Salzgitter strip unit is 92% self-sufficient in electricity

Steelmakers may still be concerned about the cpotential costs of Europe’s Emissions Trading System. Although costs will likely be less than estimated by many (see below) the additional cost of power is still a worry. However, this does not change the fact that captive power supply should still cut costs. Power generators expect to be able to pass on thier costs from the ETS to customers in full. As such the additional cost to captive production should be equal to the additional cost of buying in power. Meanwhile, steelmakers with captive power will be able to choose how to allocate their allocated carbon credits, potentially making their additional costts lower.

 Platts SBB News – 1 June 2012 German steelmaker Salzgitter is around 60% self-sufficient in electricity across its strip steel plant in Salzgitter and its Peiner beams mill. The electricity generated at the strip mill site – by two in-house power plants – has an annual market value of around €150m, the company told Platts Steel Business Briefing.

The two 110 megawatt units were finished a few years ago and have since been optimised. Strip production in Salzgitter is now 92% self-sufficient, whereas the Peiner meltshop still relies 100% on external power suppliers.

Together, the Salzgitter stations produce roughly one terawatt of power per year, all of which is consumed on site, the company said. Self-supply creates an annual saving for the company of up to €25m, according to the firm’s spokesman.

However, changes to the European Union’s emissions trading scheme for carbon-dioxide from 2013 onwards could mean that Germany’s steel industry incurs extra costs totalling up to €485m/year, according to Salzgitter’s comments to the German press.

This action would add additional costs of between €17 and €37 per tonne of steel produced, according to Salzgitter’s ceo, Heinz Jörg Fuhrmann.

Switch to EAF could save struggling EU mills: Laplace

As Europe seeks ways of maintaining its steel idustry in the current economic climate, one suggestion could make steelmaking more sustainable both economically and environmentally. More EAF-based steelmakign could significantly reduce greenhouse gas emissions per tonne of steel. But for this to be sustainable it would require far more significant closures of basic oxygen furnace capacity.

SBB 25 May – The construction of electric arc furnaces at currently idled integrated steelworks in Europe could be a way to secure a future for these sites, Marcel Genet, managing director of consultancy firm Laplace Conseil, told the SBB Steel Markets Europe conference this week in Brussels.

Genet said that closing completely an existing plant has a high financial cost and a strong impact on the relationships with clients. For that reason, Genet believes some of the 8-10 integrated sites currently closed or at risk of closure in Europe could benefit from the construction of electric arc furnaces. This would preserve the existing finishing lines at the site and lower significantly the investments compared to the cost of modernising some of the integrated steelworks equipment.

Europe has a plentiful supply of scrap and the price of scrap would not be impacted by the addition of 20-30m t/y of new EAF capacities. Genet noted that a number of scrap suppliers already price their scrap based on the iron ore prices.

Genet reported two contrasting examples of uneconomic integrated works in France during the 1980s. While the Neuves Maisons works in northeastern France was re-converted to EAF operation and is now producing under the control of the Italian Riva group, the works at Mondeville in Normandy ultimately faced closure after having decided to stick with the integrated route.

Laplace Conseil proposed a similar solution for the ArcelorMittal works in Liège, Belgium, back in January, as reported by Platts SBB. Crude production at the plant was halted permanently a year ago.

EU OKs compensation for big energy users hit by power costs

The European steel industry is undergoing a transition linked to its current economic difficulties and the slowdown of steel demand. At the same time, steelmakers are concerned by added regulatory costs. The environment would, in theory, benefit from an increase in EAF steelmaking capacity as opposed to blast furnace-basic oxygen furnace capacity. However, future electricity costs, the main cost element of EAF steel, will determine the relative level of investment.

SBB 24 May – The European Commission has adopted a framework under which member states may compensate high energy users, including steel producers. This is in response to the higher electricity costs expected to result from a change to the EU Emissions Trading Scheme as from 2013.

The regulation will allow subsidies of up to 85% of the increased cost faced by the most efficient companies in each sector from 2013 to 2015, a cap that will gradually fall to 75% in 2019-2020.

