Tata Steel Netherlands (TSN) is assessing early closure of coke and gas plants at its Ijmuiden steel plant, the steelmaker has announced, after being served a notice of intention to revoke relevant permits by Dutch environmental authorities. The issue threatens to become an existential one for the steelmaker.
The decision to revoke comes after a multi-year process to compel TSN to remedy violations of environmental standards at its coke and gas plants (CGP) 1 and 2, concerning excess emissions of substances of high concern. The plants have been under “heightened supervision” by authorities since 2023, leading to the imposition of a penalty scheme on TSN in late 2024, as well as requirements to perform renovations on CGP 2 such to bring it back into compliance with operational standards.
Since then, the Environmental Agency (ODNZKG) has charged TSN with over 20 million euros of fines, exhausting maximum penalties amount set by the regulator. As authorities still consider the plants in violation – and further charges can no longer be collected – the next step is to initiate revocation of the permits.
The Environmental Agency made its letter to TSN public on 19 May, finding “structural and significant exceedances of emission limit values for substances of very high concern (ZZS), where the norm is exceeded to a high degree,” resulting in “severe” consequences for the local environment and community.
TSN’s conduct was deemed “calculating,” with the Environmental Agency describing the steelmaker’s consistent failure to meet environmental compliance requirements, despite previous enforcement actions. Further, the Agency no longer believes TSN has capacity to actually remedy the long-standing issues at all, stating that “it is plausible that you do not have a realistic possibility to bring your actions into compliance […] this makes the very next step the revocation of the permit.”
TSN states in its press release that the decision to revoke creates “uncertainty for TSN as a whole.”
“TSN’s focus is on finding a solution that is appropriate for all stakeholders, taking into account all relevant interests, including the continuity of the business,” the steelmaker said. “TSN has communicated to the ODNZKG how the closure of KGF 1 and 2 should take place in a safe, responsible and controlled manner.”
Parent company Tata Steel Group’s latest financial reporting also demonstrates the concern, audited in the context of “material uncertainty” for TSN’s future amid issues of environmental non-compliance. The report was still audited on a going concern basis, as Tata still believes TSN has capacity to meet its liabilities for the next financial period.
Forced closure of the CGPs could significantly impact operations at TSN, as the plant’s operations are complex, with lots of crosscutting operational synergies and dependencies.
Tata itself describes how CGP gases are heavily integrated across its operations, providing necessary energy generation to both the Ijmuiden plant, and neighbouring plants. According to TSN, the integrated nature of the steelmaker’s operations mean that “the closure of a [CGP] automatically disrupts the entire chain,” potentially forcing TSN to source up to a cited EUR850m a year of natural gas on the open market, at a time when natural gas fundamentals are experiencing extreme geopolitical volatility.
TSN acquired Vattenfall’s Ijmuiden power plants at the start of the year, after previous agreements to supply blast furnace gases expired at the end of 2025. TSN CEO Hans van den Berg celebrated the “unique” nature of the plants – fueled by TSN’s residual process gases “unlike any other power plant in the Netherlands.” Whether other power plant operators should be jealous of this exclusivity, seems increasingly questionable.
Not only would closure of the CGPs threaten the profitability of TSN operations at a time of general crisis for the EU steel industry, it would also undermine their capacity to capitalise on supportive policymaking from the European Commission, such as the EU’s new quota regime, potentially losing market share to domestic competitors better positioned to profit without overly burdening downstream consumers on cost absorption.
This year is also the first that steelmakers begin to lose free allocation coverage under the EU Emissions Trading System (ETS), forcing them to buy emissions allowances on the carbon market as an additional cost. Losing the benefits of CGP off-gas circularity, and having to source natural gas externally, could see both energy and carbon cost burdens rocket for TSN in the mid-to-long term.
“Without money, we cannot finance the Green Steel plan”
Could TSN’s green steel plan mitigate these pressures in time?
Not according to the steelmaker, which holds that closure of the CGPs before 2029 – its current decarbonisation project timeline – would mean an effective halt to its decarbonisation efforts. As stated on its website: “Without money, we cannot finance the Green Steel plan. This means that no CO2-neutral steel will be produced based on hydrogen instead of coal.”
As illustrated in McCloskey’s Green Steel Profiles, TSN planned to close CGP 2 and blast furnace 7 in 2029 in the first stage of its transition plan, to be replaced with a direct reduced iron (DRI) plant and electric arc furnace (EAF). TSN describes how this transition to DRI-based steelmaking is “complex and far-reaching and takes time,” effectively meaning CGPs “cannot close before 2029.”
In the Joint Letter of Intent signed by TSN and the Dutch government on financing the decarbonisation of Ijmuiden, the closure of CGP 1 was indicated for around 2037. While the Environmental Agency does say that revocation of the permits “does not mean that the [CGPs] will be shut down immediately” – rather, terminated “in a safe and careful manner” – historical permitting issues, and statements from Tata and the Environmental Agency, suggest that permission to operate the CGPs under existing conditions until 2029 is very unlikely, even less likely by 2037.
Tata’s latest statement seems accepting of this new reality, in which the CGPs will indeed see early forced closure. McCloskey requested additional information from TSN on estimations of expedited timelines, and implications for the realisation of its Green Steel Plan, but the steelmaker declined to provide detail beyond its press release.
