” Zinchenko asserted.

The steel map of Europe will change. In future, mills will be located near to low-cost clean energy sources and sea ports.

“We’re talking about competition inside Europe, between countries, between steel mills,” Zinchenko commented. “From 2025, it will be the start of a big battle between countries and steel mills. The battle will be in green steel strategies.”

To improve their positions, EU mills can invest in captive power generation, technology to improve energy efficiency and hedging energy supply. However, there are limitations to each. On the policy side, industry needs “investment, investment and investment,” Zinchenko said, into new clean energy generation capacity and transmission infrastructure. Energy subsidies will inevitably be used more often but will only worsen the competitive balance, he concluded.

Adam Smith Poland

kallanish.com