However, European steel industry body Eurofer says that is grossly insufficient and will not restore the level-playing field with competitors outside the EU.

At first glance, the most impacted products (EAF steel and downstream) would be covered by a maximum 50-60% of the indirect CO2 cost, should member states give the maximum they are allowed to as per guidelines, a spokesman for Eurofer told Platts Steel Business Briefing in an emailed response to questions on Wednesday.

“Given the current economic situation and the state of public finance in the EU, we don’t expect member states to give away much,” he added.

Angang to cut costs, emissions with expanded slag processing

Re-using waste from steelmaking carries a number of advantages. The steelmaker has one more product to sell, customers such as the cement industry can reduce their emissions, both can improve thier cost-effectiveness. And of course the re-used waste does not end up in a landfill.

SBB 14 May China’s Anshan Iron & Steel (Angang) plans to invest heavily in slag processing this year, increasing capacity from under 1m tonnes/year currently to 5m t/y by the end of the year by installing four new slag milling units supplied by Germany’s ThyssenKrupp Polysius.

This should help reduce input costs and increase revenues for the steelmaker, Su Xingwen of the Slag Development Co. of Ansteel told delegates to the China International Metal Recycling Conference in Beijing.

Angang can currently produce up to 160,000 t/y of >95% Fe iron nuggets and 180,000 t/y of 60% Fe iron oxide concentrates from its slag processing facilities, helping to reduce input costs. This operation generated RMB 1.02bn of revenue last year. The refined iron nuggets are produced using one of Angang’s first patented technologies and can be used directly in the oxygen converter.

Once valuable minerals have been extracted, steel slag tailings can be ground to a powder and sold to cement and concrete producers. Angang produced 1.3m t of tailings when it produced 16m t of steel in 2009. By 2015, when it expects to produce 60m t of steel, it aims to produce 4m t of tailings.

In theory, capturing the 6 trillion KJ of heat contained in the 3m t of slag produced at Angang’s main steelworks annually could also reduce costs by around RMB 100m ($15.8m), Su estimated. Angang reported a net loss of RMB 2.1bn in 2011, as Platts Steel Business Briefing has reported.

Steel use must fall, but opportunities exist: Wellmet

SBB 24 April In order to reduce greenhouse gas emissions sufficiently to prevent catastrophic climate change the global use of steel must fall, notes Julian Allwood, group leader of the Wellmet2050 project at Cambridge University. However, there are opportunities for steelmakers to add value and potentially increase margins by producing less steel, he argues.

The global industry has almost reached the maximum amount of blast furnace capacity it will ever need, Allwood says. Increasing scrap supply should mean that new capacity will be primarily EAF-based.

However, steelmakers should also be producing less steel by making their products more material-efficient. Many steel products, such as sections, are around one third heavier than they need to be to fulfill their roles and much auto sheet contains around twice as much steel as carmakers will use, Allwood says.

By working with their customers steelmakers can help to find ways of providing exactly the same products with significantly less steel, and therefore significantly less raw material, labour and other costs. Producing steel with a specific end-use in mind could also increase efficiency and create low-cost premium products for steelmakers to profit from.

Unfortunately economies of scale are working to prevent this. Producing large quantities of commodity products to minimize labour costs currently makes economic sense but is not environmentally sustainable. Meanwhile, making more labour-intensive but tailored products for end users is only economical if a significant premium is being paid for the product.

Perhaps materials should be more highly valued by society and priced higher, one ArcelorMittal executive quipped at Platts SBB’s Green Steel conference in Berlin.

EBRD: Little future for carbon capture in the steel industry

SBB 23 April A critical lack of funding and the high cost of developing and implementing carbon capture and storage (CCS) mean it is unlikely to become widespread in the steel industry, senior advisor to the European Bank of Reconstruction & Development, Christopher Beauman told delegates at Platts Steel Business Briefing’s third annual Green Steel Strategies conference in Berlin.