Additionally, TSN’s permit applications for the Green Steel Plan are currently suspended by the Environmental Agency until the steelmaker clarifies – among other issues – “information on the emissions of substances of very high concern”. The Environmental Agency pre-warned TSN that failing to provide additional details would likely result in permitting delays, and has published their communications to TSN for transparency with local communities.
TSN’s subsidy framework agreement with the Dutch government, in which it would be granted financing of up to EUR2 billion to fill funding shortfalls, is also conditional on the steelmaker remedying the Environmental Agency’s complaints, otherwise the agreement can be terminated unilaterally and with immediate effect:
“The State may terminate the [Joint Letter of Intent] with immediate effect, upon service of a notice in writing, if: […] TSN does not adequately address its legacy liabilities – in particular CGP2 – including further improving the compliance and control of the operation.”
Even if the overall agreement remains in place, final subsidy payments will only be issued upon the completion of DRI-EAF construction, including successful closure of CGP 2 and blast furnace 7.
Under the joint agreement, TSN would be entitled to up to EUR2bn to cover estimated overall CAPEX of EUR4.0-6.5bn for the project, and mandated to source private investment of EUR2.3-4.0bn to fund the remainder. The funding also only covers stage one, i.e the replacement of CGP 2, with no funds available for the later conversion of assets in stage 2, including the closure of CGP 1. With existing TSN operations ‘materially uncertain,’ private investment could be a tough sell to potential investors.
Regardless, any and all state funds are designated for specific purposes, and TSN specifically could not use the funds to remedy operational permitting issues with the CGPs.
It is important to note that TSN has only agreed a Joint Letter of Intent with the Dutch government outlining terms, and a formative agreement is yet to be signed.
Market reaction and expectations
McCloskey’s sources were surprisingly accepting of the news, expecting TSN to find alternative means of meeting its operational obligations, albeit at higher costs.
Several market participants were aware of TSN’s dispute with local authorities as an ongoing issue, and suggested that if permits are withdrawn, that the steelmaker would instead source coke externally to maintain production levels. Sources largely see this as a financing issue, and expect more of an impact on cost than output volumes:
“Tata Steel will have some time to reorganize and buy coke. This will be a financing issue, not a production hurdle,” said an EU steelmaker.
McCloskey’s coal market contacts, however, have not identified any immediate seaborne demand boost, and are yet to receive prompt inquiries.
Prices for imported seaborne met coke in Europe are continuing to move higher, supported by higher FOB levels and firm freight rates. The McCloskey CIF ARA assessment for CSR 65/63 BF coke was at $315/t on 15 May – a 20-month high. FOB prices for Indonesian material – rapidly gaining popularity among buyers in the Atlantic region – rose to $270/t, with prompt availability understood to be tight.
However, some European steelmakers have highlighted that seaborne coke imports do remain economically viable due to high coking coal prices. Furthermore, freight rates for Australian material remain elevated as a result of the Middle East conflict, continuing to inflate imported coal costs for regional buyers.
“It currently makes more sense to import coke – especially given the availability of cheaper Indonesian material – than to produce it in light of recent price hikes for Australian coking coal,” a steelmaker source commented.
McCloskey assessments for MCC1 low-vol PHCC and MCC2 mid-vol PHCC Australian seaborne metallurgical coal were both up by $1.20/t to $238.10/t FOB and $242.50/t FOB respectively on 19 May. Both indicators were slightly above $195/t FOB during the same period last year.
Compounding its burdens, Tata Steel Netherlands is already experiencing production issues on finished steel orders, requiring them to source material on the open market:
“[TSN] is already outsourcing hot-rolled coil to a German mill. They will just get more upstream products externally,” a distributor said.
Tata Steel closed its direct sheet plant (DSP) in early April after Environmental Agency findings that hazardous chrome 6 emissions at the site exceeded legal thresholds, forcing the steelmaker to buy hot-rolled coil (HRC) on the open market to fulfil its delivery commitments.
In Northwest Europe, deals and workable price levels for HRC have been reported at EUR680-700/t ex-works, with the majority of indications clustering between EUR680-690/t ex-works.
One distributor suggested that the revocation of the emission permits for the CGPs could result in a chain reaction across TSN operations, and a sharp drop in production. Some in the distribution space would welcome this reduction in market capacity: bullishness in domestic HRC prices has somewhat stalled recently, as regulatory supply-side drivers such as CBAM and quota fears lose a degree of momentum against demand headwinds.
“We could really use a boost again,” a Benelux-based service center said. “Demand is weak, and prices are under pressure.”
History repeating?
Several market participants drew comparisons between the ongoing problems at TSN with those of Italian steelmaker Acciaierie d’Italia (ADI), formerly known as Ilva. While the specific environmental issues confronting Italy’s ADI are not identical to those surrounding Tata Steel’s operations in the Netherlands, parallels have nonetheless sparked concern among industry sources.
The market remembers ADI as a cautionary tale, and understands that environmental issues can significantly impact steel production. In 2012, the massive environmental and health scandal at ADI resulted in the arrest of senior executives from the Riva family, then owners of ADI, and the eventual nationalization of the company. ADI has never fully recovered from the destabilization of its operations, and currently remains under state control.
Author: Benjamin Steven, Maria Tanatar & Olena Maksymenko
