Already embedded with CO2, ferrous scrap is the “new gold” key for the production of green steel, EUROMETAL President Fernando Espada has told S&P Global Commodity Insights.
Such scrap is “vital for the production via the electric arc furnace route for steel,” Espada said May 24 on the sidelines of the EUROMETAL conference in Barcelona. “We will need more and more scrap, but at one point, as demand is growing amid the European Commission’s target to become CO2 neutral by 2050, we will see less scrap in the market — that’s why a lot of countries are pushing to keep the scrap inside their own borders,” he explained.
The importance of scrap towards lower carbon emissions was echoed by CRU Group European Flat Steel Analyst Matthew Watkins, who told the conference there would be less good quality scrap available in the future for which demand would still be high due to blast furnace/basic oxygen furnace-intensive Chinese production. However, he said overall EAF output is forecast to rise in the coming years.
Talking about the European “green revolution,” Espada told S&P Global that the EAFs and all the basic oxygen furnace steel mills in Europe had very clear and ambitious targets to produce clean steel in a relatively short term.
Spain in particular is “very much ready” and “well positioned,” as it has most of the companies based on the EAF route and also has the possibility to increase its renewable energy production thanks to the wind and sun benefits of its geographic location, Espada said.
Lack of apparent demand
There is currently a lack of apparent demand for steel In Europe, and Spain in particular, Espada said, saying that was a correction from a previous speculative period.
“The apparent demand is missing as the market is waiting to find an equilibrium point,” he said. “Prices are moving down, but I don’t think we will come back to pre-pandemic levels as production costs, such as the energy costs and the raw materials costs, have doubled and, in some cases, even triplicated.”
Rising inflation is also a problem, he added.
Platts assessed Turkish imports of premium heavy melting scrap 1/2 (80:20) May 25 at $465/mt CFR, up just $2/mt from where it started 2022 at $463/mt, but down from the intra-year high of $665/mt reached March 16,.
Real demand had slowed too, but less then apparent demand, Espada said, with flat products suffering due to the automotive slowdown and the relatively well-known supply issues.
Flat steel production in 2022 is expected to be more or less at the same level as 2021, he added.
Production of longs steel products in Spain is expected to stay stable or grow slightly, according to Roberto Gonzalez, president of UAHE, the Spanish Association of Steel Stockholding companies.
“At the moment inflations costs are the problem, but I see good demand in machinery manufacturing and construction in general,” Gonzalez told S&P Global on the sideline of the event.
According to UAHE data the longs market grew by 4.81 % year on year in Q1 2022 to 330,612 mt across all the products.
In 2021, Spain produced 14.3 million mt of crude steel production, up 28% year on year, according to Spanish industry group Unesid.
— Annalisa Villa