Some funding is being made available in Europe, pointed out Baroness Worthington of Sandbag which campaigns for action on climate change. The European Commission has made revenues from the sale of 300m carbon credits available to CCS projects, with a current market value of around €2.25bn ($2.97bn).

However, the funding is not sufficient to counteract the huge cost of investment. A relatively cost-efficient steelmaker would become unsustainable if it carried the cost of installing CCS alone. The funding in Europe is insufficient and there is even less of it available in other regions, Beauman argued. Furthermore, the funding that is available is focused almost entirely on the power sector.

In Europe the only steelmaking CCS project remains ArcelorMittal’s project at Florange in France. This intends to develop a top-gas recycling blast furnace which will produce waste gases with no carbon monoxide, making them suitable for underground storage. Part the Europe’s Ultra-Low CO2 Steelmaking (ULCOS) project, the plant is expected to generate results by 2014.

There is some chance that CCS funding will become available in China as Beijing has noted that it is a technology it wants to develop in the current five-year plan (2011-2015). However, this too is likely to be focused on the power sector and the availability of storage sites may also be an issue, Beauman said.

Worldsteel chief: ‘combined solution’ key to climate change

SBB 20 April World Steel Association director general Edwin Basson said all industry – and all industrial nations – must be included in ongoing efforts to curb carbon emissions, not just steel.

Basson, in an address during Platts Steel Business Briefing’s third-annual Green Steel Strategies conference in Berlin, called regulations aimed at reducing so-called tailpipe emissions “nonsensical” and said a life-cycle assessment approach is essential in making future strides.

Worldsteel, whose membership includes 17 of the 20 largest steelmakers in the world, believes the global steel industry is already a key player in moving toward greener industrial output, even as it accounts for just 6.5% of all CO2 production.

Basson pointed to the construction of the Golden Gate Bridge in 1937, which required some 83,000 tonnes of steel. “Today, only half that amount would be needed,” due to advances in stronger, lightweight steels, Basson said, adding that water recycled by steelmakers back into rivers and other bodies of water also is often cleaner than when it was extracted.

“Clearly, it is impossible to solve he climate change issue by focusing on the steel industry,” he said. “The future solution must be a combined solution.” Also, any near-term results gained by reducing steel’s CO2 output will be limited. “This is not going to give us results today or tomorrow. We will not halve carbon emissions in the next five years,” Basson said.

Matthias Finkbeiner, professor of life-cycle analysis at the Berlin Technical University, said “hardly any measure is a silver bullet.”

Finkbeiner said the UK’s total CO2 emissions increased by 19% since 1990, even as its domestic industry reduced overall emissions by 12%. The reason: the UK was a net importer of emissions related to the consumption of products made in other regions not as environmentally conscious.

Carbon reduction initiatives spur debate

SBB 25 April  The merits of the European Union’s Emissions Trading System and other carbon reduction initiatives generated a spirited debate during Platts Steel Business Briefing’s third-annual Green Steel Strategies conference in Berlin.

A panel including; Steve Rowlan, Nucor’s gm of environmental affairs; Baroness Worthington, a member of British Parliament and founder of Sandbag; Christopher Beauman, senior adviser to the European Bank for Reconstruction and Development; and Mike Romano, vp of strategic accounts for NALCO; discussed the challenges of operating under current and proposed mandates.

Worthington argued a number of European steelmakers are “sitting on a large set of allowances” under the EU’s carbon trading scheme, as emissions have been below previous estimates.

Some say that’s simply due to reduced steel production amid the recessionary economic climate, and when one panelist questioned whether steel producers believe in the initiative, Worthington fired back: “It’s not whether you believe in it or not. It’s not a ghost or God. It’s actually a functioning policy that’s in place right now to bring carbon [emissions} down.”

Many involved in European carbon trading argue there should be intervention to prop up the sagging carbon price (a result of surplus emissions), such as a set-aside of allowances, as low prices do nothing to spur investment into new technology.

European steelmakers have told Platts SBB there should be no “manipulation” of the market, which is just designed to cut emissions.

Rowlan said cap-and-trade initiatives like those in place in Europe and being considered in the US put steelmakers at a cost disadvantage to competitors in regions without such policies. “To an industry that wants to be competitive, it is all about cost,” he said. “How does the steel industry survive?”

Beauman conceded higher costs “are inevitable” in the effort to reduce global CO2. “The question is at what spread and at what fairness?” he said.

Still, Romano said unproven and costly technologies like carbon sequestration aren’t the answer in the near term. “The technologies aren’t coming to the forefront in the next five years,” he said.

Eurofer: Europe’s carbon reduction scheme ‘heavy burden’ for industry

Europe’s energy intensive industries continue to complain about the future cost of carbon credits. Issues of cost and the effectiveness of current regulation is legitimate. A life cycle approach to emissions is still not part of European policy and sometimes costs can lead to less investment in new, cleaner technologies. But ultimately the effect of the weak economy will have a far greater effect on invesment in European industry.

SBB 20 April Europe’s approach to reducing steelmakers’ carbon emissions presents “a heavy burden to the competitiveness of the industry” that ultimately restrains investment in new facilities and technologies aimed at achieving the same goal, according to German Steel Federation president Hans Jurgen Kerkhoff.

Kerkhoff, speaking at Platts SBB’s third annual Green Steel Strategies conference in Berlin, said while the European Union’s carbon reduction targets are ambitious, their impact is lessened as other regions around the world have not committed similarly to the effort. And the cost of such measures – which will total billions of euros annually – take funding away from important technological advances that many producers already are undertaking.

The German steel industry on its own realized a 2.4% year-on-year reduction in carbon emissions in 2011, but a steel life-cycle assessment approach should be the focus of emissions initiatives going forward, he said.

“Instead of regulatory investments, we should give more priority to technological developments,” Kerkhoff said, adding that his organization is “in constant political discussions in Berlin, as well as Brussels,” home of the EU. “Climate protection begins with steel,” Kerkhoff said. “Steel is the basis of sustainable value creation. A sustainable economy can only grow up with and out of industry.”

Echoing Kerkhoff’s sentiments, Danny Croon, environment director for Eurofer, said in a separate presentation that the industry views Europe’s carbon measures as “unilateral and disproportionate” to other regions of the world.

European mills see differing profits from carbon credit sales

In the current period of the European Emissions Trading System, steelmakers have been left with a surplus of carbon credits. This surplus may be reversed as restrictions on emissions become more stringent from next year onwards but for now these credits are a tempting way to bolster ailing balance sheets. However, the key to getting the most out of these credits is a proper strategy and some steelmakers are achieving almost double the return per credit as others, as this story from Platts Steel Business Briefing’s Daily Briefing shows.

SBB 19 March – SSAB sells surplus carbon credits as emissions fall

Sweden-based steel producer SSAB saw greenhouse gas emissions at its European plants decline in line with production last year to 5.5m tonnes of carbon dioxide. The company also took the opportunity to bolster its balance sheet by selling 4.1m surplus carbon credits.

SSAB earned SEK 275m ($40.47m) from the sale of carbon credits last year. This would suggest it earned just $9.87 for each of the credits.

The company sold most of the credits towards the end of the year when SSAB’s blast furnaces were running at low utilisation levels, a SSAB spokesperson says. Carbon credit prices fell sharply in Q4, Platts SBB notes.

ArcelorMittal earned an average of $18.6 per credit last year, indicating a more sustained sale of credits through the year, analysts suggest.

As part of the European Emissions Trading System (ETS), steelworks must report their greenhouse gas emissions and hand over one carbon credit for each tonne of carbon dioxide equivalent emitted. In the current trading period (2008-2012) steelmakers have been given sufficient carbon credits to cover their emissions. In fact they have received more than they have so far used as the allocation was calculated before the 2008 financial crisis and so actual emissions have been lower than previously expected.

SSAB was granted 36.7m credits for 2008-2012 and now has 7.5m remaining to cover emissions this year. SSAB could therefore have more credits to sell unless it increases its European steel production by around 36%. Platts SBB calculates.